FORMATIVE ASSESSMENT 1 From

CONTRIBUTION 12 April 2021

(20%) to
3 May 2021

FORMATIVE ASSESSMENT 2 From

CONTRIBUTION 4 May 2021
(20%) to
25 May 2021

ONLINE SUMMATIVE ASSESSMENT

CONTRIBUTION (60%) TO FINAL MARK

FINAL 11 June 2021 09h00 – 14h00

RE-WRITE 22 July 2021 09h00 – 14h00

1. A production possibility frontier shows_________________ Unit 1

A The maximum combination of inputs that can be used to produce output in a typical economy.
B The maximum revenue that can be generated from the sale of output produced by
limited resources in an economy.
C The minimum quantities of commodities that can be produced from limited but fully-employed
resources in an economy.
D The maximum quantities of commodities that can be produced from limited but fully-employed
resources in an economy.
E The quantities of factors of production available to produce goods and services in an economy.
2. A basis for the systematic study of economics exists because________ Unit 1
A Resources are scarce in relation to material wants.
B Governments interfere because there is always an efficient allocation of scarce resources.
C Individual economic actors never make rational economic decisions.
D Resources are plentiful relative to wants, therefore an allocation problem arises.
E The market consistently fails to allocate resources efficiently, thereby establishing the need to
study economics.

3. The law of increasing opportunity cost is reflected in the shape of the _______ Unit 1
A Production possibilities curve concave to the origin.
B Production possibilities curve convex to the origin.
C Horizontal production possibilities curve.
D Straight- line production possibilities curve.
E Upward-sloping production possibilities curve.Compare the above to a firm under perfect
competition
4. An increase in the price of gasoline will most likely cause the demand curve of tyres to
change in which direction. Unit 4
A To the left, because gasoline and tyres are substitutes.
B To the left, because gasoline and tyres are complements.
C To the right, because gasoline and tyres are substitutes.
D To the right, because gasoline and tyres are complements.
E To the right, because an increase in the price of gasoline makes consumers poorer and thus
not willing to pay as much for tyres.
5. A change in demand is said to take place when there is a ____________ Unit 5
A Shift of the demand curve.
B Shift of the supply curve.
C Movement along the demand curve.
D Quantity change.
E Price change.

6. The opportunity cost of money that a firm’s owner has invested is an example of ______
Unit 7
A Implicit costs.
B Direct production costs.
C Sunk costs.
D Accounting costs.
E Explicit costs.
Compare the above to a firm under perfect competition
7. For an inferior good, the quantity demanded _______________ Unit 6
A Does not change when income rises or falls.
B Rises when income falls.
C Falls when income falls.
D Rises when income rises.
E Responds directly to changes in income.
8. The law of diminishing returns states that if increasing quantities of a variable factor are
applied to a given quantity of fixed factors, then ________________ Unit 7
A The marginal product, the average product and total product of the variable factor will
eventually decrease.
B Total product will eventually begin to fall.
C The average product will eventually decrease with constant marginal product.
D The marginal product will eventually decrease with constant average product.
E The average product will eventually decrease, but only if total product is held
constant.Compare the above to a firm under perfect competition
9. In the context of the circular flow of economic activity, which of the following would not be a
traditional activity of the government? Unit 3

A Purchases of labour services from households

B Purchases of capital goods from firms in goods markets
C Provision of public goods and services
D Transfers of tax revenues to low-income groups or regions
E Sales of consumer goods to foreign buyers
10. Which of the following characteristics would you not associate with perfect competition
Unit 8

i. Influence over market price

ii. Product differentiation
iii No uncertainty about market conditions
iv Agreements between sellers to control supply
v Economic profit in the long run
A i, ii, iii, iv and v
B i, iv and v
C ii, iv and v
D i, ii, iii and v
E i, ii, iv and v
11. A firm’s marginal cost is the increase in its total cost divided by the increase in its ________
Unit 7
A Average cost.
B Quantity of labour.
C Average revenue.
D Output
E Capital.
12. In the long run, a profit maximising firm produces any given level of output by choosing the
production method that ____________ Unit 7

A Shows a flat total cost curve.

B Produces that output at the lowest possible cost.
C Maximises the marginal product of all factors.
D Maximises the marginal product of labour.
E Minimizes labour input.
13. In the market for first year economics textbooks, assuming everything else remains
unchanged, the equilibrium price of textbooks will increase if Unit 4
A There is a surplus of textbooks.
B the price of university education, a complement, increases.
C the supply of textbooks increases.
D the cost of the publication of textbooks increases.
E there is a drop in the cost of paper necessary to produce textbooks.

14. If the cross elasticity of demand between bread rolls and cheese is –3,0, this implies that
these goods are ________________ Unit 6
A luxuries.
B complements.
C necessities.
D substitutes.
E income inferior goods.
15. If milk is a normal good, then a decrease in consumers’ income will definitely cause ______
Unit 6
A a decrease in the demand for milk.
B an increase in the demand for milk.
C an increase in the supply of milk.
D a decrease in the supply of milk.
E an increase in the demand and supply of milk.

16. Zero economic profit earned by firms in a perfectly competitive market indicates that _____
Shutdown rule Unit 8
A firms will exit in the long run.
B total revenue covers all variable costs of production exactly.
C MR < AR.
D P = ATC.
E zero normal profit.
17. In the market for diamonds, assuming everything else remains unchanged, the equilibrium
price of diamonds will decrease if ___________ Unit 4
A there is a shortage of diamonds.
B the price of gold, a complement, decreases.
C the supply of diamonds decreases.
D the price of cubic zirconia’s, a substitute, increases.
E there is a technological improvement in mining equipment.
18. There is an increase in the number of adverts highlighting the dangers of consuming artificial
sweeteners (as opposed to sugar). Which of the following is likely to occur in the market for
sugar, as a result of this? Unit 4
An increase in both price and equilibrium quantity traded
B A decrease in price and an increase in equilibrium quantity traded
C A decrease in both price and equilibrium quantity traded
D An increase in price and a fall in equilibrium quantity traded
E None of the above is likely to result
19. If the cross elasticity of demand for two goods, A and B, is +5,0, then this implies that these
goods must be _________________ Unit 6
A luxuries.
B complements.
C necessities.
D substitutes.
E income inferior goods.

20. In economics, the short run is a period of time ________________ Unit 7

A of one year or less.
B in which all inputs are variable.
C in which all inputs are fixed.
D in which the quantity of at least one input is fixed and the quantities of the other inputs can be
varied.
E in which all inputs are variable but technology is fixed.
21. If the price of domestic airline tickets increases, then, ceteris paribus: Unit 4
A the demand for domestic air travel will increase.
B the demand for car rentals, a complement in consumption, will increase.
C the demand for domestic air travel will decrease.
D the demand for car rentals, a complement in consumption, will decrease.
E the demand for car rentals, a substitute in consumption, will decrease.
22. A perfectly competitive firm is referred to as a _____________ Unit 8
A price giver.
B price taker.
C price maker.
D price cutter.
E price setter.
23. Market demand ____________ Unit 4
A shows how much an individual is willing and able to consume at each and every price.
B is the horizontal summation of all the individual demand curves in a market.
C is the vertical summation of all the individual demand curves in a market.
D is a positive slope.
E shows how much individuals are willing to supply at each and every price.

24. In the market for air travel, which of the following variables would decrease demand,
ceteris paribus? Unit 4
A An increase in rental rates for hired cars, a substitute
B A rise in income of tourists
C A rise in the price of air travel
D A rise in the price of hotel accommodation, a complement
E A drop in the price of air travel
25. A movement along a demand curve illustrates…
a) A change in quantity demanded
b) A change in the price
c) All of the above
d) None of the above

26. A price set above the equilibrium price will result in…
a) A market shortage
b) A decrease in the price level
c) An increase in the price level
d) None of the above
27. When production takes place on points on the production possibilities frontier we refer to this
as…
a) Economic growth.
b) Improved production technique.
c) Full employment.
d) None of the above.

28. Secondary factors of production include…

a) Capital
b) Entrepreneurship
c) All of the above
d) None of the above
29. In the goods market, the following are traded…
a) Factors of production
b) Goods and services
c) Public goods and services
d) None of the above

30. The following are buyers in the factor market…

a) Household
b) Government
c) All of the above
d) None of the above
31. Opportunity cost refers to…
a) The cost of the best alternative forgone.
b) The value of the best alternative forgone.
c) All of the above.
d) None of the above.

32. Points beyond the production possibilities frontier are…

a) Inefficient
b) Efficient
c) Negative
d) None of the above
33. Monopolistic competition is characterised by…
a) A single firm
b) Firms earn economic profit in the long-run
c) A kinked demand curve
d) None of the above

34. Long-run economic profits are possible under…

a) Oligopoly
b) Monopoly
c) All of the above
d) None of the above
35. When marginal product increases…
a) Total product increase
b) Average product is decreasing
c) All of the above
d) None of the above

36. A firm will close down in the short-run if…

a) Accounting profit is equal to zero
b) Economic profit is equal to zero
c) Normal profit is equal to zero
d) None of the above
37. A price ceiling above the equilibrium price will cause…
a) A market surplus
b) A market shortage
c) A deadweight loss
d) None of the above

38. Price elasticity of demand…

a) Increases down a straight line demand curve
b) Decreases down a straight line demand curve
c) Is constant down a straight line demand curve
d) Increases reaches a maximum and then decreases down a straight line demand curve.
39. The type of price elasticity of demand depicted in the figure is…
a) Perfectly inelastic
b) Perfectly elastic
c) Unitary elastic
d) None of the above

40. Accounting profit equals...

a) Total revenue less total explicit costs
b) Normal profit + economic profit
c) All of the above
d) None of the above
41. Perfect competition is characterised by…
a) A large number of sellers
b) A large number of buyers
c) Perfect information
d) All of the above

42. The demand curve for a perfectly competitive firm is…

a) Perfectly inelastic
b) Perfectly elastic
c) Elastic
d) Inelastic
43. A leftward shift of the supply curve can be caused by…
a) An increase in the price level
b) A decrease in the price level of production inputs
c) A decrease in the price level
d) None of the above

44. When demand and supply increase, this results in…

a) A market surplus
b) A definite increase in equilibrium quantity
c) A definite increase in equilibrium price
d) All of the above