MUF0061 Economics Unit 1

Skills and Application Task: SA2 Introduction to Microeconomics

Practice Task

Practice Task
MUF0061 Economics Unit 1: Introduction to Microeconomics
Study Area 2: Markets in Action
Skills and Application Task: SA2

Instructions
Answer ALL questions.
Section A consists of 15 questions. You must answer ALL questions on the Multiple Choice Answer
Sheet on page 13. This page may be removed for ease of use. Please fill in your details and place
the completed Multiple Choice Answer Sheet behind the cover of this booklet.
Section B consists of 5 questions. They must be answered in this booklet.
Materials Allowed: Pens, rulers, pencils
A scientific (non-programmable) calculator is allowed.
Reading Time: 5 minutes (no marking or writing allowed)
Writing Time: 45 minutes

Candidates are to fill in the following

Family Name:

Given Name(s):

Student ID Number:

Class/Teacher:

Campus Location:

For Marker Use Only

Multiple Choice Short Answer Questions

Questions Q1 Q2 Q3 Q4 Q5 Total
15 marks 1 marks 3 marks 3 marks 3 marks 5 marks 30 marks

MUF0061 Skills and Application Task: SA2 Practice Task 1

 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Section A: Multiple Choice Questions

Specific Instructions for Section A

Section A consists of 15 multiple choice questions worth 1 mark each, a total of 15 marks.

Choose the response you consider best answers the question or completes the statement, and circle
your choice on the Multiple Choice Answer Sheet on page 16.

A correctly answered question scores 1 mark, an incorrect answer scores 0.

No credit will be given in a case where the answers are not marked in the Multiple Choice Answer
Sheet on page 16 or if two or more options are circled for a question.

Marks will not be deducted for incorrect answers and you are strongly encouraged to attempt every
question.

Question 1
Which of the following factors is likely to cause a decrease in supply of pineapples?

A. Lower costs of production for pineapples.

B. An increase in demand for pineapples.

C. Lower prices for bananas, assuming bananas are a substitute product for
consumers.

D. An increase in the wage rate paid to pineapple pickers.

Question 2
A market can best be defined as:

A. An arrangement whereby governments regulate the prices that firms are able to
charge consumers.

B. A system in which interaction between buyers and sellers determines the prices
and quantities traded of goods and services.

C. A situation in which the quantity supplied of a product is exactly equal to the

quantity demanded.

D. A situation whereby the price of a product is determined by the level of demand

firms have for the resources required to produce the product.

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 3
Which of the following is an accurate example of the operation of the price mechanism?
A. A decrease in demand causes a surplus of a product at the original equilibrium
price. Firms are likely to decrease their prices until prices reach a new
equilibrium where there is no surplus and no shortage.
B. An increase in supply causes a shortage of a product at the original equilibrium
price. Firms are likely to increase their prices until prices reach a new equilibrium
where there is no surplus and no shortage.
C. An increase in demand causes a shortage of a product at the original equilibrium
price. Firms are likely to decrease their prices until prices reach a new
equilibrium where there is no surplus and no shortage.
D. A decrease in supply causes a surplus of a product at the original equilibrium
price. Firms are likely to increase their prices until prices reach a new equilibrium
where there is no surplus and no shortage.

Question 4
Refer to Table 1 below.
Table 1: Demand and Supply Schedules for Beyoncé Concert Tickets in Melbourne

Price $80 $100 $120 $140 $160

Demand 20,000 18,000 17,000 13,000 8,000

Supply 16,000 16,500 17,000 18,000 18,800

Which of the following statements is true?

A. There will be a shortage of Beyoncé concert tickets at a price of $140.
B. The equilibrium quantity for Beyoncé concert tickets is 18,000.
C. The equilibrium price for Beyoncé concert tickets is $100.
D. There will be a shortage of Beyoncé concert tickets at a price of $100.

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 5
The purpose of an excise tax on production is:
A. to encourage a decrease in production and/or higher equilibrium prices for a
particular product.
B. to encourage an increase in production and/or lower equilibrium prices for a
particular product.
C. to eliminate a surplus in a market.
D. to ensure that firms are paying enough tax.

Question 6
Allocative efficiency is best described as:
A. A situation whereby resources are allocated towards producing goods and
services that best meet the needs and wants of society.
B. A situation whereby a minimum quantity of resouces is used to produce a given
level of goods and services.
C. A situation whereby firms are able to maximise their production of goods and
services, using a minimum quantity of labour.
D. A situation whereby consumers and producers exchange goods and services for
money in the minimum time possible.

Question 7
The law of supply states that:
A. there is an inverse relationship between the price of a product and the quantity
that buyers will be willing and able to buy.
B. there is an inverse relationship between the price of a product and the quantity
that sellers will be willing and able to sell.
C. there a direct relationship between the price of a product and the quantity that
buyers will be willing and able to buy.
D. there is a direct relationship between the price of a product and the quantity that
sellers will be willing and able to sell.

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 8
Figure 1: The Market for Hamburgers in Singapore

According to Figure 1, at a price of $8 there would be:

A. a shortage.
B. an equal quantity supplied and demanded.
C. excess demand.
D. a surplus.

Question 9
Imagine that Product A is a complement to Product B. What is the likely effect of an increase
in the price of Product A?
A. A decrease in demand for Product A.
B. A decrease in demand for Product B.
C. An increase in demand for Product A.
D. An increase in demand for Product B.

MUF0061 Practice Assessment Task 2a Page 5

 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 10
The effect of a subsidy for consumers is:
A. supply will decrease and equilibrium prices will fall.
B. demand will decrease and equilibrium prices will fall.
C. supply will decrease and equilibrium prices will rise.
D. demand will increase and equilibrium prices will rise.

Question 11
Which of the following factors is most likely to cause a product’s demand to be price
inelastic?
A. A large quantity of close substitutes is available.
B. The product is unnecessary for consumers.
C. There is a long time period before consumers are likely to purchase the product.
D. The product is relatively inexpensive in comparison to most consumers’
incomes.

Question 12
Which of the following is the best example of ‘derived demand’ for resources?
A. An increase in demand for university courses leads to higher incomes for
graduates.
B. An increase in demand for university courses leads to an increase in demand for
university teachers.
C. A decrease in demand for university courses leads to a decrease in supply of
university courses.
D. A decrease in demand for university courses leads to an increase in demand for
other types of training courses.

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 13
Which of the following is likely to cause a decrease in demand for taxi journeys?
A. An increase in the price of substitute products.
B. An increase in supply of substitute products.
C. An increase in the number of taxi firms supplying.
D. A decrease in the cost of petrol.

Question 14
Which of the following might have caused both equilibrium price and quantity to decrease?
A. An increase in demand.
B. An increase in supply.
C. A decrease in demand.
D. A decrease in supply.

Question 15
A higher price for Product Z will lead to:
A. a rightward shift of the supply curve for Product Z.
B. a movement upwards along the demand curve for Product Z.
C. a leftward shift of the demand curve for Product Z.
D. a movement downwards along the supply curve for Product Z.

MUF0061 Practice Assessment Task 2a Page 7

 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Section B: Short Answer Questions

Specific Instructions for Section B

Section B consists of 5 questions worth a total of 15 marks. The marks allotted to each sub-part are
indicated beside the question. Answer ALL questions.
Draw appropriate, correctly labelled diagrams where necessary.
You can use extra space for writing responses at the end of this booklet, indicating you have
continued your answer. Ensure your answer is clearly labelled with the appropriate question number.

Question 1 (1 mark)
Define the concept ‘market equilibrium’.

Question 2
a) Define what is meant by a market surplus. (1 mark)

b) Distinguish between an increase in supply and an expansion in supply.

(2 mark)

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 3
Refer to Figure 2 below and answer the questions that follow.

Figure 2: The Market for Skateboards

A new film is released about skateboarding which leads to an increase in the popularity of
skateboards amongst teenagers. On the diagram above, clearly label the following:
i. The change in demand or supply
ii. The change in equilibrium price
iii. The change in equilibrium quanitiy
(1 + 1 + 1 = 3 marks)

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Question 4
a. State one purpose of a subsidy. (1 mark)

b. A subsidy is given to medical firms who provide doctors’ appointments to consumers.

After the subsidy is given there are 2 effects:
a. Price decreases by 30%
b. Quantity demanded increases by 5%
Use the information above to answer the following questions:
i. Identify whether the PED for doctors’ appointments is elastic or inelastic.

ii. With reference to one factor that can influence PED of a product, suggest why
the response in quantity demanded was low (small) after the price changed for
doctors’ appointments.

(1 + 1 = 2 marks)

Question 5
By referring to the concept of ‘consumer sovereignty’ and ‘derived demand’, explain how
resource allocation is determined in a market-based economic system. Provide an example
to support your explanation. (5 marks)

MUF0061 Practice Assessment Task 2a Page 10

 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Extra Space for Responses

Clearly write question number next to all responses in this space

End of Practice Task

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 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

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MUF0061 Practice Assessment Task 2a Page 12

 MUF0061 Economics Unit 1
Skills and Application Task: SA2 Introduction to Microeconomics
Practice Task

Section A: Multiple Choice Answer Sheet

Candidate to complete:

Family Name:

Given Name(s):

ID Number: Class/Teacher:

Indicate your chosen answer by circling the appropriate letter like this: A B C D

If you change your mind, clearly cross out your first response and circle your new selection.

1. A B C D
A B C D

2. A B C D

3. A B C D

4. A B C D

5. A B C D

6. A B C D

7. A B C D

8. A B C D

9. A B C D

10. A B C D

11. A B C D

12. A B C D

13. A B C D

14. A B C D

15. A B C D
Total Marks: /15

MUF0061 Practice Assessment Task 2a Page 13