PAPER 1 Total Marks 60 Total Time Duration 1 Hours 30 Minutes

PART I

Multiple Choice Questions (ATTEMPT ANY 20) [1 Mark Each]

1. The table shows the price of, demand for and supply of X per week.


price ($)

demand
(tonnes)

supply
(tonnes)
20
30
40
16
12
10
10
12
14

What will be the effect if the government imposes a minimum price of $40
per tonne?

A a fall in the price of X

B a shortage of X

C a surplus of X

D a waiting-list for X

2. In many countries, extra staff are employed by the postal service
and additional collections of post are made to clear the large amount
of mail before holiday periods. What happens to the demand and
supply curves for postal services during these periods?



demand curve

supply curve

A
B
c
D

moves to left
moves to left
moves to right
stays the same

moves to left stays the
same moves to right
moves to right

3. Which factor would cause a shift in the supply curve for a good?
A) a fall in the price of the good
B) a fall in the price of its raw materials
C) an increase in the quantity consumed
D) an increase in consumers incomes
4. What is not held constant in calculating a demand schedule?

A) the incomes of consumers
B) the prices of complementary goods
C) the price of the good itself
D) the tastes of consumers
5. In 2002 in Paris there was a decrease in demand for theatre tickets. What
might have caused this?
A a decrease in fares on public transport in Paris
B a decrease in the number of tourists in Paris
C an increase in the number of jobs available in Paris
D an increase in the subsidy given to theatres in Paris
6. What is regarded as a factor of production?

A capital
B interest
C profit
D rent

7. In a mixed economy,
(a) all economic decisions are taken by the central authority.
(b) all economic decisions are taken by private entrepreneurs.
(c) economic decisions are partly taken by the state and partly by the private
entrepreneurs.
(d) none of the above.
8. Which of the following bundles of goods could not be produced with the
resources the economy
currently has?
(a) a (b) b
(c) c (d) d








9. To what economic issue does this statement refer?

A exchange
B market forces
C scarcity
D income distribution
10. A supply curve shows the relationship between the quantity supplied and

A company profits.
B the demand for the product.
C the output of the product.
D the price of the product.


11. What is likely to increase the supply of fish brought to market?
A a decrease in the number of fishing vessels operating
B the imposition of a quota on the import of fish
C the imposition of a sales tax on fish
D a decrease in the cost of building fishing vessels
Use the figure at right to answer questions 12-14.

12. Which point on the PPF shows a productively efficient level of output?
(a) A (b) B
(c) C (d) All of the above.









13. Which of the following clearly represents a movement toward greater
productive efficiency?
(a) A movement from point A to point B.
(b) A movement from point C to point D.
(c) A movement from point F to point C.
(d) A movement from point E to point B.


14. Which of the following illustrates a decrease in unemployment using the PPF?
(a) A movement down along the PPF.
(b) A rightward shift of the PPF.
(c) A movement from a point on the PPF to a point inside the PPF.
(d) A movement from a point inside the PPF to a point on the PPF.
15. Demand for a commodity refers to :
(a) desire for the commodity.
(b) need for the commodity.
(c) quantity demanded of that commodity.
(d) quantity of the commodity demanded at a certain price during any particular
period of time.

16. Contraction of demand is the result of :
(a) decrease in the number of consumers.
(b) increase in the price of the good concerned.
(c) increase in the prices of other goods.
(d) decrease in the income of purchasers.
17. Identify the coefficient of price-elasticity of demand when the percentage
increase in the quantity of a good demanded is smaller than the percentage
fall in its price :
(a) Equal to one. (b) Greater than one.
(c) Smaller than one. (d) Zero.
18. The price of hot dogs increases by 22% and the quantity of hot dogs
demanded falls by 25%. This indicates that demand for hot dogs is :
(a) elastic. (b) inelastic.
(c) unitarily elastic. (d) perfectly elastic.
19. If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100
and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the
price elasticity of demand for pizzas is :
(a) .67 (b) 1. 5
(c) 2. 0 (d) 3. 0
20. Elasticity of supply is zero means
a. perfectly inelastic supply
b. perfectly elastic supply
c. imperfectly elastic supply
d. none of the above

21. Elasticity of supply is greater than one when
a. proportionate change in quantity supplied is more than the proportionate change
in price.
b. proportionate change in price is greater than the proportionate change in quantity
supplied.
c. change in price and quantity supplied are equal
d. None of the above

22. The price of a commodity decreases from Rs. 6 to Rs. 4 and his demand for
goods increases from 10 units to 15 units, Find the coefficient of price
elasticity.
a.) 1. 5 b.) 2. 5
c.) -1.5 d.) 0. 5

23. Suppose a department store has a sale on its silverware. If the price of a
place-setting is reduced from Rs. 300 to Rs.200 and the quantity demanded
increases from 3,000 place-settings to 5,000 place-settings, what is the price
elasticity of demand for silverware?
(a) . 8 (b) 1. 0
(c) 1. 25 (d) 1. 50

PART II (ATTEMPT ALL COMPULSORY)
Structured Questions
Que. 1 In Zimbabwe a local community markets a tea which grows wild in their area.
Communities should be able to manage their natural resources if they are to benefit,
especially if they are to gain an economic benefit, the leader of the project said.
(a) Identify the factors of production. [4]
(b) Explain what benefits might be gained by the local community in Zimbabwe from
the project. [6]
Que. 2 Sometimes in an industry a firm buys a smaller competitor which uses similar
factors of production. At other times a firm buys another firm which supplies it with
the raw materials and other inputs for its production.
(a) Explain what is meant by the factors of production. [4]
(b) Discuss the reasons why some firms remain small. [6]
Que. 3 Explain the following
(a) Explain the terms scarcity and opportunity cost. [4]
(b) Describe the factors that affect an individuals choice of occupation and show
how the idea of opportunity cost might be relevant to that choice. [6]
Que.4
(a) Explain the terms Market Failure and public goods. [4]
(b) Explain merit goods, demerit goods, social benefits and social costs. [6]