6073Q1 SPECIMEN ECONOMICS

Extracted Content: 6073Q1 SPECIMEN ECONOMICS

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ZIMBABWE SCHOOL EXAMINATIONS COUNCIL General Certificate of Education Advanced Leva

ECONOMICS 0073/1
PAPER 1 Multiple Choice
SPECIMEN PAPER 1 hour 15 minutes
Additional materials:
Multiple choice answer sheet
Soft clean eraser
Soft pencil (type B or HB is recommended)
TIME 1 hour 15 minutes
INSTRUCTIONS TO CANDIDATES

Do not open this booklet until you are told to do so.

Write your name, Centre number and candidate number on the answer sheet in the spaces provided unless
this has already been done for you.

There are forty questions in this paper. Answer all questions. For each question there are four possible
answers, A, B, C and D. Choose the aneyou consider correct and record your choice in soft pencil on
the separate answer sheet provided.

Read very carefully the instructions on the answer sheet.

Calculators may be used.

INFORMATION FOR CANDIDATES

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.

This question paper consists of 18 printed pages and 2 blank pages.
Copyright: Zimbabwe School Examinations Council, Specimen Paper.

@ZIMSEC SPECIMEN PAPER

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Productive efficiency is achieved when

A a firm is producing on the lowest point of its average cost curve.
B there are no further opportunities of substituting labour for capital.
Cc all factors of production are fully employed.

D the firm is maximizing profits.

The diagram shows a production possibility curve for country Z producing two goods X
and Y. As one moves from left to right along the PPC, What happens to the opportunity
cost?

goodY 4
good X
0)
A It remains constant.
B It is unitary.
Cc It increases.
D It falls.

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3 The graph below shows short run production for a competitive firm. Revenue /Cost$ D Output 0

At which point A, B, C or D does the firm achieve productive efficiency?

4 Which of the following is the most suitable source of finance for a firm to acquire
machinery?

A Bank overdraft
B Debt factoring
Cc Hire purchase
D Trade credit

5 Which of the following is an advantage of a public limited company over a private
limited company?

A Easy to set up.

B More capital can be raised.

Cc The firm enjoys secrecy.

D The firms enjoys economies of scale.

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The key defining role of the entrepreneur is a

A decision maker.

B good manufacturer.
Cc profit maker.

D risk bearer.

If the demand for a good is inelastic an increase in its price causes total expenditure on
the good to

A become zero.

B decrease.

Cc increase.

D remain constant.

Effective demand for a commodity refers to the

A desire to purchase a commodity.

B great ability to purchase the commodity.

Cc need for a commodity that one wants to purchase.

D willingness to purchase the product backed by ability to pay.

Income elasticity of demand is given by

A change in quantity demanded
change in income

B % change in quantity demanded
% change in income .

% change in quantity demanded
Cc on ee ae x 100.
% change in income
% change in income
D ae x 100.

% change in quantity demanded

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10

The diagram below shows the demand curves for a product.

Price
D2

D1

oS
So

D1

Output
0

A shift of the demand curve D1D1 to D2D2 could be caused by

a decrease in quantity supplied.

an increase in the price of a compliment.
a decrease in consumers incomes.

an increase in the price of a substitute.

Sane,

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11 ~—s The diagram below shows the demand curve for commodity X.

Income

Quantity
0

Which of the following statements is correct? X is

A anormal good.
B an inferior good.
Cc a substitute.

D

a complimentary good.

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1 ~Where on the graph below is price elasticity of demand greater than one?

4

Price
D
Cc
|
|
|
|
| B .
Quantity
0 MR AR

A AB

B AD

Cc BC

D DC

If firms in an oligopolistic industry agree to form a cartel, what are the likely effects on

price and output produced?

EFFECT ON PRICE EFFECT ON OUTPUT
A falls falls
B falls increases
Cc increases falls
D increases increases

In a contestable market

bigger firms have preferential treatment from government.
abnormal profits are earned in both the short run and long run.
there is threat of potential entry by new firms.

there is a limited number of firms.

Sane

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6B

16

17

The diagram below shows the TR and TC curves fora firm.

Price

TR

0 : > Output
Qo Q: Q Qs
At which level of output is the loss equal to the fixed costs?
A Q3
B Q2
Cc Qi
D Qo
Why is plastic money not included in M: definition even though consumers use it in
carrying out transactions?
A It is not money but just electronic devices linking where money is kept and where
itis to be spent.
B It is not issued by monetary authorities and some retailers issue it.
Cc It is not an asset, but is just a means of accessing money to settle debts.
D It is not acceptably transferrable as money is.

According to monetarist theory what is the short-run effect of an unexpected increase in

the money supply?

A An increase in the rate of interest.

B An appreciation of the foreign exchange rate.
Cc An increase in real wages

D An increase in employment.

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The cash ratio of the banking system is 12.5%. Given a deposit of $25 000 the amount of money created in the economy is

A 2 000.
B 3 125.
Cc 200 000.
D 312 500.

Demand-pull inflation is caused by

A an increase in indirect taxes.

B an increase in interest rates.

Cc a reduction in direct taxes.

D a reduction in the money supply.

The graph below shows the supply curves of wheat.

Price

So
St

0 Quantity

What causes a shift of the supply curve from So to S1?

A rise in price of wheat.

A rise in price of barley.

A rise in income of farmers.

A subsidy given to wheat farmers.

Sane,

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21 ~The diagram below shows the total revenue curve of a firm.

Revenue

Output
0

When (TR) Total Revenue is at its maximum then

A marginal revenue is zero.

B marginal revenue is equal to marginal cost.
Cc average revenue is equal to average cost.

D marginal revenue is equal to average revenue.

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22

11

The table below shows a firm’s total and marginal cost and output

OUTPUT TOTAL COST $ MARGINAL COST $
1 300 20
2 315 15
3 325 10
4 340 15
5 360 20
6 385 25

What is the average fixed cost of producing 4 units?

A 22.67
B 70

Cc 85

D 325

Which combination of changes in import prices and export prices result in a fall in the

value of a country’s terms of trade?

AVERAGE IMPORT PRICES

AVERAGE EXPORT PRICES

decrease by 50%

decrease by 10%

decrease by 10%

decrease by 5%

decrease by 10%

increase by 5%

Sanur

increase by 5%

increase by 10%

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12

The diagram below relates to the production of cars and maize in countries W and Z with
a given quantity of resources.

Maize ,

400

140

Cars
0 70 100

Using relative cost advantages, trade between countries W and Z can occur since

country Z has an absolute advantage in the production of cars.

country W has an absolute advantage in the production of both cars and maize.
country W has an absolute advantage in the production of cars and Country Z has
a comparative advantage in maize.

country W has a comparative advantage in the production of maize and Country Z
has a comparative advantage in the production of cars.

5S AWS

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13

The diagram below shows the domestic market for a good. With free international trade
the price is P. The country then imposes a tariff on imports of the good causing domestic
price to rise to P1.

Price

Pl

World Supply with Tariff

World Supply

Quantity units

As aresult of the tariff imposition quantity of goods imported change from

Sane

ZtoY.
Z to X.
VZtoVY.
VZ to WY.

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14 26 The diagram below shows the effect of a devaluation on a country’s balance of trade.

Balance of Trade

J Curve

Surplus
+
0 Time

Deficit
What explains the initial deterioration of the balance of trade?

A Increased export prices.

B Increased interest rates.

Cc Short run inelastic demand for imports.
D Insufficient foreign reserves.

27 A socially efficient output is achieved when

marginal social cost equals marginal social benefit.
marginal private cost equals marginal social benefit.
marginal private cost equals marginal private benefit.
marginal social cost equals marginal private benefit.

Sanur

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15

The profits for three companies in the same industry are shown below.

Company Profit($) Tax Paid($)
xX 2 000 200
Y 5 000 400
Z 9 000 600

The nature of the tax applied in this economy is

A regressive.
B progressive.
Cc proportional.
D exemptive

The reason for government intervention in the market is

A existence of diseconomies of scale.

B imbalance between buyers and sellers.

Cc existence of significant economies of scale.

D existence of negative externalities in production.

Other things being equal, which of the following causes the demand curve for labour to
shift to the right?

A arise in real wages

B an increase in immigration

Cc an increase in productivity of labour
D a fall in the money wage rate

In the liquidity preference theory, the speculative demand for money is low when bond
price is
A low and interest rate is high.
B low and interest rate is low.

Cc high and interest rate is high.
D high and interest rate is low.

Overtime, the national rate of unemployment may fall as a result of the following except

an increase in money supply.

an increase in the mobility of labour.

a reduction in state unemployment benefits.

a reduction in trade union restrictive practices.

Sane

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16

With reference to the diagram below, which of the following indicates actual economic
growth?

Wheat 1

Tobacco

0
operating at point E
movement from point C to point D
movement from point A to point B
A shift of PPC1 to PPC2

Sanur

Below is the demand and supply curve for labour on the market.

Wage rate

wi
Wo

Quantity of labour
What type of unemployment is caused by an increase in the wage rate to W1?
A Frictional
B Classical
Cc Cyclical
D Structural

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17

The government of a particular country introduces laws to reduce powers of trade union

Thisisanexampleof policy
A demand

B fiscal

Cc monetary

D supply side

In the diagram below S1 is the initial closed economy’s savings function which then shifts
to Se.

Savings

Real National Income

What is the effect on the multiplier and on the marginal propensity to save?

Effect on Multiplier | Effect on Marginal propensity to save
A falls falls
B falls rises
Cc rises rises
D rises falls

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18

What is the marginal propensity to consume for a closed economy with no government
sector in which investment rises by $100 resulting in real gross domestic product (GDP)
rising by$1000?

A 0,1
B 0,9
Cc 1,0
D 10,0

The sales made by a supermarket in five days were $94, $98, $86, $90 and $91. What is
the effect to the weekly mean of including Saturday’s sales of $61?

A decreases

B increases

Cc remains constant

D cannot be determined

A survey was conducted by a chocolate manufacturing firm on its products. Which
measure of central tendency helps the firm to establish the most favouredbrand?

A mean
B median
Cc mode
D range

One advantage of using interviews over questionnaires when collecting data is that

itis less expensive.

it permits anonymity and may result in more honest responses.
it does not eliminate bias in the phrasing of the questions.

it is suitable for use with both literate and illiterate respondents.

Sanur

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