Answer the following 10 Multiple-choice questions and enter the answers into the following table
MULTIPLE CHOICE ANSWERS
No 1 2 3 4 5 6 7 8 9 10
1 Scarcity exists
A. only in poor nations.
B. only among poor families.
C. in all countries of the world.
D. when people consume beyond their needs.
2 A review of the performance of the Indian steel industry during the 1990s is primarily the concern of
C. both macroeconomics and microeconomics.
D. neither macroeconomics nor microeconomics.
3. Which of the following sets of decisions must be made by all economies?
A. What to produce? How to produce it? For whom to produce it
B. What is the price? Who will produce it? Who will consume it?
C. How much to produce? When to produce? How much does it cost?
D. None of the above.
4. Abolition of child labour in developing countries is likely to
A. increase wages of unskilled adult workers.
B. make school places scarcer.
C. shift the production possibility frontier towards the origin in the short term.
D. shift the production possibility frontier away from the origin in the long term.
E. All of the above
5 Assuming diamonds and pearls are substitutes, a decrease in the price of diamonds, other things being equal, results in
A. a downward movement along the demand curve for pearls.
B. a leftward shift in the demand curve for pearls.
C. an upward movement along the demand curve for pearls.
D. a rightward shift in the demand curve for pearls.
6. Assuming noodles and oyster sauce are complements, a decrease in the price of noodles will
A. decrease the demand for noodles.
B. increase the demand for noodles.
C. increase the demand for oyster sauce.
D. decrease the demand for oyster sauce.
7. Minimum wages are an example of
A. a price ceiling.
B. an equilibrium price.
C. a price floor.
D. a public good.
8. Typically, a good that provides external benefits to society has
A. too few resources devoted to its production.
B. too many resources devoted to its production.
C. optimal resources devoted to its production.
D. allowed the producers of the good to earn very handsome profits.
9. If an increase in train fares in Singapore raises total revenue of the operators, this is evidence that demand is
A. unitary elastic.
B. price elastic.
C. price inelastic.
D. perfectly elastic.
10. The income elasticity of demand for tattoos is estimated to be –0.27. We can conclude that tattoos
A. have a relatively steep demand curve.
B have a relatively flat demand curve.
C are a normal good.
D are an inferior good.
QUESTION 2 (5 marks)
Read the textbook, analyse the issue “Population growth, sustainability and the PPF (pp. 44–5)”, and answer the following questions
1 Draw a production possibilities frontier for an economy that has no immigration. (1 Mark)
2 Explain how a new policy of promoting immigration could shift this nation’s PPF. (1 Mark)
3 Does this shift in the PPF result only from increased resources in the form of new labour, or do other resources and technological change also play a part? Where does the natural environment fit into this picture? (1.5 Marks)
4 Give some thought to the PPF for the countries from which workers are emigrating. Does this emigration affect their production possibilities, and what is its effect on the natural environment in these countries? (1.5 Marks)
QUESTION 3 (5 marks)
1 Distinguish between an increase in demand and an increase in quantity demanded. Show each graphically (1 Mark).
2 Explain what will happen to either supply or demand in the following situations
a) As a result of the improving economy, several large overseas companies decide to enter the supermarket business in Australia.
b) Consumers suddenly decide that tattoos are unfashionable.
c) The Department of Employment issues findings of a study that shows that playing computer games increases young people's job prospects.
d) Frost threatens to damage the coffee crop, and consumers expect the price to rise sharply in the future.
e) The price of air conditioners increases significantly. What is the effect on the market for electricity?
f) The price of reticulated water rises. What is the effect on the soft drink market?
g) Tobacco company and retail lobbyists persuade the government to remove the excise tax paid by sellers on each packet of cigarettes sold.
h) A new type of robot is invented that will wash people's cars at home.
QUESTION 4 (5 marks)
1. List and explain three elasticities of demand. (2 Marks)
2. Consider the following demand schedule.
Price Quantity demanded Elasticity coefficient
Use the midpoint formula to calculate the elasticity coefficient between
a) P = $25 and P = $20
b) P = $20 and P = $15
c) P = $15 and P = $10
d) P = $10 and P = $5
Enter the result into the table (2 marks)
3 In terms of linearity of the demand curve and its elasticity coefficient, what conclusion can you generate from the result of your calculation?