This document provides solutions to past CAPE Economics exam questions. It begins by summarizing the key aspects of a production possibility frontier curve, including the assumptions it is based on and what different points on the curve represent. It then discusses concepts like scarcity, choice, and opportunity cost. Other sections cover market equilibrium, monopolistic competition versus perfect competition, and government intervention to address market failures like public goods, externalities, and natural monopolies.
CAPE Economics, June 2004, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions. It includes explanations of indifference curves, budget lines, cost curves, and perfect competition. Key points covered are the characteristics of indifference curves, how to draw a budget line, calculating substitution and income effects of a price change, the shapes of average and marginal cost curves, and how firms respond to changes in demand and price in the short and long run under perfect competition.
CAPE Economics, June 2007, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam questions from June 2007. It includes analysis of concepts like utility, marginal utility, demand and supply, production functions, costs of production, and market structures. Key points covered are the optimal consumption levels that maximize utility subject to a budget constraint, the impact of price ceilings, the relationship between average and marginal physical products as labor input increases, and definitions of price elasticity of demand under different market structures.
This document contains solutions to past exam questions for a CAPE Economics exam. It addresses topics like total utility, marginal utility, demand curves, factors influencing demand, and market structures. For question 1, it defines total utility and marginal utility, applies the law of diminishing marginal utility, and analyzes consumer choice between goods. For question 2, it defines demand, states the first law of demand, and distinguishes between movements along and shifts of the demand curve. For question 3, it compares oligopoly and monopolistic competition, discusses how advertising affects substitutability under monopolistic competition, and analyzes short-run and long-run profits for firms under monopolistic competition.
CAPE Economics, June 2005, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains Edward Bahaw's solutions to past CAPE Economics papers. It provides detailed answers and explanations to questions on microeconomics concepts such as production analysis, costs, market structures, and market failures. The solutions include graphs and calculations to illustrate key economic principles like diminishing returns, efficiency under perfect competition versus monopoly, and how externalities can lead to under or overproduction. Overall, the document offers a comprehensive review of microeconomics topics through step-by-step workings of past exam questions.
CAPE Economics, June 2006, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from June 2006. It discusses key economic concepts like equilibrium price, Pareto efficiency, price ceilings, factors that influence demand and supply of goods. For price ceilings, it explains how shortages can occur and possible government policies in response, like subsidies or rationing. It also defines production functions and the three stages of production.
CAPE Economics, May 22nd 2008, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam questions. It defines key economic concepts like scarcity, production possibility curves, opportunity cost and production functions. It also discusses demand and supply factors, price elasticity including determinants and impact of time. Finally, it compares different market structures like perfect competition, monopolistic competition and monopoly in terms of their characteristics.
This document provides solutions to past CAPE Economics exam questions. It begins by defining key economic concepts like markets, demand and supply curves, and market equilibrium. It then discusses market disequilibriums, shifts in demand and supply curves, and different market structures. Later sections address market failures from externalities, public goods, and asymmetric information. The document also examines profit maximization for firms and defines poverty.
CAPE Economics, June 2007, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions from June 2007. It defines key economic concepts such as GDP, GNP, the expenditure and income approaches to calculating national income. It also discusses factors that influence aggregate demand and supply as well as the volatility of investments. Specifically, it explains that GDP measures domestic production while GNP includes income from abroad. It also lists taxation, government spending, and interest rates as determinants of aggregate demand and prices, capital, natural resources, and technology as determinants of aggregate supply.
CAPE Economics, June 2004, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions. It includes explanations of indifference curves, budget lines, cost curves, and perfect competition. Key points covered are the characteristics of indifference curves, how to draw a budget line, calculating substitution and income effects of a price change, the shapes of average and marginal cost curves, and how firms respond to changes in demand and price in the short and long run under perfect competition.
CAPE Economics, June 2007, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam questions from June 2007. It includes analysis of concepts like utility, marginal utility, demand and supply, production functions, costs of production, and market structures. Key points covered are the optimal consumption levels that maximize utility subject to a budget constraint, the impact of price ceilings, the relationship between average and marginal physical products as labor input increases, and definitions of price elasticity of demand under different market structures.
This document contains solutions to past exam questions for a CAPE Economics exam. It addresses topics like total utility, marginal utility, demand curves, factors influencing demand, and market structures. For question 1, it defines total utility and marginal utility, applies the law of diminishing marginal utility, and analyzes consumer choice between goods. For question 2, it defines demand, states the first law of demand, and distinguishes between movements along and shifts of the demand curve. For question 3, it compares oligopoly and monopolistic competition, discusses how advertising affects substitutability under monopolistic competition, and analyzes short-run and long-run profits for firms under monopolistic competition.
CAPE Economics, June 2005, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains Edward Bahaw's solutions to past CAPE Economics papers. It provides detailed answers and explanations to questions on microeconomics concepts such as production analysis, costs, market structures, and market failures. The solutions include graphs and calculations to illustrate key economic principles like diminishing returns, efficiency under perfect competition versus monopoly, and how externalities can lead to under or overproduction. Overall, the document offers a comprehensive review of microeconomics topics through step-by-step workings of past exam questions.
CAPE Economics, June 2006, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from June 2006. It discusses key economic concepts like equilibrium price, Pareto efficiency, price ceilings, factors that influence demand and supply of goods. For price ceilings, it explains how shortages can occur and possible government policies in response, like subsidies or rationing. It also defines production functions and the three stages of production.
CAPE Economics, May 22nd 2008, Unit 1, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam questions. It defines key economic concepts like scarcity, production possibility curves, opportunity cost and production functions. It also discusses demand and supply factors, price elasticity including determinants and impact of time. Finally, it compares different market structures like perfect competition, monopolistic competition and monopoly in terms of their characteristics.
This document provides solutions to past CAPE Economics exam questions. It begins by defining key economic concepts like markets, demand and supply curves, and market equilibrium. It then discusses market disequilibriums, shifts in demand and supply curves, and different market structures. Later sections address market failures from externalities, public goods, and asymmetric information. The document also examines profit maximization for firms and defines poverty.
CAPE Economics, June 2007, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions from June 2007. It defines key economic concepts such as GDP, GNP, the expenditure and income approaches to calculating national income. It also discusses factors that influence aggregate demand and supply as well as the volatility of investments. Specifically, it explains that GDP measures domestic production while GNP includes income from abroad. It also lists taxation, government spending, and interest rates as determinants of aggregate demand and prices, capital, natural resources, and technology as determinants of aggregate supply.
CAPE Economics, June 12th, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions from June 2008. It defines key economic concepts like inflation, unemployment, interest rates, and consumption functions. It also explains models like the accelerator model and Keynesian assumptions about consumption. Factors that can affect household consumption and savings decisions are outlined such as income, interest rates, expectations, and tax incentives.
CAPE Economics, June 2005, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from 2005. It begins by providing calculations for GDP using the expenditure and income approaches. It then discusses which transactions should and should not be included in GDP calculations. The rest of the document discusses topics related to macroeconomics including the marginal propensity to consume, the multiplier effect, monetary policy tools, money markets, government debt, fiscal policy, and more. Diagrams and calculations are provided to support the explanations.
This document contains Edward Bahaw's solutions to past CAPE Economics papers from June 2010. It includes:
1) Definitions of real GDP, nominal GDP, and the GDP deflator for converting between the two measures.
2) Factors that influence living standards in addition to GDP such as inflation, income distribution, leisure time, and environmental externalities.
3) Solutions to questions on the multiplier, equilibrium income, and factors affecting investment levels.
CAPE Economics, June 2006, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from 2006. It includes:
1) Definitions of GDP, real GDP, the GDP deflator and how they are calculated.
2) Explanations of aggregate demand, aggregate supply, and how fiscal and monetary policy can impact equilibrium output and prices.
3) Discussions of automatic stabilizers, discretionary fiscal policy, and how changes in taxes and spending affect the multiplier.
4) Advantages and disadvantages of different types of money, how fiat currency derives value from legal tender laws, and motives for holding money.
The document contains 3 years (June 2007, June 2008, June 2009) of unit test questions and answers. Each year contains 45 multiple choice questions with answers ranging from A-D. The questions assess different subjects (math, science, history etc) with varying levels of difficulty.
The document contains the results of 3 different units from June 2007, June 2008 and June 2009. Each unit contains 45 multiple choice questions with answers ranging from A-D.
CAPE Economics, June 2004, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
1. This document contains solutions to past CAPE Economics exam papers from 2004 provided by Edward Bahaw. It includes questions on macroeconomic indicators, aggregate demand and supply, and the money supply.
2. For a question on GDP growth rates, the solutions show that nominal GDP in Trinidad and Tobago increased 109.5% from 1990-2002 while real GDP increased 28.4% over the same period.
3. Answers on aggregate demand and supply analyze the relationship between these concepts and factors such as inflation, interest rates, taxes, and government spending.
4. Questions on money supply are addressed, including the credit creation process in commercial banks, how deposits and loans are multiplied, and
June 2008 trinidad unit 2 - paper 2 - answerCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from June 2008 and July 2008. It provides detailed explanations and workings for questions on topics including:
- Calculating real and nominal GDP and converting between the two measures
- Calculating GDP using the expenditure and income approaches
- Determining equilibrium national income
- Explaining types of unemployment including natural rate, cyclical, structural, and frictional unemployment
- Defining money and its functions as a medium of exchange, standard of deferred payment, and unit of account
- Tools central banks use to influence the money supply including issuing currency, changing reserve requirements, open market operations, and interest rate adjustments
The document is an acknowledgement section from a student's dissertation thanking various people who assisted with the project, including God, the student's teacher, the staff at WASCO including the Finance Manager who provided information and advice, and the student's parents for their support and resources. The student's father's position on the board of WASCO was particularly helpful as it enabled contact with the organization and a suggestion of the research topic.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
MANAGEMENT OF BUSINESS Cape '07 u1 p2 #1Liam Nabbal
Globalization refers to the free movement of labor, capital, and goods around the world and the growing integration of the world's economy. There are both positive and negative impacts of globalization on Caribbean businesses. Positively, it provides access to improved technologies, enlarges potential markets, and offers cheaper supplies of raw materials. However, it also increases competition from foreign firms and can create a technological divide if local businesses cannot keep up with advances. On balance, while globalization poses challenges, its benefits are likely greater for Caribbean businesses.
Private sector intervention to correct market failureSandrea Butcher
The private sector uses four main measures to address market failures:
1. Corporate codes of conduct that set standards for product safety and quality as well as social and environmental issues to address information failures.
2. Corporate social responsibility programs that voluntarily reduce negative externalities and increase positive ones to improve social welfare.
3. Voluntary agreements with governments where firms commit to gradually reduce pollution emissions over time.
4. Corporate ethics codes that establish norms of behavior for employees to internalize external costs as private costs.
While these measures can improve welfare by reducing market failures, they also increase business costs, which may be passed onto consumers as higher prices.
The document is a research study on bullying among students at Princes Town West Secondary that examines the causes and effects of bullying through a questionnaire. It finds that verbal and physical bullying are most common, negatively impacting students' self-esteem, with 45% of bullied students believing the bullying is true. The study aims to understand bullying's effects to help address the issue and improve students' well-being.
This is my Management of Business Internal Assesment hat i scored very high on. I would like to share this with you to give a little guidance to you.
I also have Communication Studies, Sociology and Entrepreneurship Unit IA Sba also available.
you can contact me at - erica5dacas@gmail.com
This document discusses the potential effects of reclassifying withdrawable shares as liabilities instead of equity for the St. Lucia Civil Service Co-operative Credit Union (SLCSCCU) in accordance with revised IAS 32 standards. The reclassification could significantly impact the SLCSCCU's financial statements and ratios by increasing liabilities and debt ratios. It may also negatively affect the SLCSCCU's ability to attract new members and access lending as the financial statements would indicate lower equity. While the cooperative movement disagrees with the standards, strategies to increase permanent share capital could help mitigate some impacts in the interim.
- The document analyzes the demand for chicken and chips at a school café through a survey.
- Key factors affecting demand were found to be price, location, and availability of substitutes. At a price of $20, most students bought 1 chicken and chips per week.
- The majority of respondents said they would buy less if the price increased by $5 and more if the price decreased. Price was identified as the most important factor influencing purchases.
Caribbean Studies - CAPE Unit 2 - Internal Assignment/IA 2017John Doe
This document appears to be a research paper or project on the topic of how poverty affects social development in Lengua Village, Princes Town, Trinidad and Tobago. It includes an introduction outlining the research problem, purpose, objectives and definitions. It also includes a literature review summarizing several sources on the relationship between poverty and social development. For data collection, the author used a questionnaire distributed to households in the village as well as secondary sources like books and articles. The document goes on to present and analyze the collected data, discuss findings, and provide conclusions and recommendations.
This document provides past papers for the CAPE Caribbean Studies examination from 2006 to 2016. It contains questions and suggested answers for Papers 1, 2, and 3/2 from May/June examinations during this period. The past papers are intended to help students prepare for the CAPE Caribbean Studies exam by familiarizing them with the format and types of questions asked.
Get HI5003 Economics for Business Holmes T2 2022 final assessment help with diploma assignment help at an affordable price with 100% plagiarism-free. We provide best assignment writing services in Australia.
This document contains solutions to past CAPE Economics exam questions from June 2009. It defines key economic terms like inflation, economic growth, unemployment rate, and balance of payments. It also explains how to calculate GDP using the expenditure and income approaches. Finally, it discusses the average propensity to consume, marginal propensity to consume, and determinants of consumption such as interest rates and inflation.
CAPE Economics, June 12th, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document provides solutions to past CAPE Economics exam questions from June 2008. It defines key economic concepts like inflation, unemployment, interest rates, and consumption functions. It also explains models like the accelerator model and Keynesian assumptions about consumption. Factors that can affect household consumption and savings decisions are outlined such as income, interest rates, expectations, and tax incentives.
CAPE Economics, June 2005, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from 2005. It begins by providing calculations for GDP using the expenditure and income approaches. It then discusses which transactions should and should not be included in GDP calculations. The rest of the document discusses topics related to macroeconomics including the marginal propensity to consume, the multiplier effect, monetary policy tools, money markets, government debt, fiscal policy, and more. Diagrams and calculations are provided to support the explanations.
This document contains Edward Bahaw's solutions to past CAPE Economics papers from June 2010. It includes:
1) Definitions of real GDP, nominal GDP, and the GDP deflator for converting between the two measures.
2) Factors that influence living standards in addition to GDP such as inflation, income distribution, leisure time, and environmental externalities.
3) Solutions to questions on the multiplier, equilibrium income, and factors affecting investment levels.
CAPE Economics, June 2006, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from 2006. It includes:
1) Definitions of GDP, real GDP, the GDP deflator and how they are calculated.
2) Explanations of aggregate demand, aggregate supply, and how fiscal and monetary policy can impact equilibrium output and prices.
3) Discussions of automatic stabilizers, discretionary fiscal policy, and how changes in taxes and spending affect the multiplier.
4) Advantages and disadvantages of different types of money, how fiat currency derives value from legal tender laws, and motives for holding money.
The document contains 3 years (June 2007, June 2008, June 2009) of unit test questions and answers. Each year contains 45 multiple choice questions with answers ranging from A-D. The questions assess different subjects (math, science, history etc) with varying levels of difficulty.
The document contains the results of 3 different units from June 2007, June 2008 and June 2009. Each unit contains 45 multiple choice questions with answers ranging from A-D.
CAPE Economics, June 2004, Unit 2, Paper 2 suggested answer by Edward BahawCAPE ECONOMICS
1. This document contains solutions to past CAPE Economics exam papers from 2004 provided by Edward Bahaw. It includes questions on macroeconomic indicators, aggregate demand and supply, and the money supply.
2. For a question on GDP growth rates, the solutions show that nominal GDP in Trinidad and Tobago increased 109.5% from 1990-2002 while real GDP increased 28.4% over the same period.
3. Answers on aggregate demand and supply analyze the relationship between these concepts and factors such as inflation, interest rates, taxes, and government spending.
4. Questions on money supply are addressed, including the credit creation process in commercial banks, how deposits and loans are multiplied, and
June 2008 trinidad unit 2 - paper 2 - answerCAPE ECONOMICS
This document contains solutions to past CAPE Economics exam papers from June 2008 and July 2008. It provides detailed explanations and workings for questions on topics including:
- Calculating real and nominal GDP and converting between the two measures
- Calculating GDP using the expenditure and income approaches
- Determining equilibrium national income
- Explaining types of unemployment including natural rate, cyclical, structural, and frictional unemployment
- Defining money and its functions as a medium of exchange, standard of deferred payment, and unit of account
- Tools central banks use to influence the money supply including issuing currency, changing reserve requirements, open market operations, and interest rate adjustments
The document is an acknowledgement section from a student's dissertation thanking various people who assisted with the project, including God, the student's teacher, the staff at WASCO including the Finance Manager who provided information and advice, and the student's parents for their support and resources. The student's father's position on the board of WASCO was particularly helpful as it enabled contact with the organization and a suggestion of the research topic.
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive function. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
MANAGEMENT OF BUSINESS Cape '07 u1 p2 #1Liam Nabbal
Globalization refers to the free movement of labor, capital, and goods around the world and the growing integration of the world's economy. There are both positive and negative impacts of globalization on Caribbean businesses. Positively, it provides access to improved technologies, enlarges potential markets, and offers cheaper supplies of raw materials. However, it also increases competition from foreign firms and can create a technological divide if local businesses cannot keep up with advances. On balance, while globalization poses challenges, its benefits are likely greater for Caribbean businesses.
Private sector intervention to correct market failureSandrea Butcher
The private sector uses four main measures to address market failures:
1. Corporate codes of conduct that set standards for product safety and quality as well as social and environmental issues to address information failures.
2. Corporate social responsibility programs that voluntarily reduce negative externalities and increase positive ones to improve social welfare.
3. Voluntary agreements with governments where firms commit to gradually reduce pollution emissions over time.
4. Corporate ethics codes that establish norms of behavior for employees to internalize external costs as private costs.
While these measures can improve welfare by reducing market failures, they also increase business costs, which may be passed onto consumers as higher prices.
The document is a research study on bullying among students at Princes Town West Secondary that examines the causes and effects of bullying through a questionnaire. It finds that verbal and physical bullying are most common, negatively impacting students' self-esteem, with 45% of bullied students believing the bullying is true. The study aims to understand bullying's effects to help address the issue and improve students' well-being.
This is my Management of Business Internal Assesment hat i scored very high on. I would like to share this with you to give a little guidance to you.
I also have Communication Studies, Sociology and Entrepreneurship Unit IA Sba also available.
you can contact me at - erica5dacas@gmail.com
This document discusses the potential effects of reclassifying withdrawable shares as liabilities instead of equity for the St. Lucia Civil Service Co-operative Credit Union (SLCSCCU) in accordance with revised IAS 32 standards. The reclassification could significantly impact the SLCSCCU's financial statements and ratios by increasing liabilities and debt ratios. It may also negatively affect the SLCSCCU's ability to attract new members and access lending as the financial statements would indicate lower equity. While the cooperative movement disagrees with the standards, strategies to increase permanent share capital could help mitigate some impacts in the interim.
- The document analyzes the demand for chicken and chips at a school café through a survey.
- Key factors affecting demand were found to be price, location, and availability of substitutes. At a price of $20, most students bought 1 chicken and chips per week.
- The majority of respondents said they would buy less if the price increased by $5 and more if the price decreased. Price was identified as the most important factor influencing purchases.
Caribbean Studies - CAPE Unit 2 - Internal Assignment/IA 2017John Doe
This document appears to be a research paper or project on the topic of how poverty affects social development in Lengua Village, Princes Town, Trinidad and Tobago. It includes an introduction outlining the research problem, purpose, objectives and definitions. It also includes a literature review summarizing several sources on the relationship between poverty and social development. For data collection, the author used a questionnaire distributed to households in the village as well as secondary sources like books and articles. The document goes on to present and analyze the collected data, discuss findings, and provide conclusions and recommendations.
This document provides past papers for the CAPE Caribbean Studies examination from 2006 to 2016. It contains questions and suggested answers for Papers 1, 2, and 3/2 from May/June examinations during this period. The past papers are intended to help students prepare for the CAPE Caribbean Studies exam by familiarizing them with the format and types of questions asked.
Get HI5003 Economics for Business Holmes T2 2022 final assessment help with diploma assignment help at an affordable price with 100% plagiarism-free. We provide best assignment writing services in Australia.
This document contains solutions to past CAPE Economics exam questions from June 2009. It defines key economic terms like inflation, economic growth, unemployment rate, and balance of payments. It also explains how to calculate GDP using the expenditure and income approaches. Finally, it discusses the average propensity to consume, marginal propensity to consume, and determinants of consumption such as interest rates and inflation.
3Final ExaminationBAM 223 Principles of EconomicsM.docxtamicawaysmith
3
Final Examination
BAM 223 Principles of Economics
Multiple Choice Questions (Enter your answers on the enclosed answer sheet)
An economic ________ is a simplified version of some aspect of economic life used to analyze 1.
an economic issue.
variablea.
marketb.
modelc.
trade-off d.
Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of
$5,000 per week. The plant owner observes, “Although the last 300 hats we produced and
sold increased our revenue by $1,000 and our costs by $1,100, we are still making an
overall profit of $5,000 per week so I think we’re on the right track. We are producing the
optimal number of hats.”
Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit 2.
be higher or lower, and if so by how much?
Its profit will be $1,100 higher. a.
Its profit will be $1,000 lower. b.
Its profit will be $100 lower.c.
Its profit will be $100 higher. d.
The term market in economics refers to: 3.
a place where money changes hands.a.
a legal institution where exchange can take place.b.
a group of buyers and sellers of a product and the arrangement by which they come c.
together to trade.
an organization which sells goods and services. d.
Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of
$10,000 per week. A manager at the plant observes, “Although the last 400 t-shirts we
produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still
making an overall profit of $10,000 per week so I think we’re on the right track. We are
producing the optimal number of t-shirts.”
Refer to Scenario 1-3. Using marginal analysis terminology, what is another economic term 4.
for the incremental cost of producing the last 400 t-shirts?
marginal costa.
explicit costb.
operating costc.
Any of the above terms are correct.d.
4
Final Examination
BAM 223 Principles of Economics
Suppose the U.S. government encouraged new teachers to take jobs in underperforming 5.
schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying
the economic idea that:
people respond to economic incentivesa.
people are rationalb.
optimal decisions are made at the marginc.
equity is more important than efficiency d.
Dr. Goldfinger decides to invest in companies which he believes can “improve the 6.
productivity and efficiency” of health care services. How can Dr. Goldfinger strive to achieve
this productive efficiency?
by investing in companies that produce goods and services at the lowest possible costa.
by investing in companies that produce up to the point where the marginal benefit of the b.
last unit produced is equal to the marginal cost of producing it.
by investing in companies that fairly distribute their products and servicesc.
by investing in companies that produce goods and services based on consumer d.
preferences ...
This document contains a tutorial on microeconomics with multiple choice questions and short answer questions. It discusses key microeconomic concepts such as:
- The main economic problem is scarcity of resources and the need to allocate them efficiently. Households and societies face scarcity.
- Factors of production include land, labor, capital and entrepreneurship. Opportunity cost is the next best alternative given up when making a choice.
- Production possibility curves show the maximum combinations of two goods an economy can produce with its scarce resources, and demonstrate concepts like full employment, unemployment, and scarcity.
- Opportunity costs can be different depending on a country's production possibilities. Factors like technological progress can shift the
1.5.10 Market structure, static efficiency, dynamic efficiency and resource a...IsmailAhsan4
1. The document discusses different types of economic efficiency including productive efficiency, allocative efficiency, and dynamic efficiency.
2. Productive efficiency occurs when maximum output is produced at minimum cost, while allocative efficiency occurs when production matches consumer demand.
3. Dynamic efficiency refers to improvements in technology and production methods over time that allow firms to better satisfy consumer needs.
1.The aggregate supply curve relating the price level to real GDP.docxherminaprocter
The document discusses key concepts in macroeconomics including:
1. The aggregate supply curve has three segments - horizontal, upward sloping, and vertical - which reflect different levels of resource utilization.
2. Fiscal policy uses changes in government spending and tax revenues to influence aggregate demand and thereby real GDP and price levels.
3. The ability-to-pay principle suggests that those with higher incomes should pay more in taxes to reflect their greater ability to pay.
This document contains 6 practice questions about production possibility frontiers (PPF). It covers key concepts such as opportunity cost, shifts in the PPF curve, and how events like technological progress, economic growth, and resource allocation affect the PPF. For each question, it asks the reader to define terms, draw and analyze PPF diagrams, and discuss implications for efficiency and economic performance.
This document contains a study guide for an FBLA economics exam. It includes:
1) Results from a diagnostic test taken by 4 students
2) Definitions of 20 economic terms and the students' vocabulary scores
3) Definitions of 20 more economic terms and additional vocabulary scores
4) Definitions of 20 more terms for a total of 60 terms and more scores
5) Descriptions of 5 key economic concepts and final vocabulary scores.
The document discusses economic cycles and models used to explain them. It states that cycles are movements in aggregate demand around a longer-term trend line determined by aggregate supply. Cycles are explained by the components of aggregate demand: consumption, investment, government spending, and net exports. The stage of the economic cycle is indicated on diagrams by the actual size and change in size of the output gap between actual and potential GDP. Keynesian models of the aggregate expenditure line and aggregate demand/aggregate supply are presented as ways to illustrate different stages of the economic cycle like booms, recessions, recoveries, and downturns. The models are evaluated as only approximations and the real world is more complex.
This chapter introduces the aggregate demand and aggregate supply model. It explains how equilibrium output, potential output, business cycles, and output gaps are determined in this model. It also discusses how monetary and fiscal policy can be used to stabilize output and reduce output gaps.
The document provides an overview of market structures in microeconomics. It begins with definitions of key terms like market, market structures, and classifications based on number of firms, product types, and barriers to entry. It then covers different market types like perfectly competitive markets, monopoly markets, and imperfectly competitive markets including monopolistic competition and oligopoly. For each market type, it discusses characteristics, demand curves, profit maximization processes, supply curves, and equilibrium conditions. It provides examples and diagrams to illustrate concepts like consumer and producer surplus.
GCF - Présentation Industry - 1222_.pdfHlnePEYRUSQUE
The document provides an overview of market trends, M&A trends, and GEREJE Corporate Finance's expertise in the industry sector. It discusses current trends such as consolidation in fragmented markets, environmental pressures to reduce emissions, and growth in areas like construction robotics and green building. Recent M&A transactions in aeronautics, construction, and logistics are also summarized. The document outlines GEREJE's experience, international presence, access to investors, track record, and sector expertise in advising companies in the industry space.
The document is a 50 question macroeconomics exam covering topics like:
- Production possibilities curves
- Determinants of economic growth
- Fiscal and monetary policy tools
- Aggregate supply and demand
- Unemployment and inflation
- Money and banking
It tests understanding of core macroeconomic concepts through multiple choice questions.
Investment is spending on capital goods like factories, machinery, and equipment. It is an important component of aggregate demand and affects a country's competitiveness. Most investment is done by private businesses, but governments also invest, especially in infrastructure. Investment allows improvements in productivity and technology that can shift the production possibilities frontier outward over time. Higher investment can boost aggregate demand and supply in the short-run but also enables higher potential output in the long-run through increasing a country's productive capacity. The main factors that affect business investment are interest rates, risk, demand growth expectations, taxes and regulations, technological change, and confidence.
This document provides an overview of key macroeconomic concepts including aggregate demand, aggregate supply, factors that influence them, and how they interact in the aggregate demand-supply model. It discusses the consumption and investment functions, the multiplier effect, and how shifts in aggregate demand and supply can impact output and prices. Supply-side policies aim to shift the aggregate supply curve to increase potential output. The accelerator model and limitations of the multiplier approach are also summarized.
GE Healthcare held its 2022 Investor Day on March 10th. Peter Arduini, CEO of GE Healthcare, outlined the company's focus on driving precision health innovation through integrated clinical care, connected technology, and data. He discussed how GE Healthcare is positioned at the nexus of care pathways and aims to improve lives through its global franchise. Arduini also emphasized the company's focus on operational performance through lean and its planned spin-off, which will enable growth acceleration. Long term, GE Healthcare aims to deliver mid-single digit revenue growth, expand margins, and generate over 100% free cash flow conversion.
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02 production possibilities and opportunity costNepDevWiki
The key concepts from Chapter 2 of the document include:
1) The three fundamental economic questions are what to produce, how to produce, and for whom to produce.
2) Opportunity cost is the best alternative forgone in making a decision and represents the value of the next best choice not selected.
3) A production possibilities curve illustrates the maximum combinations of two goods an economy can produce given scarce resources, and assumes resources and technology are fixed in the short-run.
4) Points inside the curve represent inefficient production, while points on the curve are efficient. The law of increasing opportunity costs and marginal analysis are important concepts relating to the production possibilities curve.
5) Economic growth occurs when
This document provides solutions to economics examination questions from 2015 compiled by Khalid Aziz of Iqra Commerce Network. It covers topics in microeconomics including opportunity cost, production possibility curves, income and substitution effects, demand curves for normal goods, price elasticity of demand, kinked demand curves, and short-run equilibrium under monopolistic competition. Diagrams and equations are used to explain concepts such as opportunity cost, production possibility frontiers, indifference curves, budget constraints, demand curves, price elasticity, kinked demand curves, marginal revenue curves, and profit/loss calculations.
An economist studying the relationship between money supply, interest rates, and inflation rate is engaged in macroeconomic research, which examines an economy's overall performance rather than individual choices. A basic difference between microeconomics and macroeconomics is that microeconomics examines individual choices while macroeconomics considers overall economic performance. After years of slow growth, rising global demand for oil was met by increased non-OPEC supplies, and OPEC was unable to restrain output to lift prices, reflecting a rightward shift of the demand curve for oil.
Similar to CAPE Economics, July 2nd, Unit 1, Paper 2 suggested answer by Edward Bahaw (20)
CAPE Economics Classes will be held on Saturdays from 2pm to 4pm for Unit 1 and from 4pm to 6pm for Unit 2, starting on September 10th, 2011. The classes will take place at Cassie Street in El Dorado and can be contacted by calling 312-7201 or visiting www.capeeconomics.tk.
Cape economics classes at Upper Level ChaguanasCAPE ECONOMICS
CAPE Economics classes will be held on Saturdays at the Upper Level Chaguanas location starting October 9th, 2010. Unit 1 will meet from 8:30am to 10:30am and Unit 2 will meet from 10:45am to 12:45pm. The instructor will be Edward Bahaw.
The document discusses several key concepts related to international trade including:
- Open economies engage in international trade by exporting and importing goods and services.
- Countries trade with each other due to differences in costs of production across countries.
- Absolute advantage refers to when a country can produce more of a good than other countries using the same amount of resources.
- Comparative advantage occurs when a country has a lower opportunity cost of producing a good than other countries.
Under a floating exchange rate system, the exchange rate between currencies is determined by foreign exchange market forces of supply and demand. Under a fixed exchange rate system, a government sets the exchange rate. When there is a surplus of foreign exchange under a fixed system, the central bank must purchase the surplus to increase the money supply. When there is a shortage, the central bank must sell foreign exchange to decrease the money supply. The document discusses the advantages and disadvantages of fixed and floating exchange rate systems for businesses and governments.
The document discusses macroeconomic concepts including:
- Aggregate demand and aggregate supply curves, showing the relationship between output and price levels.
- Fiscal and monetary policy can be used to shift the aggregate demand curve to manage the economy. Expansionary policies aim to boost output while contractionary policies curb inflation.
- Supply-side policies shift the aggregate supply curve by increasing the economy's productive capacity.
The document discusses monetary policy tools used by central banks to influence the money supply and interest rates. It explains that expansionary monetary policy involves lowering interest rates through tools like lowering reserve requirements, engaging in open market operations, and reducing policy rates. This increases money supply and aggregate demand. Contractionary policy does the opposite through higher interest rates. The quantity theory of money is also covered, showing how increasing the money supply directly increases price levels in an economy.
The document discusses key concepts related to determining national income, including:
1) The circular flow of income between producers, consumers, and factors of production.
2) The equilibrium level of national income is reached when total injections (spending) equals total withdrawals (saving) in the economy.
3) Fiscal policy tools like changes in government spending and taxation can be used to reduce inflationary or deflationary gaps between the actual and full employment levels of national income.
The document discusses several key concepts related to measuring national income:
- National income is the total income in a nation and can increase (economic growth) or decrease (recession).
- Gross Domestic Product (GDP) measures the total value of goods and services produced domestically and includes consumption, investment, government spending, exports, and imports.
- GDP can be measured at market prices or factor costs after adjusting for subsidies and indirect taxes.
The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It provides details on the characteristics of each market structure such as the number of sellers, barriers to entry/exit, profits, nature of products, and pricing behavior. Examples of barriers to entry include government approvals, patents/copyrights, capital requirements and lack of raw materials. The document also covers concepts such as average and marginal revenue, cost curves, normal vs abnormal profits, and profit maximization conditions for perfect competition and monopoly.
The document discusses key concepts in microeconomics including supply and demand, market equilibrium, and externalities. It provides graphs and explanations of how markets adjust to shifts in supply and demand through changes in price and quantity. Externalities are described as costs or benefits impacting third parties from production or consumption. The document also examines how government policies like taxes and subsidies can impact market equilibrium.
The document discusses concepts related to consumer demand and elasticity, including:
- The law of demand and consumer demand curve
- Marginal utility theory and the law of diminishing marginal utility
- How consumers make choices based on marginal utility per dollar to maximize satisfaction
- Price elasticity of demand and how it is used to determine pricing strategies
- Income elasticity of demand and its use in categorizing goods
- Cross elasticity of demand and its relationship between goods
The document discusses several economic concepts including scarcity, production possibility curves, opportunity cost, and factors of production. It defines scarcity as limited resources to meet unlimited wants and needs. It uses production possibility curves to illustrate the concept of opportunity cost and trade-offs involved in allocating resources between different goods. The four factors of production are identified as land, labor, capital, and entrepreneurship.
CAPE ECONOMICS SATURDAY CLASSES AT UPPER LEVELCAPE ECONOMICS
This document provides details about economics classes offered by CAPE starting on October 9th, 2010. The classes will be taught by Edward Bahaw on Saturdays at the UPPER LEVEL location in Chaguanas. Unit 1 will be from 8:30am to 10:30am and Unit 2 will be from 10:45am to 12:45pm.
CAPE Economics classes will be held on Saturdays from 2pm to 4pm for Unit 1 and from 4pm to 6pm for Unit 2, starting on September 18th, 2010. The classes are taught by Edward Bahaw and those interested can call 312-7201 for more information.
The document discusses various econometric modeling techniques including regression equations, cointegration, error correction models, vector autoregressive (VAR) modeling, and vector error correction models (VECM). It explains that regression equations can produce spurious results if the data is non-stationary, and that cointegration exists if the residuals from a regression equation are stationary. Error correction models specify the short-run relationship that maintains the long-run equilibrium between cointegrated variables. VAR models express current values of variables as functions of past values, while VECMs are VARs in first differences that incorporate the long-run cointegrating relationships between variables.
The document discusses fiscal policy and government budgets. It defines key terms like:
1) Balanced budget multiplier which is equal to 1, occurring when a increase in government spending is matched by an increase in taxation, leading to no change in national income.
2) Fiscal policy which is the management of the economy through government spending and taxation levels.
3) Government budgets which can be balanced, unbalanced with a deficit, or with a surplus if revenues exceed spending.
4) How government borrowing can increase interest rates and "crowd out" private sector investment. It can also lead to inflation and drain foreign exchange reserves.
The document discusses various aspects of monetary policy and monetary aggregates. It defines narrow money (M1) as comprising currency in circulation and demand deposits, while broad money (M2) includes M1 plus long-term deposits and other savings accounts. It describes the monetary transmission mechanism by which an increase in the money supply leads to a fall in interest rates and rise in output and employment. It also discusses currency substitution, the motives for holding money, and various monetary policy tools used by central banks.
This document contains diagrams illustrating the income and substitution effects of a fall in the price of good X under three scenarios: normal goods, inferior goods, and Giffen goods. For normal goods, consumption of good X increases due to both the substitution and income effect. For inferior goods, consumption decreases due to the substitution effect but increases due to the income effect, resulting in an ambiguous total change. For Giffen goods, consumption paradoxically increases due to the income effect outweighing the substitution effect.
The document discusses definitions and categories of petroleum reserves based on probabilities of production. It defines proven, probable, and possible reserves, which have 90%, 50%, and 10% certainty of being produced, respectively. Methods for estimating reserves are described, including volumetric analysis, decline curve analysis, and production forecasting based on projected prices, costs, and other factors.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
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it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
A workshop hosted by the South African Journal of Science aimed at postgraduate students and early career researchers with little or no experience in writing and publishing journal articles.
Physiology and chemistry of skin and pigmentation, hairs, scalp, lips and nail, Cleansing cream, Lotions, Face powders, Face packs, Lipsticks, Bath products, soaps and baby product,
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CAPE Economics, July 2nd, Unit 1, Paper 2 suggested answer by Edward Bahaw
1. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
CAPE
ECONOMICS
nd
July 2 2008
Unit 1
Paper 2
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
2. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
June 2008 – Unit 1 – Paper 2
1a)i) The production possibility is an abstract curve used to demonstrate an economy’s
production capacity from its given resources. As different quantities of resources are
devoted towards the production of each good, different output levels are attained. The
curve or frontier, maps all possible combinations of medical services and education
which can be produced, as the given resources are distributed between the productions of
each good in different quantities.
Education
A
14
B
12 G.
C
9
U.
D
5
E
O
10 18 25 30 Medical
Services
The curve shows that using all resources the following combination of education and
medical services are possible.
Possibility Education Medical Services
A 14 0
B 12 10
C 9 18
D 5 25
E 0 30
ii) Assumptions on which the PPF is based are:
1. The curve is drawn on the assumption that only two goods and services can be
produced namely, Good X and Good Y.
2. The PPF is constructed such that resources are both fully employed and utilized
efficiently.
This means that all production combinations which lie along the curve such as A, B, C, D
and E are derived when all resources are efficiently employed.
1b)i) Scarcity arises out of the inequality between limited resources and the unlimited
wants of man. That is, it may be literally impossible to satisfy all human wants as the
resources or factors of production available are simply insufficient. Point G represents
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
3. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
scarcity as it represents an output combination that is unattainable with the current
endowment of resources.
1b) ii) Choice
Since resources are simply insufficient to meet the unlimited human desires for goods
and services, choices are encountered. This choice would relate to the exact production
combination which the economy decides to produce. In other words only one production
combination could be chosen between A, B, C, D and E.
1b) iii) Increasing Opportunity Cost
The production possibility curves are typically concave to the origin, as shown in figure.
This shape implies that as more resources are allocated towards the production of a
particular good, opportunity cost increases. This occurs because as more resources are
diverted towards the production of medical services, producers may be forced to use
resources which were more suitable to the production of education services.
1c)i)a) Allocative Efficiency
Allocative efficiency is achieved when resources are directed to production which
generates an optimal output combination of goods and services. An optimal output
combination occurs when resources are allocated to production in such a way that the
socially optimal level of output is produced. Socially optimal means that various goods
and services are neither under produced nor over produced. If a good or a service is under
produced, then the resulting shortage would create a net loss of welfare. Similarly, if a
good or service is over produced, then the underlying surplus would also impose a net
welfare loss onto society.
1c)i)b) Production Efficiency
Production efficiency occurs when the largest quantity of goods and services is produced
from a given amount of inputs. This implies that the cost which the firm incurs in
producing a good is minimized and is achieved at the lowest point along the firm’s long
run average cost curve. This is shown to occur at the point where the marginal cost curve
intersects the average cost curve (MC = AC). This point is sometimes referred to as the
point of maximum efficiency or the productive optimum.
Production Possibility Curve
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
4. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
Education
Production
Efficiency
achieved along
any point on the
Frontier
Allocative Efficiency
achieved only at one
point on the Frontier
where the socially
optimal output is
produced
Medical
Services
c ii) Production efficiency occurs when the economy is operating on the production
possibility frontier. If for some reason resources were being used inefficiently or they
were idle or under-utilized, then output produced by the economy would not be
maximized. Such output combinations would correspond to points within the production
possibility frontier.
In terms of allocative efficiency, this would refer to just one point along the frontier
where the right mix of output is produced. In other words, resources would be allocated
in such a way that the quantities of medical services and education produced maximises
social welfare.
1d) i) A decrease in the resource endowment would have the effect of shifting the
production possibility curve to the left as the quantity of output the economy can produce
will be smaller.
ii) Improvements in technology would enable the economy to produce more output and
thus the production possibility curve would shift outwards.
2a) i) The rapid expansion in China and India would lead to an increase in demand for oil
as more energy would be consumed. This is shown by a rightward shift of the demand
curve in the figure.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
5. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
Increase in Demand
P D2
D1
D2
D1
Q
2 a) ii) As the demand for oil increases, at unchanged prices, a shortage for oil would be
created. Such a shortage would lead to upward pressure on price which would lead to an
extension of supply.
Shortage Created and Extension of Supply
P D2
S
D1
E1
P1
D2
S D1
Q1 Q’ Q
Shortage
2 a) iii) As price rises in this manner there is an increase in quantity supplied, as
producers are encouraged to produce more output for the market. This is shown by the
extension of supply depicted by the yellow arrow in panel B. At the same time, the
gradual increase in prices discourages some consumers from purchasing the good or
service and thus quantity demanded declines. This is shown by the contraction of demand
represented by the green arrow in panel B. This gradual increase in prices would continue
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
6. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
until a new equilibrium is established at E2. At this new equilibrium the quantity bought
and sold would be greater compared to the original equilibrium.
New Equilibrium
P D2
S
D1
E2
P2
E1
P1
D2
S D1
Q1 Q2 Q’ Q
2 a) iv) At the new equilibrium the new price has increased to P2.
2b) As oil prices increase, the cost of energy becomes more expensive. This leads to an
increase in the cost of production of all goods including food. This can be shown by a
leftward shift of supply. In addition rising oil prices may also increase the incentives for
the production of alternative energy such as ethanol. This would have the effect of
increasing the demand for agriculture land which simultaneously increases the cost of
producing food. This is shown in the figure by the leftward shift of the supply curve
from S1 to S2. Initially, this leads to the creation of a shortage in the market at the existing
market price P1. This is shown by the amount Q 1 to Q’. A shortage in the market would
compel consumers to offer higher prices as they attempt to purchase the quantity of food
they desire. As a consequence, the market price gradually increases, leading to an
extension of supply as shown by the green arrow. At the same time, the upward pressure
on prices would prompt a decrease in consumption via a contraction of demand as shown
by the yellow arrow. The gradual upward movement of prices and the associated
extension of supply and the contraction of demand would continue until the shortage is
totally eliminated. This would occur at E2 where equilibrium is re-established at a higher
price.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
7. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
Decrease in Supply of Food
P S2
D S1
P2 E2
P1 E1
S2
S1 D
Q’ Q2 Q1 Q
3 a) A comparison of Monopolistic Competition and Perfect Competition
Number of Barriers to
Type of Competition Sellers Entry and Exit Products
Perfect Competition Larger number No Product Homogeneity
Product Differentiation
Consumers benefit from
Monopolistic Competition Many No greater variety
Check class notes
3 b) A comparison of Monopolistic Competition and Perfect Competition
Type of 3 b i) Competitive 3 b ii) Output
Competition Behaviour Decision 3 b iii) Pricing Behaviour
There is a market demand and
market supply which gives a
market price. The demand
There are a very large The firms' only goal is curve which each individual
number of producers to maximize profit. firm faces is perfectly elastic.
Perfect
where each firm This is achieved where This means that the firms are
Competition
supplies a small marginal cost is price takers. That is they accept
percentage of the equated to marginal the market prices. If the firms
market. As a result revenue. Marginal set a price higher than the
firms do not compete revenue is equal to market price they would loose
on a one on one basis. average revenue. all their customers.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
8. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
In monopolistic Since there are many firms
competition, there are selling differentiated products,
many firms offering The firms' goal is also each firm has the power to set
differentiated products to maximize profit. the price of its own products.
(heterogeneous This also occurs where That is because of brand loyalty
Monopolistic products). This is marginal revenue is if the firm increase its price it
Competition different from perfect equal to marginal would not loose all of its
competition in which cost. Marginal customers. In the long run
all offer the same revenue under this though because of the freedom
product. Firms also use type of competition is of entry and exit, the price
advertising to attract less than average would be set where only
customers. revenue. normal profit is earned.
3 c) A comparison of Monopolistic Competition and Perfect Competition
Profit Efficiency
Type of
Competition Short Run Long Run Production Allocative
Perfect
Competition Any level Normal Yes Yes
Monopolistic
Competition Any level Normal No No
4 a i) Public Goods: Non- Excludability and Non-Rivalry
The consumption of public goods and services is characterised by non rivalry and non
excludability. Rivalry in consumption means that only one person can consume the good
or service at a particular point in time. A good where there is non-rivalry in consumption
on the other hand can be collectively consumed by multiple consumers at the same time.
For example there is non-rivalry in the use of a green park as this can be enjoyed by a
group of people at the same time. The term excludability means that only consumers who
pay for a good have the right to consume it. That is to say, if someone does not pay for
such a good or service, then he or she would not be able to consume it. In the case of non-
excludability, consumers who do not pay for a good or service cannot be prevented from
consuming it. In other words there is the free rider problem when non-rivalry exists as
consumers would be able to consume the good or service for free. A good example of
such a good is a street light, where individuals can use the light to see their way at night
even though they do not directly pay for it. If left to the market, no private producer
would be willing to supply goods and services which are non-excludability, as they
would be unable to charge consumers for such. As such the output of such goods would
be below the allocatively efficient output level.
4a) ii) Externalities
Externalities are spillover effects of economic activity which affect third parties. When
the external effects are negative (external marginal cost), the market would over produce
the good or service and when the external effects are positive (external marginal benefits)
the market under produces the good or service relative to the socially efficient amount.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
9. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
This is because markets only take into consideration demand and supply, which is the
same as private marginal benefits and private marginal costs respectively. Evidently,
markets do not take into consideration external marginal cost nor external marginal
benefits which means, the market’s equilibrium usually does not conform to the socially
optimal level of output. The presence of negative and positive externalities consequently
means that some goods would be over produced while others may be under produced
respectively. Both of these cases represent an inefficient allocation of resources.
4 a iii) Information Asymmetry
Asymmetric information is defined as a difference in access to relevant information by
different participants of a transaction. That is to say, certain participants may have all the
relevant information, while other participants may not be fully aware of all the relevant
details. Asymmetric information distorts decision making and causes the allocation of
resources via markets to become inefficient. The two kinds of market failure due to
asymmetric information are moral hazard and adverse selection.
Moral hazard occurs when there are hidden actions or morally hazardous behaviour on
the part of one party in a transaction. This particularly applies to the insurance industry
where individuals who pay insurance premiums are compensated should any unfortunate
loss arise. Moral hazard occurs in this type of transaction where the insured individual
takes more risk by driving recklessly. This occurs as there is comfort that all expense
would be covered should an accident occur. If the individual did not have an insurance
policy, then he or she would drive more carefully in order to avoid having to pay for
costly damages from an accident. Moral hazard therefore acts to the detriment of
insurance companies as they would be faced with greater insurance claims.
Adverse selection occurs when the asymmetric information arises from a hidden attribute
about a good or service. In the used car market for instance, the car salesman may be
aware of the servicing records of the motor vehicle. The buyer on the other hand, may not
be privy to such information. As a result of these hidden attributes the buyer would not be
certain about the reliability of the vehicle and may refrain from purchasing a used car
simply because of the information asymmetry. This decision may be sub optimal if in
reality the car was properly maintained and in perfect working condition. In other words,
the individual gave up a good opportunity simply because of the information asymmetry
or hidden attribute in this case.
4b) i) Natural Monopoly
A natural monopoly is defined in economics as an industry where a single firm tends to
become the only supplier of a particular kind of product or service over time because of
the fundamental cost structure of the industry. Such industries are characterized by the
existence of high fixed cost (of the capital goods especially) such that it is feasible for
one firm only to supply the entire market in order to spread the fixed cost over a large
volume of output. In other words, there is a natural reason for this industry being a
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
10. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
monopoly as more than one smaller scale firms would be less efficient than the natural
monopolists.
4 b) ii) If a natural monopoly is unregulated it would produce the level of output where
marginal cost is equal to marginal revenue and charge a price that consumers are willing
to pay for that output as given by the market demand curve. At this level of output both
production and allocative efficiency would not be achieved.
4 c) Government Regulation of a Natural Monopoly
Typically, governments set the price which coincides with the output level at which just
normal profits are earned. That is at this price, AR = AC. Although this output level still
does not coincide with the allocative level of output (AR = MC) it is much closer to this
output level than the profit maximise level where MR = MC.
5a) The price of a factor of production within a particular industry is determined by the
industry’s demand and supply of the factor. In the case of labour, wages are determined
by the interaction between the demand for labour and the supply of labour within the
industry. This is demonstrated in the figure.
Panel A: Labour Market Panel B: The Individual Firm
Wage Wage
Rate ($) Rate ($)
SL
E
WL Wage
Rate
Share of
Share of Income
Income going MRP
going to labour
to labour by
by firm
industry
DL
QE Quantity Q’ Quantity
of of
Labour Labour
In the figure, the industry demand for labour is shown by D L and the industry supply of
labour is shown by SL. Overall, the labour market attains equilibrium at point E where a
single wage rate WL exists throughout the industry. The share of income received by
labour from the industry as a whole is shown by the rectangle. The area of this rectangle
gives the quantity of labour times the wages rate.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
11. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
The individual firm in the industry would accept the market wage rate and hirer labour up
to point where marginal revenue product (MRP) is equal to this rate. The area of the
rectangle gives the share of income received by labour form the individual firm.
5b) Transfer earnings are the minimum payments to a factor which is just adequate to
compensate the owner for providing productive resources to firms. If the owner does not
receive this payment, no productive resources would be supplied to firms in that industry.
Factor owners would thus transfer there factor inputs to other industries which meet the
minimum payments. Transfer earnings are depicted by the area under the supply curve as
up to the equilibrium level of output as shown in the figure.
Economic Rent on the other hand, accounts for payments made to any factor of
production in excess of the minimum payments required by the factor owner. This is
therefore the difference between the total amount paid to a factor of production and its
level of transfer earnings. Economic rent is therefore represented by the area above the
supply curve but under the price line as shown in the figure.
Transfer Earnings and Economic Rent
Wage
Rate ($)
SL
WL Wage
Rate
Economic
Rent
Transfer
Earnings DL
Quantity of
Labour
5c) i) Factors of production are demanded by producers purely as an input in the
production process. As such, the demand for factors of production is described as a
derived demand, as indirectly it arises out of the need to fill consumers demand for final
goods and services. As firms encounter rising demand for their products, they will need
to employ more factor inputs and thus the demand for factors increases. Similarly, if the
demand for final output declines, then less production would be required and thus the
demand for factors of production used in the production process would be curtailed. In
short, the demand for factors of production depends ultimately on the demand for final
goods and services which the factors of production are used to generate.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
12. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
5c) ii) The price of land in a commercial district would have higher value than the price
in other areas because of the difference in marginal revenue product. Marginal revenue
product refers to the change in revenue from the sale of one more unit of a good or
service produced by the factor of production. Since land in a commercial area can be used
to locate a retail business or a service providing business, it would be able to generate a
lot of revenue. In other areas though, the land may not be able to generate as much
revenue since it may not be as busy with shopping consumers. As a result wiliness to pay
for land in a commercial area would be much greater which accounts for its higher price.
5d) In a medium size to large poultry farm, an increase in production can be achieved
from and increase in capital employed as well as labour. Capital in this case would refer
to the farm facilities used to house and support the chickens. An expansion in this case
would only be possible in the long run. If the farmer increases the amount of labour and
capital employed by 100 percent and output increases by 150 percent then the business
would be achieving increasing returns to scale. If the factor rewards remains the same,
then the average cost of production would fall. This represents a case of the firm
benefiting from economies of scale. If however as a result of the expansion the price of
factors of production increased by more than 50 percent, the average cost of production
would rise representing the occurrence of diseconomies of scale.
6a) Absolute poverty - Absolute poverty measures the actual number of people within an
economy who are unable to afford certain basic goods and services such as food and
shelter. This occurs simply because there income is below the poverty threshold, or
poverty line. According to the United Nations development program, the poverty line is
US$2 per day and all individuals with an income below this threshold are absolutely
poor.
Relative Poverty - Relative poverty measures the extent to which a household's financial
resources falls below the average income level of the economy. For instance, if the
average level of income in a country is US$10,000 per annum then an individual who
earns $US6,000 per annum would be classified as relatively poor. Clearly a person, who
is classified as relatively poor, may not be absolutely poor.
Based on these definitions it is clear that someone can be classified as relatively poor but
not absolutely poor.
6b) The basic needs approach combines certain aspects of absolute and relative measures.
This is because it considers firstly the amount of income needed for long-term physical
well-being such as food, clothing and shelter which is essentially the definition of
absolute poverty. In addition it also considers the amount of income needed to afford
other goods and services which the average member of society consumes such as health
care, but also personal care, furniture, transportation, communication, laundry, and home
insurance. This is similar to looking at the average level of income earned under the
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
13. EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS
relative poverty approach. Anyone with income below this combined income level,
would face poverty according to the basic needs approach.
The additional items included in the basic needs approach is therefore what constitutes
the difference between this approach and the poverty line approach.
6c) i) Taxes and subsidies – the government can ease poverty by lowering taxes and
providing subsidies. Lower taxes would increase the amount of disposable income
enabling consumers to afford more goods and services. This measure should be applied
on a progressive basis meaning that the individuals who earn the lowest income should
face the lowest tax percentage in order to promote greater equality. Subsidies applied on
items such as food for instance would lower its price enabling greater affordability. To
reduce inequality such subsidies should only be available to the poorest in society.
ii) Public Housing - the government can lessen through the provision of public
housing solutions. This can be in the form of houses given to the poorest
individuals in society who do not posses the means to own their own home. The
houses would also be provide on a lease basis at lower than market rates.
iii) Education and Training - Poverty reducing measures with respect to the provision
of education include: free education, book grants, public school transportation and
even school meals. These measures would enable the poorest individuals in
society to have access to education which they would otherwise be unable to
afford.
6d) Education and Training - This policy overcomes poverty at the source by improving
the skills and hence employability of workers. Education also improves labour
productivity and this result in increased wages to workers. As such this is the most
sustainable method as the individuals who receive this assistance would not require such
forever. As education milestones are achieved these individuals would be able to earn
more income and thus the government would therefore be able to redirect resources to
other areas in the economy.
EDWARD BAHAW CAPE ECONOMICS PAST PAPER SOLUTIONS