CAPE Economics Unit 1 · 2007 · Paper 2

52 questions and parts from this paper. Open one to see it in full, then practise it on Quelpr and get it marked against the mark scheme.

1. 1(a)(i)2 marksDefine the term 'marginal utility'.
2. 1(a)(ii)a)5 marksCalculate the marginal utility derived from video games.
3. 1(a)(ii)b)5 marksCalculate the marginal utility derived from novels.
4. 1(b)5 marksDraw a diagram illustrating Abina's budget constraint.
5. 1(c)(i)5 marksCalculate the marginal utility per dollar for Abina's consumption choices.
6. 1(c)(ii)2 marksState the optimal combination of video games and novels Abina should consume per month.
7. 1(d)(i)2 marksState how an increase in spending budget by $20, ceteris paribus, affects the quantity of video games and novels consumed.
8. 1(d)(ii)2 marksState how an increase in the price of one of the goods, ceteris paribus, affects the quantity of video games and novels consumed.
9. 1(e)(i)a)5 marksUsing the data from Table 2, draw a diagram showing the demand curve and supply curve for housing.
10. 1(e)(i)b)2 marksIndicate the equilibrium price and equilibrium quantity of housing on the diagram.
11. 1(e)(ii)a)3 marksShow a government-imposed price ceiling of $110 on rent on the diagram drawn in (e)(i).
12. 1(e)(ii)b)i)6 marksState the likely effects of the rent price ceiling on the availability of housing.
13. 1(e)(ii)b)ii)6 marksState the likely effects of the rent price ceiling on consumer surplus and producer surplus.
14. 2(a)(i)2 marksState the formulae for average physical product (APP) and marginal physical product (MPP).
15. 2(a)(ii)6 marksCopy and complete the short-run production function table by calculating APP and MPP.
16. 2(b)(i)8 marksDraw a diagram displaying the average physical product and marginal physical product curves.
17. 2(b)(ii)6 marksDiscuss the relationship between the average physical product curve and the marginal physical product curve.
18. 2(b)(iii)9 marksExplain why the firm's marginal product initially rises and then falls as additional units of labour are employed.
19. 2(c)12 marksConstruct a table showing Total Fixed Cost, Total Variable Cost, Total Cost, Average Variable Cost, Average Total Cost, and Marginal Cost, given that Total Fixed Cost is 30.00 and wage per worker is 20 per day.
20. 2(d)(i)2 marksState the formula for calculating price elasticity of demand when the manufacturer sells 30 garments at 4 per garment and 25 garments at 5 per garment.
21. 2(d)(ii)5 marksCalculate the elasticity of demand and state the effect on total revenue of an increase in price.
22. 3(a)(i)4 marksDefine the term 'market structure' and identify two market structures present in your country.
23. 3(a)(ii)6 marksState four major assumptions of perfect competition and provide an example of a perfectly competitive industry in your country.
24. 3(a)(iii)10 marksCompare two market structures other than those mentioned in part (a)(i).
25. 3(b)(i)8 marksDraw a diagram showing the effect of the tax on the cigarette market.
26. 3(b)(ii)a)3 marksDiscuss the effect of the tax on the quantity of cigarettes bought and sold.
27. 3(b)(ii)b)3 marksDiscuss the effect of the tax on the price paid by the buyer.
28. 3(b)(ii)c)3 marksDiscuss the effect of the tax on the net price received by the seller after tax remittance.
29. 3(c)(i)5 marksDefine 'deadweight loss' and shade the region representing the deadweight loss of the cigarette tax on your diagram from (b)(i).
30. 3(c)(ii)8 marksDefine consumer surplus and producer surplus, indicating on the diagram the lost consumer surplus and producer surplus.
31. 4(a)8 marksDiscuss the concept of 'market failure' in relation to Pareto efficiency criteria.
32. 4(b)20 marksState four causes of market failure and explain how each leads to an inefficient market outcome in your country.
33. 4(c)22 marksDiscuss four measures implemented by your country's government to correct market failure and evaluate the effectiveness of two of them.
34. 5(a)(i)2 marksState what the diagonal line represents in Figure 1.
35. 5(a)(ii)1.5 marksState what the vertical axis represents in Figure 1.
36. 5(a)(iii)1.5 marksState what the horizontal axis represents in Figure 1.
37. 5(a)(iv)1.5 marksState what Curve (b) represents in Figure 1.
38. 5(a)(v)1.5 marksState what Curve (c) represents in Figure 1.
39. 5(b)(i)6 marksDiscuss the role of the diagonal line in depicting income inequality.
40. 5(b)(ii)10 marksExplain what Lorenz curves (b) and (c) indicate regarding the distribution of household income between the highest 20% and lowest 20% of households.
41. 5(b)(iii)4 marksComment on the significance of the area between Curve (b) and Curve (c).
42. 5(b)(iv)4 marksState which distribution, (b) or (c), yields a higher Gini coefficient, explaining your reasoning.
43. 5(c)6 marksExplain the difference between absolute poverty and relative poverty.
44. 5(d)12 marksExplain the term 'social welfare' and discuss how government subsidies for education influence social welfare.
45. 6(a)3 marksDefine the term 'value of the marginal product of labour'.
46. 6(b)12 marksExplain the difference between the labour force and the potential labour force.
47. 6(c)8 marksDistinguish between size and functional income distribution and classify these distributions.
48. 6(d)(i)9 marksState the earnings received by each of the four economic factors of production.
49. 6(d)(ii)4 marksName the economic reward accruing to each factor of production.
50. 6(d)(iii)4 marksIndicate the percentage of total revenue earned by each factor of production.
51. 6(e)(i)6 marksDistinguish between transfer earnings and economic rent.
52. 6(e)(ii)4 marksCalculate the economic rent John earns if his minimum acceptable return for his personal inputs is 15% of revenues.