CAPE Economics Unit 1 · 2012 · Paper 2

38 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)a)2 marksDefine the terms 'indifference curve' and 'budget line'.
2. 1(a)(i)b)8 marksDraw a diagram showing an indifference curve and a budget line, and use it to explain consumer equilibrium.
3. 1(a)(ii)5 marksUsing the diagram from (a)(i)b), explain how a decrease in the price of Good X shifts the consumer to equilibrium B.
4. 1(b)(i)a)2 marksExplain what is meant by the 'substitution effect'.
5. 1(b)(i)b)2 marksExplain what is meant by the 'income effect'.
6. 1(b)(ii)6 marksWith the aid of a diagram, explain the income and substitution effects using either the Hicksian approach or the Slutskian approach.
7. 2(a)(i)5 marksState the formula for each of the following costs: Total cost, Marginal cost, Average fixed cost, Average total cost, and Variable cost.
8. 2(a)(ii)8 marksCopy and complete the table to determine Total Cost, Marginal Cost, Average Fixed Cost, and Average Total Cost for output levels 0 through 4.
9. 2(b)6 marksUsing a diagram, explain the relationship between marginal cost and average total cost.
10. 2(c)6 marksUsing a diagram, explain the relationship among the marginal cost curve, the firm's supply curve, and the average variable cost curve.
11. 3(a)(i)3 marksState the difference between 'normal profit' and 'positive economic profit' (abnormal profit).
12. 3(a)(ii)2 marksExplain the concept of 'market structure'.
13. 3(b)8 marksDistinguish among the four major market structures based on: the number of firms in the industry, the product, barriers to entry, and control over price.
14. 3(c)(i)a)4 marksCalculate the Four-Firm Concentration Ratio for the industry.
15. 3(c)(i)b)4 marksCalculate the Herfindahl-Hirschman Index for the industry.
16. 3(c)(ii)4 marksInterpret the two measures of industrial concentration calculated in relation to market structures.
17. 4(a)(i)2 marksDefine 'economic efficiency'.
18. 4(a)(ii)2 marksDefine 'market failure'.
19. 4(b)(i)4 marksDistinguish between 'private benefits' and 'social benefits'.
20. 4(b)(ii)1 markExplain how divergence between private benefits and social benefits leads to market failure.
21. 4(c)(i)4 marksCompare the characteristics of a 'public good' with those of a 'private good'.
22. 4(c)(ii)2 marksExplain how a public good may cause market failure.
23. 4(c)(iii)2 marksExplain how the government may respond to the problem caused by public goods and externalities.
24. 4(d)8 marksDraw a diagram illustrating 'deadweight loss' and use it to explain how a monopoly can cause market failure.
25. 5(a)(i)2 marksIdentify TWO factors of production and their respective rewards.
26. 5(a)(ii)2 marksExplain why the demand for a factor of production is considered a derived demand.
27. 5(b)(i)2 marksOutline the 'marginal productivity theory'.
28. 5(b)(ii)3 marksExplain how the marginal productivity theory relates to the demand for labour.
29. 5(c)(i)6 marksWith the aid of a diagram, distinguish between 'transfer earnings' and 'economic rent'.
30. 5(c)(ii)2 marksAssuming that the factor supply curve is vertical, state the values of economic rent and transfer earnings.
31. 5(d)4 marksDiscuss the effect of a monopsony on the labour market.
32. 5(e)4 marksA computer has a two-year lifespan and yields a marginal revenue product (MRP) of…
33. 6(a)(i)2 marksDefine the term 'wage differentials'.
34. 6(a)(ii)4 marksOutline TWO factors that give rise to wage differentials.
35. 6(b)(i)5 marksWith the aid of a diagram, examine the level of wages when the buyer has monopoly/monopsony power in the market.
36. 6(b)(ii)4 marksWith the aid of a diagram, examine the level of wages when there is perfect competition in the labour market.
37. 6(c)(i)6 marksExplain TWO types of labour mobility.
38. 6(c)(ii)4 marksDiscuss the expected effect of CSME labour mobility on the labour market of CARICOM member states.