CAPE Economics Unit 1 · 2014 · 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)2 marksDefine the term 'scarcity'.
2. 1(a)(ii)3 marksDraw and label a diagram of the production possibilities frontier (PPF) for Utopia.
3. 1(a)(iii) a)5 marksUsing the PPF from (a)(ii), explain how the concept of opportunity cost relates to the problem of scarcity.
4. 1(a)(iii) b)3 marksUsing the PPF from (a)(ii), explain how economic growth can be achieved in Utopia.
5. 1(b)(i)4 marksState TWO differences between a 'command economy' and a 'free market economy'.
6. 1(b)(ii)8 marksGiven the disadvantages of a centrally planned economy, discuss TWO possible economic reasons for the collapse/downfall of this type of economic system over the past three decades.
7. 2(a)(i)3 marksList THREE determinants of price elasticity of demand.
8. 2(a)(ii)8 marksCalculate the price elasticity of demand using the arc method and interpret the results.
9. 2(b)(i)4 marksSketch and label the demand curve faced by ABC Company Ltd, indicating total revenue before and after the price change.
10. 2(b)(ii)3 marksAdvise ABC Company Ltd on a pricing decision that is in its best interest, justifying your answer.
11. 2(c)(i)2 marksDefine the term 'consumer surplus'.
12. 2(c)(ii)5 marksThe government imposes an effective price floor in the cow leather market. Using a well-labelled diagram, illustrate consumer surplus after the price floor is implemented.
13. 3(a)(i)7 marksCopy and complete the table to show marginal cost and average cost for each level of output.
14. 3(a)(ii)5 marksUse the completed table from (a)(i) to plot marginal cost, marginal revenue, and average cost curves on the same diagram.
15. 3(b)(i)5 marksWith the aid of an example, explain the relationship between the marginal cost curve and the average cost curve.
16. 3(b)(ii)3 marksIdentify the market structure under which the firm operates, justifying your answer.
17. 3(c)5 marksAnalyse how a specific characteristic of perfect competition guarantees that, in the long run, perfectly competitive firms earn zero economic profits.
18. 4(a)(i)2 marksDefine the term 'public good'.
19. 4(a)(ii)3 marksExplain why public goods are usually provided by the government.
20. 4(b)(i)2 marksDefine the term 'externality'.
21. 4(b)(ii) a)4 marksCopy the diagram provided into your answer booklet and label it to illustrate a negative production externality.
22. 4(b)(ii) b)4 marksUse the completed diagram to explain how negative externalities lead to market failure.
23. 4(b)(iii)6 marksOutline THREE policies that the private sector can adopt to correct market failures.
24. 4(c)(i)1 markIdentify the issue being described.
25. 4(c)(ii)3 marksExplain how the issue identified in (c)(i) leads to market failure.
26. 5(a)(i)2 marksExplain what is meant by the statement 'The demand for all productive resources is a derived demand.'
27. 5(a)(ii) a)4 marksOutline TWO factors that influence the demand for labour.
28. 5(a)(ii) b)4 marksOutline TWO factors that influence the supply of labour.
29. 5(b)(i)2 marksState the 'least-cost rule'.
30. 5(b)(ii)3 marksUse the least-cost rule to calculate the hourly rental price of a machine.
31. 5(b)(iii)6 marksAssuming the popularity of Blue Corp's semiconductor chips falls, explain with the aid of a well-labelled diagram the effect of this decrease on the marginal revenue product curve for machine hours.
32. 5(c)4 marksOutline TWO factors that can account for workers in certain countries being more productive than workers in other countries.
33. 6(a)(i)4 marksDistinguish between 'relative poverty' and 'absolute poverty'.
34. 6(a)(ii)4 marksOutline TWO strategies that governments can employ to alleviate poverty.
35. 6(b)(i)5 marksDraw and label a diagram showing the Lorenz curve for both Country A and Country B. Indicate the line of equality on the diagram.
36. 6(b)(ii)3 marksExplain the concept of 'income inequality'.
37. 6(b)(iii)3 marksCompare the income share of the bottom 50% of the population of Country A and Country B.
38. 6(b)(iv)6 marksOutline THREE measures that the government of the country with higher inequality can implement to narrow the gap between the two countries.