Microeconomic Essentials Final OSA PDF

FINAL ONLINE SUMMATIVE ASSESSMENT Bachelor of Business Administration Bachelor of Public Administration Bachelor of Commerce in Accounting Bachelor of Commerce in Entrepreneurship Bachelor of Commerce in Reta...

FINAL ONLINE SUMMATIVE ASSESSMENT Bachelor of Business Administration Bachelor of Public Administration Bachelor of Commerce in Accounting Bachelor of Commerce in Entrepreneurship Bachelor of Commerce in Retail Management Bachelor of Commerce in International Business PROGRAMME Bachelor of Commerce in Project Management Bachelor of Commerce in Financial Management Bachelor of Commerce in Marketing Management Bachelor of Commerce in Supply Chain Management Bachelor of Commerce in Human Resource Management Bachelor of Commerce in Information and Technology Management MODULE Microeconomic Essentials YEAR One (1) INTAKE January 2024 Semester 1 DATE 28 May 2024 SECTION A [100 MARKS] Answer ALL the questions in this section. Type ONLY the letter that represents the correct answer next to the corresponding number in your online answer booklet. E.g. 26 B QUESTION 1 (4 Marks) Table 1 below shows the production of pencils and pens The opportunity cost of increasing the production of pens from 7 to 14 units is ________ pencils. a) 2 b) 4 c) 6 d) 8 QUESTION 2 (4 Marks) Consider the supply and demand curves illustrated below. Which of the following statements is TRUE? a) At a price of P3, there is excess demand equal to the distance DE. b) At a price of P3, there is excess demand equal to the distance BE. c) At a price of P3, there is excess supply equal to the distance BE. d) At a price of P3, there is excess supply equal to the distance DE. QUESTION 3 (4 Marks) Use the figure below to answer the question that follows. Which one of the following statements is CORRECT? a) Flows (2) and (3) represent income. b) Flows (2) and (4) represent spending. c) Flows (1) and (2) represent spending. d) Flows (1) and (3) represent spending. QUESTION 4 (4 Marks) Suppose you are given the following data on demand for a product. The price elasticity of demand when price decreases from R9 to R7 is: Price (R) Quantity demanded 10 30 9 40 8 50 7 60 6 70 a) 0.63. b) 1.16. c) 1.60. d) 2.27. QUESTION 5 (4 Marks) You have been provided with the following information for a farm producing potatoes in the short run. The output is measured in the number of potatoes produced per hour. Complete the average product and marginal product columns. Capital Labour TP AP MP 2 0 0 - - 2 1 4 4.00 2 2 10 6 2 3 17 2 4 25 2 5 32 2 6 38 2 7 42 6.00 4 2 8 44 2 9 44 2 10 43 At which point does the law of diminishing returns set in? a) fourth unit of labour b) fifth unit of labour c) sixth unit of labour d) seventh unit of labour QUESTION 6 (4 Marks) In the diagrams below, D2 shows how the demand curve has shifted from D1. S2 shows how the supply has shifted from S1. Which diagram in Figure 6.1 best represents how demand and supply for a normal product would shift if the costs of production rise and incomes fall? a) A b) B c) C d) D QUESTION 7 (4 Marks) The diagram below shows the market for cooking oil. If the movement of the supply curve for S1 to S2 took place, but the price failed to adjust to the new equilibrium, which one of the following would likely be witnesses in the market for product B? a) There will be an excess supply in the market b) There will be an excess demand in the market c) The new market price does not need to adjust, as the price can remain constant and the new market will still be in equilibrium d) The price is not a significant factor in determining the market equilibrium. QUESTION 8 (4 Marks) Salaries are declining in South Africa, but more people are getting paid, new data shows. The average salary in South Africa has shown the most significant month-to-month fall in March, declining 5.6%. This has led to South Africans having less disposable income and increasingly relying on debt to make ends meet, the group said. Source: https://businesstech.co.za/news/finance/513420/how-salaries-in-south-africa-are-shrinking/ Use the figures below to answer question 8 that follows: Which of the figures correctly indicates the effect of a decrease in James’s salary on the demand of chicken liver which is considered to be an inferior good? a) A b) B c) C d) D QUESTION 9 (4 Marks) The figure shows the short run conditions of a firm in a perfectly competitive market. In the long run, ------------ --will ------------the industry so that the market supply curve shifts to the ------------until prices-----------sufficiently to allow all firms to make a normal profit only. a) Existing firms, exit, right, drop b) New firms, enter, right, drop c) Existing firms, exit, left, rise d) New firms, enter, left, rise QUESTION 10 (4 Marks) Dairy Group is the leading raw milk buyer in South Africa, passionately committed to creating optimum growth and value for their dairy producer members. They are as passionate about growing the strength of the local dairy industry as they are about the first-class products they send across the continent. By growing a culture of shared interests and opportunities within the local dairy industry, they offer consumers a wide range of nutritional products, at competitive prices. The figure below represents Dairy Group market for full cream milk. People have become more concerned that drinking full cream milk causes them to gain weight, which they do not like. As a result, the a) demand curve will not shift, and the supply curve shifts from S1 to S2. b) demand curve shifts from D1 to D2and the supply curve shifts from S1 to S2. c) demand curve shifts from D2 to D1 and the supply curve shifts from S2 to S1. d) demand curve shifts from D2 to D1 and the supply curve will not shift. QUESTION 11 (4 Marks) The diagram below shows the equilibrium position of Balloon manufacturers who are operating under pure competition because one company does not have an edge over another. The maximum economic profit (or minimum economic loss) for the firm in the diagram above would be a a. profit of R540 b. loss of R480 c. profit of R60 d. loss of R490 QUESTION 12 (4 Marks) Consider the following scenario: Steven owns his own auto repair shop. He uses his own premises as a workshop. If he had rented his premises to someone else, he would have received R18 000 in rent. He initially invested R50 000 in his business to buy tools and machines. If he had invested the money, he could have earned 10% per year on the money, which is R5 000 per year. If he did not work for himself, he could have earned a salary of R60 000. His expenditure for the year consisted of the following: Oil, petrol, sparkplugs, fan belts and other materials: R70 000 Salary for two junior mechanics: R35 000 Admin costs: R15 000 Assume that the total revenue of the auto shop is R230 000. Calculate Steve’s economic profit. a) R203 000 b) R110 000 c) R27 000 d) R32 000 QUESTION 13 (4 Marks) Use the demand diagram below to answer this question. Note that P × Q equals $900 at every point on this demand curve. Which of the following statements correctly describes own-price elasticity of demand, for this particular demand curve? I. Demand is unit elastic at a price of $30, and elastic at all prices greater than $30. II. Demand is unit elastic at a price of $30, and inelastic at all prices less than $30. III. Demand is unit elastic for all prices. a) I and II only. b) I only. c) I, II and III. d) III only. QUESTION 14 (4 Marks) Imagine you are an economist studying the labour market in a particular region. The diagram below illustrates the market for low-skilled labour in that area. The market is initially in equilibrium at a wage rate ($) and quantity of labour (employment). Now, consider a scenario where a government-imposed price floor is introduced in the low-skilled labour market, causing a reduction in the equilibrium quantity of labour from Q1 to Q2 units.Which of the following correctly describes the resulting decrease in MARKET surplus? a) Market surplus will decrease by a – c. b) Market surplus will decrease by e + c. c) Market surplus will decrease by a + b + e + c. d) Market surplus will decrease by b – e. QUESTION 15 (4 Marks) Imagine a small juice producer named " Bilberry Infused Beverages " known for its refreshing beverages. The owner, Louis, keeps track of the production costs. Recently he decided to expand his operations and produce more Juices to meet the increasing demand. Table 15.1 below shows the data he has collected: Complete Table 15.1 below and use the information to answer the question that follows. Table 15:1 Production Costs for Bilberry Infused Beverages What is the marginal cost of producing the 8th unit of the good? a) 4 b) 10 c) 12 d) 29  QUESTION 16 (4 Marks) In the long run, which of the following would NOT be expected in the industry depicted below? Figure 16.1 a) Firms will exit the industry. b) An increase in total revenue for the remaining firms. c) An increase in output for the firms. d) A decrease in the marginal revenue for the remaining firms. QUESTION 17 (4 Marks) Sarah owns the only bakery in a small town, and she specializes in a unique type of pastry that has gained immense popularity. Due to high demand and limited competition, Sarah has a monopoly on this pastry. As a result, she can set the price at a level that maximizes her profits. Sarah is currently the sole provider of this pastry in the town, giving her significant market power in the short run. The Figure below relates to the short-run monopoly equilibrium of Sarah’s bakery. Use the figure to answer the question 17 The monopolist profit per unit is equal to a) R100. b) R250. c) R280. d) R460. QUESTION 18 (4 Marks) The below figure shows a linear (straight-line) demand curve for Burger King Corporation. Starting at point A and then moving to point B and then point C, the price elasticity of demand a) Increases. b) Increases and then decreases. c) Decreases and then increases. d) Decreases. QUESTION 19 (4 Marks) The following table represents the short-run total cost schedule of a bottled water manufacturer. Study the table below and then answer the question. When output increases from 30 to 80 bottles of mineral water, the marginal cost of producing one of those 50 bottles of mineral water is: a) R5 b) R6 c) R12,50 d) R20 QUESTION 20 (4 Marks) Study the diagram and answer the question. This production possibilities frontier is concave to the origin because: a) resources are equally substitutable between the production of food and films. b) society can have more food only if it produces more films. c) the cost of food in terms of films is constant. d) the opportunity cost of food in terms of films increases and more films are produced. QUESTION 21 (4 Marks) Mr Browns owns and operate a dog grooming. Figure 21.1 shows the cost and revenue curves for a pet grooming session. Initially, Mr Browns sets his price to maximise profits. Figure 21.1: Costs, Revenue per grooming session Calculate the change in total supernormal profit if Mr Browns changes his objective from profit maximisation to revenue maximisation. a) -R225 b) -R117 c) R108 d) R125 QUESTION 22 (4 Marks) The Figure below shows demand for Fruit Snacks. Which movement reflects a decrease in quantity demanded but NOT a decrease in demand? a) from point a to point c b) from point a to point e c) from point a to point d d) from point a to point b QUESTION 23 (4 Marks) What part of the MC curve can be seen as the firm’s supply curve? a) The entire MC curve. b) The rising part from R60 on the vertical axes. c) The rising part from R100 on the vertical axes. d) The rising part from R120 on the vertical axes.  QUESTION 24 (4 Marks) At the profit maximizing price and output, the firm in Exhibit 23-3 has an average profit of _______ and a total profit of ________. a) $10 and 850. b) $20 and 425 c) $40 and 1700 d) $50 and 850 QUESTION 25 (4 Marks) The profit maximizing firm in Figure below 25.1 would Figure 25.1 a) produce 90 units of output b) produce more than 90 units of output c) produce slightly less than 90 units of output d) close to minimize loss END OF PAPER