QUESTION ONE(20 Marks)

Choose the correct answer. Write down the question number and the correct letter next to it. E.g. 1.11 A

1.1. Which of the following is key to the way in which economists think?

a) Money

b) Wealth

c) Opportunity cost

d) Poverty

e) Balance sheet

1.2. Which one of the following is NOT a microeconomic concept?

a) The price of petrol.

b) The demand for potatoes.

c) The consumer price index.

d) The supply of pumpkins.

e) The e-toll fee in Gauteng.

1.3. Which one of the following statements is incorrect?

a) Choice always involves sacrifice.

b) Choice always involves opportunity cost.

c) Economists measure cost in terms of opportunity cost.

d) Economists consider only explicit monetary costs.

e) There are always costs involved in the use of scarce resources.

1.4. Which of the following in NOT viewed as a factor of production?

a) A sugar-cane plantation.

b) A skilled bricklayer.

c) N3 Freeway to Gauteng.

d) Machinery for milk processing.

e) None of the above.

1.5.Which one of the following may result in a decrease in the demand for frozen vegetables, a normal good?

a) A rise in consumers' incomes.

b)An increase in the price of frozen vegetables.

c)A decrease in the price of freezers.

d)A decrease in the price of fresh vegetables.

e)A decrease in the price of frozen vegetables.

1.6.If the government sets a maximum price above the equilibrium price:

a)a surplus will develop.

b)a shortage will develop.

c)excess supply will develop.

d)excess demand will develop.

e)the market will be unaffected.

1.7The demand for chocolates is price elastic if:

a)an increase in price results in an increase in total revenue.

b)a decrease in price results in an increase in total revenue.

c)the good is a necessity.

d)a decrease in price results in a decrease in total revenue.

e)the quantity of chocolates demanded is not sensitive to changes in price.

Use the following data to answer Questions 1.8 and 1.9.

Quantity produced

1

2

3

4

5

Fixed costs

100

100

100

100

100

Variable costs

200

300

350

700

1 400

1.8.What is the average cost of producing 4 units?

a) 100

b)700

c) 25

d)175

e)200

1.9.What is the marginal cost of the third unit?

a) 100

b)300

c) 50

d)700

e)850

1.10. The maximum loss a firm should experience in the short run is equal to:

a)zero.

b)total costs.

c)total variable costs.

d)total fixed costs.

e)average total costs.