economics i (ecs101-6) · economics i (ecs101-6) tutorial letter 101/2005 (first and second...

ECS101-6/101/3/2005

DEPARTMENT OFECONOMICS

Economics I(ECS101-6)

Tutorial Letter 101/2005(First and second semester)

CONTENTS

(See inside)

2

CONTENTS

Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Prescribed textbook and study material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Communication with the university . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Communication with lecturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Discussion classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Study groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Study approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Assessment system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Examination admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9The format of the examination paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Proposed study program: First semester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Proposed study program: Second semester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Submission of assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Extension for submitting assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Assignments - closing dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Assignments: First semester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Assignment 01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Assignment 02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Assignment 03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Assignment 04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Assignments: Second semester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Assignment 01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Assignment 02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Assignment 03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Assignment 04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

3 ECS101-6/101

WELCOME

Dear Student

Welcome to Economics 1A! The code for this module is ECS101-6. We hope that you find thismodule interesting, mentally stimulating and rewarding.

Read this tutorial letter thoroughly, plan your studies (see the suggested study programme inthis tutorial letter) and begin work immediately. Since there are only 15 weeks from the last dayof registration to the start of the examination it is imperative that you get off to an early start.

TO BE ADMITTED TO THE EXAMINATION YOU MUST SUBMIT AT LEASTASSIGNMENT 01 OR ASSIGNMENT 02 BEFORE THE DUE DATE.

YOUR SEMESTER MARK AND EXAMINATION MARK WILL CONTRIBUTE TO YOUREXAMINATION MARK.

THE SEMESTER MARK IS BASED ON THE MARKS AWARDED FOR THEASSIGNMENTS.

4

PRESCRIBED TEXTBOOK AND STUDY MATERIAL

Prescribed material

The prescribed material for this module consists of one textbook, one study guide and alltutorial letters you will receive during the course of the semester. The particulars are asfollows:

Textbook

Philip Mohr, Louis Fourie and associates. 2004. Economics (for South African students).Third edition. Pretoria: Van Schaik.

Please do not buy the second edition! Only the third edition is prescribed.

This book can be obtained from the official booksellers. Please consult the list of officialbooksellers and their addresses in the booklet entitled Unisa: services and procedures (which you received with your tutorial matter). If you have any difficulties with obtainingbooks from these bookshops, please contact the Registrar (Academic) as soon as possibleat telephone number (012) 429-4152.

Study Guide

You should have received a study guide for this module at registration.

Tutorial letters

Please read this tutorial letter (TL 101) carefully before starting your studies in ECS101-6.For this module you will receive a number of tutorial letters during the course of the semesterfrom the Department of Despatch (TL 102, 201, 301).Note: Some of this tutorial matter may not necessarily be available when you register. It willbe posted to you during the course of the semester.

Inventory letter

When you registered, you should have received an inventory letter containing informationabout your tutorial matter. See also the booklet entitled Unisa: services and procedures. It isyour responsibility to make sure that you receive all the tutorial matter from Unisa.

The study material for Economics 1A (ECS101-6) is also available on the Internet at no extracost. Students who would like to make use of this site and participate must first register withStudents Online (SOL). For more information please consult the booklet Unisa: services andprocedures.

5 ECS101-6/101

COMMUNICATION WITH THE UNIVERSITY

For all administrative matters and contact numbers please consult the booklet Unisa servicesand procedures as well as Tutorial letter 301/2005.

Listed below are the telephone numbers and e-mail addresses of the administrative departmentsat Unisa that deal with most student queries.

# For queries dealing with registration matters, applications, change of addresses, courseexemptions, costs, etc we refer you to the Department of Undergraduate Student Affairs,telephone number (012) 429-4111 or e-mail address [email protected]

# For queries dealing with study material and tutorial letters not received we refer you to theDepartment of Despatch, telephone number (012) 429-4104 or e-mail [email protected]

# For all queries regarding assignments we refer you to the Assignment Section, telephonenumber (012) 429-4155 or e-mail address [email protected]

# Direct all exam queries such as dates, results, etc to the Department of Examinations,telephone number (012) 429-4155 or e-mail address [email protected]

# Queries relating to the availability of the prescribed textbook or difficulties with obtaining itfrom the official booksellers, should be directed to the Registrar (Academic), telephonenumber (012) 429-4152

Note: Always have your student number at hand when you call the University.

COMMUNICATION WITH LECTURERS

For your convenience a designated telephone number is reserved for ECS101-6:

(012) 429-4159

A routing facility will ensure that you are automatically connected to the first available lecturer.This may take a while. Please do not hang up if you do not receive an immediate reply. Mr MLucouw (the administrative coordinator) can also be contacted at (012) 429-4350.

E-mail communication with lecturers can be established via SOL. Consult the booklet Unisa:services and procedures.

Letters to lecturers should be addressed to: The HeadDepartment of EconomicsPO Box 392UNISA0003

6

DISCUSSION CLASSES

In the first semester and the second semester a number of discussion classes will be held inthe major centres (Pretoria, Polokwane, Durban and Cape Town). The relevant dates andvenues will be set out in Tutorial Letter 301/2005.

STUDY GROUPS

Students are encouraged to form study groups. The addresses of other students in yourneighbourhood may be obtained from the University.

Please write to:

The Registrar (Academic)PO Box 392UNISA0003

or telephone number (012) 429-4131

or e-mail [email protected]

STUDY APPROACH

The study guide is the most important learning aid at your disposal. Consult your study guidebefore you start working through the textbook.

Chapters and subsections that are prescribed for examination purposes are set out in detail inthe study guide. Guidelines for studying the prescribed work are also explained in the studyguide.

Four assignments per semester are included in this tutorial letter. Although examinationadmission is obtained by submitting at least one of the two compulsory assignments, you canobtain a good semester mark through the assignments. We would strongly advise you to do allfour assignments. From past experience we know that a strong correlation exists between thenumber of assignments passed and the final mark.

7 ECS101-6/101

ASSESSMENT SYSTEM

An integrated assessment system is used for this module. This means that your final mark isbased not only on your examination mark, but also on your performance during the semester.

Assignments are not only used to give you an opportunity to evaluate your understanding of theprescribed material, or to give you feedback on your readiness for the examinations, but theyare also used in the calculation of a semester mark.

Your final mark will be calculated as follows:

Semester mark 10% + Examination mark 90%.

A final mark of 50% is required in order to pass this module.

Semester mark

Your semester mark is based on your assignment marks. During the semester you have fourassignments which count towards your semester mark. Different weights are allocated to theassignments. The first assignment counts 10%, while the second, third and the fourth eachcounts 30% of your semester mark.

Obviously, if an assignment is not submitted or submitted late (for whatever reason), no markscan be awarded, for example:

Assignment Mark achieved Percentage x weight

015

1241,7 x 0,1 4,2%

021012

83,3 x 0,3 25%

03not submitted

or submitted afterthe due date

0 x 0,3 0

049

1275 x 0,3 22,5%

Semester mark 51,7%

8

The examination mark

The percentage achieved in the examination is used in the calculation of your final mark.

Final mark

As stated previously the final mark is calculated as follows:

Semester mark 10% + Examination mark 90%.

For example:

Suppose your semester mark is 51,7% and you get 54% in the examination. Your final mark willbe

(51,7 x 10%) + (54 x 90%)= (51,7 x 0,1) + (54 x 0,9)= 5,2 + 48,6= 53,8%

Keep in mind that though admission to the examination can be obtained by submitting eitherassignment 01 or assignment 02, it is to your advantage to prepare and submit all theassignments in time.

K If your final mark (as calculated in the method above) is 50%, you pass ECS101-6.K If your final mark (as calculated in the method above) is less than 50%, but between 45% and

49%, you do not pass ECS101-6 but qualify for a supplementary examination.K If your final mark (as calculated in the method above) is less than 45%, you fail ECS101-6

and you have to reregister for ECS101-6.

9 ECS101-6/101

EXAMINATION ADMISSION

For students to fully benefit from our formative tuition and assessment the Management of theUniversity decided to introduce compulsory assignments in all modules for 2005.

You are therefore required to submit a compulsory assignment to obtain admissionto the examination. For this module you can submit either Assignment 01 orAssignment 02 for examination admission purposes.

Please ensure that your compulsory assignment reaches the University before the due date )late submission will result in you not being admitted to the examination.

Although examination admission can be obtained by submitting either Assignment 01 orAssignment 02, we would strongly advise you to do all four assignments in time as they counttowards your final mark. Furthermore, experience has shown that a strong correlation existsbetween the number of assignments submitted (and passed) and the final mark.

THE FORMAT OF THE EXAMINATION PAPER

You will receive a partial fill-in examination paper plus a mark-reading sheet. Thisimplies that you must complete the first section of the exam on the examination paper.The second section of the paper must be completed on the mark-reading sheet. Theexamination paper plus the mark-reading sheet are handed to the invigilator.

Pocket calculators are not permitted in the examination room!

The 2-hour examination paper of 100 marks will consist of two sections: Section A andSection B.

Section AAll the questions in this section must be answered.Section A consists of definitions and short questions in which you are generally asked to nameor list a number of factors/determinants/categories, distinguish between two concepts or explainan economic concept (possibly with the aid of a diagram). There will also be at least one longerquestion.Section A carries a total of 40 marks (out of a grand total of 100 marks).

Section BSection B consists of 20 multiple-choice questions of which all must be answered on the mark-reading sheet which will be provided. Each question will be worth 3 marks, so that Section B willcarry a total of 60 (ie 20 multiplied by 3) marks. Note that we do not mark negatively.

PASS REQUIREMENT : A final mark (semester mark + examination mark), as explained underthe Section: Assessment system, of 50% is required.

TAKE NOTE: If you have failed ECS101-6 in a specific semester you may register for bothmodules (ECS101-6 and ECS102-8) in the next semester!

10

PROPOSED STUDY PROGRAM

First semester

Try to adhere to this study program as far as possible.

WEEKWEEK

COMMENCING ACTIVITY

1 31 January Study chapter 1 (study unit 1) and answer the questions at the end of eachsection.

2 7 February Study chapter 2 (study unit 2) and answer the questions at the end of eachsection.




6 7 March Study chapter 9 (study unit 6) and answer the questions at the end of eachsection.




10 4 April Study study unit 10 of the Study Guide and chapter 14 (study unit 11) andanswer the questions at the end of each section.

11 11 April Revise study units 1, 2, 3 and 4

12 18 April Revise study units 5, 6, 7 and 8

13 25 April Revise study units 9, 10 and 11

14 2 May Work through the mock exam paper (and answers) provided in TutorialLetter 102.IMPORTANT: Please work through the paper so that you can seewhether or not you measure up to the standard expected from you inthe examination!

11 ECS101-6/101

PROPOSED STUDY PROGRAM

Second semester

Try to adhere to this study program as far as possible.

WEEKWEEK

COMMENCING ACTIVITY

1 4 July Study chapter 1 (study unit 1) and answer the questions at the end of eachsection.




5 1 August Study chapter 8 (study unit 5) and answer the questions at the end of eachsection.





10 5 September Study study unit 10 of the Study Guide and chapter 14 (study unit 11) andanswer the questions at the end of each section.

11 12 September Revise study units 1, 2, 3 and 4

12 19 September Revise study units 5, 6, 7 and 8

13 26 September Revise study units 9, 10 and 11

14 3 October Work through the mock exam paper (and answers) provided in TutorialLetter 102.IMPORTANT: Please work through the paper so that you can seewhether or not you measure up to the standard expected from you inthe examination!

12

SUBMISSION OF ASSIGNMENTS

For detailed information and requirements as far as assignments are concerned, consult thebooklet Unisa: services and procedures, which you received with your tutorial matter. Clearguidelines on how to complete a mark-reading sheet are also given.

You are welcome to submit your multiple-choice assignments through Students Online (SOL)via the Internet instead of using a mark-reading sheet. Before you will be able to use thefunctions on SOL, you must register as a SOL user. Only students who are registered for thecurrent academic year may use SOL.

To submit an assignment via SOL:

Go to Students OnlineLog in with your student number and passwordSelect the courseClick on assignmentsClick on submit assignmentFollow the instructions

Unfortunately, it is not possible for the University to receive and process assignmentsthat are transmitted by means of facsimile or e-mail. No assignments submitted by facsimileor e-mail will be marked.

EXTENSION FOR SUBMITTING ASSIGNMENTS

NO EXTENSIONS for submission of assignments will be considered. The EconomicsDepartment has more than 15 000 ECS101-6 students and all the assignments are all markedat the same time by the computer.

Late registration, late receipt of study material, illness or operations, pressure of work,accidents, disasters, labour strikes by personnel of the Post Office or any other unforeseenoccurrence are NOT valid reasons for extension.

All the submission dates are included in this tutorial letter. You should be able to arrange yourstudy programme so that you can send in as many as possible of the assignments by the duedate.

13 ECS101-6/101

ASSIGNMENTS - CLOSING DATES

FIRST SEMESTER

There are four multiple-choice assignments for the first semester. All four assignments areincluded in this tutorial letter. The details are as follows:

Assignmentnumber

Uniquenumber

Closing date2005

Content of assignment

01 103524 28 February Study Units 1, 2, 3

02 293668 14 March Study Units 4, 5

03 262034 28 March Study Units 6, 7, 8

04 392996 11 April Study Units 9, 10, 11

The first semester students will receive a Tutorial Letter 201 during April 2005 explaining theanswers to the various assignments.

NOTE: Students registered for the first semester will not receive any answers for the fourassignments set for the second semester!

SECOND SEMESTER

There are four multiple-choice assignments for the second semester. All four assignments areincluded in this tutorial letter. The details are as follows:

Assignmentnumber

Uniquenumber

Closing date2005

Content of assignment

01 396961 1 August Study Units 1, 2, 3

02 364852 15 August Study Units 4, 5

03 230192 29 August Study Units 6, 7, 8

04 212704 12 September Study Units 9, 10, 11

The second semester students will receive a Tutorial Letter 201 during September 2005explaining the answers to the various assignments.

14

ASSIGNMENTS — FIRST SEMESTER

ASSIGNMENT 01

Unique Number: 103524Closing Date: 28 February 2005Content: Study Units 1, 2 and 3 of the Study GuideQuestions: 12 questionsWeight: 10% of the semester mark

Answer this assignment on a mark-reading sheet. Place the completed mark-reading sheet inan official assignment envelope and post it to Unisa. You are welcome to submit this assignmentthrough SOL.

If this assignment cannot be submitted on the due date or is received after the closing date forwhatever reason, it will be sent back to you unmarked and will not contribute to yourEXAMINATION ADMISSION and semester mark! It is your responsibility to make sure thatUnisa received your assignment in time.

If you have not received your assignment results within two weeks of the closing date, pleasecontact the Assignment Section at (012) 429-4155 or e-mail address [email protected] results will also be available on SOL 2 weeks after the closing date. The solutions to this assignment will be mailed to you during April 2005. Please work throughthese solutions.

Questions 1.1 and 1.2 are based on information in this tutorial letter:

1.1 Which of the following statements is/are correct?

a. To be admitted to the examination you must submit assignment 01 or 02 in time.b. If you do not submit assignment 01 or 02 but you submit assignment 03 or 04 in time,

you cannot be admitted to the examination.c. If you are admitted to the examination, all four assignments will contribute to your

semester mark.

[1] All the statements are correct[2] Only a and b [3] Only b and c[4] Only a[5] Not [1], [2], [3] or [4]


a. Suppose you get 50% for assignment 01, 70% for assignment 02, 35% for assignment03 and you do not submit assignment 04, your semester mark will be 51,7%.

b. Suppose your semester mark is 88% and your examination mark is 46%. You willpass ECS101-6 because your final mark is 50,2%.

c. Suppose your semester mark is 20% and your examination mark is 52%. You willpass ECS101-6 because you have more than 50% in the examination.

15 ECS101-6/101

[1] a and b[2] b and c [3] Only a[4] Only b[5] Not [1], [2], [3] or [4]

1.3 Economics involves

a. Scarcity, choice and opportunity cost.b. The study of rocks.c. The study of how human beings satisfy their unlimited wants with limited resources.

[1] Only a[2] Only b[3] Only c[4] a and c[5] b and c

1.4 Which one of the following statements is correct?

[1] Rich people do not experience scarcity.[2] Opportunity cost is the cost to produce goods and services.[3] Resources are limited and therefore we have to make choices all the time.[4] People in rich nations are not subject to the principle of opportunity cost.[5] Scarcity and choice are unrelated concepts.


a. Next week it will rain. This is an example of a positive statement.b. A normative statement is objective and is based on facts.c. Ceteris paribus means that all other factors remain constant.

[1] a and b[2] a and c[3] Only a[4] Only b[5] Only c


[1] Money is a capital good.[2] A soccer ball is a capital good.[3] A tractor is a capital good.[4] Furniture is an example of a semi-durable good.[5] There is no difference between a final good and an intermediate good.

16

0

Bread

Meat

C

LA

D

H

B

B

A

K

Questions 1.7 and 1.8 are based on the following production possibilities curves:


a. Point C shows the inefficient use of resources or unemployment.b. Point L shows unemployment.c. Point K is unattainable with reference to curve BB.

[1] Only a[2] Only b[3] Only c[4] None of the statements is correct[5] Not [1], [2], [3] or [4]


[1] A movement from curve AA to curve BB represents a decline in the economy.[2] A movement from curve BB to curve AA shows technological improvement in the

production of both goods.[3] It is always possible to produce combination L.[4] Given the available resources combination L is unattainble.[5] Points H, D, K and C represent efficient combinations of bread and meat.


a. Rent is the income for capital.b. Money is an important factor of production.c. A capital-intensive production system is dominated by capital goods.d. Government services form part of the secondary sector.

[1] a, b and c[2] a, c and d[3] Only a and c[4] Only b and d[5] Only c

17 ECS101-6/101


a. The market system is dominated by the free interaction of supply and demand.b. The command system is dominated by the decisions of the country’s armed forces.c. A mixed economy is based on a mixture of command, tradition and the market.

[1] Only a and b[2] Only a and c[3] Only a[4] Only b[5] All the statements are correct


a. A flow variable is measured at a particular point in time.b. The gold production in South Africa is an example of a stock variable.c. Your annual income is an example of a flow variable.

[1] All the statements are correct[2] Only b and c[3] Only a and b[4] Only c[5] Only b


[1] The flow of income and spending is in the same direction as the flow of goods andservices.

[2] Households sell their labour in the factor market.[3] The main flows in the economy are income, money and investment.[4] The main participants in the economy are politicians and firms.[5] Firms sell their factors of production in the goods market.

18

ASSIGNMENT 02

Unique Number: 293668Closing Date: 14 March 2005Content: Study Units 4 and 5 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark





a. Demand refers to the quantities of a good or service that sellers are willing to sellduring a certain period.

b. The demand curve reflects a positive relationship between the price and thequantity demanded.

c. The ceteris paribus condition applies always in economics.

[1] Only a[2] Only b[3] Only c[4] a and c[5] None of the statements is correct


a. A change in quantity supplied is illustrated by a movement along the demand curve.b. A change in demand is illustrated by a movement along the demand curve.c. Quantity demanded and demand mean the same.

[1] Only a[2] Only b[3] Only c[4] All the statements are correct[5] None of the statements is correct

2.3 This question deals with complements. Given that shoes and socks are complementswhat will happen to the demand for socks if the price of shoes decreases because of anincrease in supply?

[1] It will decrease.[2] It will increase.[3] It will not change.[4] It is not possible to tell what will happen.

19 ECS101-6/101

2.4 Which factor will shift the supply curve to the left?

[1] A decrease in the size of the population.[2] A decrease in the price of the specific product.[3] An increase in labour costs.[4] An increase in the number of sellers.[5] An increase in the productivity of the workers.


a. If there is excess demand the price must increase to reach equilibrium.b. If there is excess supply the quantity produced must increase to reach equilibrium.c. If there is excess demand the quantity produced must increase to reach equilibrium.d. If there is excess supply the price must decrease to reach equilibrium.

[1] All the statements are correct[2] Only a, b and c[3] Only a, b and d[4] Only a and d[5] Not [1], [2], [3] or [4]


An increase in the demand for chicken could be caused by a(n)

a. fall in the price of chicken.b. increase in the price of a complement (eg rice).c. increase in the price of beef (a substitute).

[1] Only a[2] a and b[3] b and c[4] Only c[5] a and c


With a simultaneous increase in demand and a decrease in supply

a. the equilibrium price of the product will increase.b. the change in the equilibrium price of the product will be uncertain.c. the equilibrium quantity of the product will decrease.d. the change in the equilibrium quantity of the product will be uncertain.

[1] a and c[2] b and c[3] a and d[4] b and d[5] Not [1], [2], [3] or [4]


If the price of cameras falls there will be

a. a decrease in the demand for films (a complement).b. a decrease in the supply of cameras.c. an increase in the quantity of cameras demanded.

20

[1] Only c[2] Only b[3] Only a[4] a and c[5] Not [1], [2], [3] or [4]

2.9 Which of the following will cause the demand curve for tea to shift to the right?

a. A decrease in the price of milk (a complement).b. A decrease in the price of tea.c. A decrease in the price of coffee (a substitute).

[1] Only a[2] Only c[3] a and b[4] b and c[5] Only b


a. An increase in the price of product Y will decrease the demand for product X (asubstitute).

b. An increase in the price of product K will decrease the demand for product L (acomplement).

c. An increase in the consumers' income will increase the demand for an inferiorproduct.

[1] a and b[2] b and c[3] Only a[4] Only b[5] Only c

21 ECS101-6/101

0

P

Q

100

80

60

40

50 100 150 250200

D

S120

Questions 2.11 and 2.12 are based on Figure 1 below.

Figure 1


a. If a maximum price is set at R60, only 100 units will be supplied.b. If a minimum price is set at R100, fewer units will be sold than at a price of R80.c. If a maximum price is set at R100, black market activities will develop.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only a[5] Only a and c

2.12 An effective minimum price ) in other words, a minimum price which will have aninfluence on the market, must be set at a price of

[1] R40.[2] R60.[3] R80.[4] R100.[5] Any one of the above prices.

22

ASSIGNMENT 03

Unique Number: 262034Closing Date: 28 March 2005Content: Study Units 6, 7 and 8 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark


If this assignment cannot be submitted on the due date or is received after the closing date forwhatever reason, it will be sent back to you unmarked and will not contribute to your semestermark! It is your responsibility to make sure that Unisa received your assignment in time.



a. Price elasticity of demand measures the responsiveness or sensitivity of consumersto price changes.

b. If the percentage change in the quantity demanded is equal to the percentagechange in the price that caused the change in the quantity demanded, the elasticitycoefficient will be equal to one.

c. Any movement of the price away from the point where the elasticity of demand isequal to one, will result in an increase in the total income.

[1] All the statements are correct[2] Only a and c[3] Only b and c[4] Only a and b[5] Only a


a. Luxury goods and services tend to have a lower price elasticity of demand.b. If the income elasticity of demand (ey) is positive, the product is a normal good.c. If the income elasticity of demand (ey) is negative, the product is an inferior good.

[1] All the statements are correct[2] Only a and b[3] Only a and c[4] Only b and c[5] Not [1], [2], [3] or [4]

23 ECS101-6/101

3.3 Assume that the price of bread increases by 10 per cent and as a result the quantity ofbread demanded decreases by 1 per cent. Which of the following statements arecorrect with reference to the relevant part of the demand curve?

a. The price elasticity of demand is equal to 10.b. The price elasticity of demand is equal to 0,1 or 1 ÷ 10.c. The price elasticity of demand cannot be calculated from the available information.d. As a result of the price increase the income of producers will definitely decrease.e. As a result of the price increase the income of producers will definitely increase.

[1] b and d[2] b and e[3] Only c[4] Only d[5] Not [1], [2], [3] or [4]

3.4 Which one of the following instances points to an elastic demand for the product beingsold?

[1] A producer tells you that he will lose half of his customers if he raises the price ofhis product by as little as 5 per cent.

[2] A university is informed that its total receipts from registration will actually increaseif the fees increase by 10 per cent.

[3] A coffee shop owner realises that even though she has reduced the price of hercoffee, her revenue from the sale of coffee has not changed.

[4] The price of maize increases by 10 per cent, and as a result the revenue of maizefarmers increases by 20 per cent.

[5] A producer tells you that he will not get consumers to buy more of his product if hereduces the price by a substantial margin.

3.5 If lettuce is an inferior good, an increase in consumers' income will

[1] increase the supply of lettuce.[2] decrease the supply of lettuce.[3] cause the equilibrium price of lettuce to fall.[4] cause the equilibrium price of lettuce to rise.[5] increase the demand for lettuce.


a. An increase in the consumption of a specific good will always increase both the totalutility and marginal utility.

b. An increase in the consumption of a specific good will usually decrease themarginal utility and increase the total utility.

c. When the marginal utility becomes negative the total utility will decrease.

[1] a and c[2] b and c[3] Only a[4] Only b[5] Only c

24


a. The more units a consumer consumes consecutively of a product, the greater themarginal utility.

b. The more units a consumer consumes consecutively of a product, the smaller thetotal utility.

c. When the marginal utility becomes negative it is called disutility.

[1] Only a[2] Only b[3] Only c[4] a and c[5] Not [1], [2], [3] or [4]


Sarah, a consumer, can only be in equilibrium

a. when she, given her income and the prices of the products, maximises her totalutility.

b. when the marginal utilities for all the goods consumed are equal and her totalincome is spent, irrespective of the prices of the goods.

c. when her weighted marginal utilities for all goods are equal irrespective of herincome.

[1] All the statements are correct[2] Only a and b[3] Only a and c[4] Only a[5] Only c

3.9 A firm's total revenue is equal to

[1] total revenue divided by the quantity sold.[2] the additional revenue earned by selling an additional unit of the product.[3] the price of its product multiplied by the quantity sold.[4] the price of its product divided by the quantity sold.


a. The relationship between total, average and marginal revenue is the same as therelationship between total, average and marginal cost.

b. The long run is a period long enough for a firm to decide whether or not to install forexample additional machines.

c. The short run is a period during which all the inputs are fixed.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only c[5] Only a

25 ECS101-6/101


a. When a firm's total revenue is equal to its total economic costs, the firm is earninga normal profit.

b. When a firm's total revenue is greater than its total economic costs, the firm isearning an economic profit.

c. Total economic costs incude explicit and implicit costs.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only c[5] Only a

Question 3.12 is based on Table 1. Complete Table 1 and answer question 3.12.

Table 1Units

produced(Q)

Total fixedcost (R)

Total variablecost (R)

Total cost

(R)

Average (total)cost(R)

Marginalcost(R)

0 30

1 22

2 43

3 114

4 58

5 50


a. It is not possible to calculate the total fixed cost and the total variable cost with thegiven information.

b. The marginal cost of producing the third unit is R28.c. The total variable cost of producing five units is equal to R220.

[1] Only a[2] b and c[3] Only b[4] Only c[5] Not [1], [2], [3] or [4]

26

ASSIGNMENT 04

Unique Number: 392996Closing Date: 11 April 2005Content: Study Units 9, 10 and 11 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark




4.1 In perfectly competitive markets all the participants are price takers. This means that

[1] all goods sold in the market are identical or homogeneous.[2] there is no government intervention.[3] no individual buyer or seller can affect the market price.[4] buyers or sellers can affect the market price.

4.2 Which of the following statements referring to the demand curve for the product of the firmunder perfect competition is/are correct?

a. The demand curve slopes down from the top left to bottom right.b. The demand curve is indicated by a horizontal line at the given market price.c. The demand curve is indicated by a vertical line at the quantity produced.d. The demand curve has a negative slope.

[1] a and b[2] b and c[3] c and d[4] b and d[5] Only b


a. A perfectly competitive firm's profit per unit of output is given by the differencebetween marginal revenue and marginal cost.

b. A firm under perfect competition maximises its profit by choosing the right level ofoutput.

c. Under perfect competition, the rising part of a firm's marginal cost curve above theminimum average (total) cost represents the firm's supply curve in the short run.

27 ECS101-6/101

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only a[5] Only b


a. In the short run, a firm under perfect competition can earn normal profit only.b. Normal profit refers to a situation in which implicit and explicit costs are covered.c. In the long run, a firm under perfect competition can earn normal profit only.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only a and c[5] Only b

4.5 Under perfect competition, profit is maximised when a firm produces an output where

[1] marginal revenue equals marginal cost, provided marginal cost is rising and liesabove minimum average (total) cost.

[2] average revenue equals average cost, provided marginal cost is rising and liesabove minimum average variable cost.

[3] marginal revenue equals marginal cost, provided marginal cost is rising and liesabove minimum average variable cost.

[4] average revenue equals average cost, provided average cost is rising and liesabove minimum average variable cost.

4.6 The two broad categories of imperfect competition are

[1] oligopoly and imperfect competition.[2] monopolistic competition and monopoly.[3] perfect competition and monopoly.[4] oligopoly and monopolistic competition.[5] monopoly and oligopoly.

4.7 Collusion is possible under

[1] perfect competition.[2] monopolistic competition.[3] perfect competition as well as monopolistic competition.[4] oligopoly.[5] monopoly.

4.8 Which of the following would be associated with a monopoly?

a. The ability to influence market price.b. The firm is a price taker.c. The ability to control market output.

28

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only a and c[5] Only b


a. For monopolistic competition to exist there must be many buyers and sellers.b. Under monopolistic competition, suppliers have an incentive to advertise their

products.c. Under perfect competition and monopolistic competition the firm's demand curve

for the product is downward-sloping.

[1] All the statements are correct[2] Only a and b[3] Only a and c[4] Only a[5] Only b


a. The labour market is a factor market and a link between suppliers and demanders.b. Labour services are transferable from one person to another.c. The nominal wage is the quantity of goods and services that can be purchased

with the money wage.

[1] a and b[2] b and c[3] a and c[4] Only a[5] Only c

4.11 The market demand curve for labour will shift to the right, ceteris paribus, because of

a. a decrease in the number of firms.b. a decrease in the price of the product.c. a decrease in the productivity of the labourers.d. an increase in the price of a complementary factor of production.

[1] Only a and b[2] a, b and c[3] a, c and d[4] Only c and d[5] Not [1], [2], [3] or [4]

29 ECS101-6/101


a. Trade unions can attempt to raise the wage rate by assisting firms to raise supplyof the product of the industry.

b. Fixing a minimum wage below the equilibrium wage will result in an excess supplyof labourers.

c. People are engaged in informal sector activity because they cannot findemployment in the formal sector.

[1] a and c[2] b and c[3] Only a[4] Only b[5] Only c

30

ASSIGNMENTS — SECOND SEMESTER

ASSIGNMENT 01

Unique Number: 396961Closing Date: 1 August 2005Content: Study Units 1, 2 and 3 of the Study GuideQuestions: 12 questionsWeight: 10% of the semester mark



If you have not received your assignment results within two weeks of the closing date, pleasecontact the Assignment Section at (012) 429-4155 or e-mail address [email protected] results will also be available on SOL 2 weeks after the closing date.

The solutions to this assignment will be mailed to you during September 2005. Please workthrough these solutions.

Question 1.1 and 1.2 are based on information in this tutorial letter:


a. To be admitted to the examination you must submit assignment 01 or 02 in time.b. If you do not submit assignment 01 or 02 but you submit assignment 03 or 04, you

cannot be admitted to the examination.c. If you are admitted to the examination, all four assignments will contribute to your

semester mark.

[1] All the statements are correct[2] Only a and b [3] Only b and c[4] Only a[5] Not [1], [2], [3] or [4]


a. Suppose you do not submit assignment 01, get 50% for assignment 02, 70% forassignment 03 and 35% for assignment 04, your semester mark will be 38,8%.

b. Suppose your semester mark is 95% and your examination mark is 46%. You willpass ECS101-6 because your final mark is 50,9%.

c. Suppose your semester mark is 20% and your examination mark is 52%. You willpass ECS101-6 because you have more than 50% in the examination.

31 ECS101-6/101

[1] a and b[2] b and c [3] Only a[4] Only b[5] Not [1], [2], [3] or [4]


a. Because of scarcity we are forced to make choices.b. Because of choices there must be some opportunity cost.c. Choice, scarcity and opportunity cost are totally unrelated.

[1] All the statements are correct[2] None of the statements is correct[3] Only a[4] Only c[5] Only a and b

1.4 Which of the following statements is/are positive statements?

a. Orlando Pirates FC is the greatest soccer team.b. The South African inflation rate is too high.c. The interest rate was lower in 2004 than in 2003.


1.5 Which one of the following is a macroeconomic issue?

[1] A fall in the demand for wine.[2] An increase in the supply of tractors. [3] An increase in the total production of bananas in Mpumalanga.[4] A fall in the demand for South African exports of goods and services to the rest of

the world.[5] A fall in the price of bicycles.

32

0

Beef

Pork

N

W

J

B

A

J G

Questions 1.6 and 1.7 are based Figure 1.

Figure 1


[1] A movement from point B to point A is not a true reflection of opportunity cost.[2] A movement from point W to point A indicates economic growth.[3] A movement from point A to point W indicates an improvement in the production of

beef.[4] A movement from the origin (0) to point W represents unemployment.[5] A movement from point A to point B illustrates the concept of opportunity cost.


a. Point N represents unemployment as the production factor labour is not usedeffeciently.

b. A movement from curve JJ to curve JG indicates unemployment.c. A movement from curve JJ to curve JG indicates a technological improvement in

the production of pork.d. Point W is the point of inefficiency.

[1] All statements are correct[2] None of the statements is correct[3] Only b and c[4] Only b[5] Only a and c


a. Flour used in a bakery is an example of a final good.b. The Gariep dam is an example of a capital good.c. Sunshine is usually regarded as a free good and has no price.

[1] Only a and b[2] Only a and c[3] Only b and c[4] Only c[5] All the statements are correct

33 ECS101-6/101

1.9 Which one of the following forms part of the secondary sector?

[1] Raw materials like agriculture, fishing and forestry products.[2] Primary and high school education.[3] The manufacturing of clothes and shoes.[4] The Transnet bus services between Johannesburg and Durban.[5] The production of gold by the gold mines.


a. The South African economy is based on the command system because a lot ofpeople work in the government sector.

b. The traditional system is dominant in South Africa because a lot of people speaktraditional languages.

c. Under a market system sellers and buyers converge in the main streets of big citiesand start selling their products there.

d. The command system is not part of the mixed system.

[1] Only a[2] a and b[3] b and c[4] Only d[5] Not [1], [2], [3] or [4]


a. The three major flows in the economy are production, spending and money.b. You can only sell your labour in the goods market.c. Firms sell in the goods market.



a. Capital is a flow variable.b. The number of births in South Africa is a stock variable.c. Profit and loss are flow variables.


34

ASSIGNMENT 02

Unique Number: 364852Closing Date: 15 August 2005Content: Study Units 4 and 5 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark



If you have not received your assignment results within two weeks of the closing date, pleasecontact the Assignment Section at (012) 429-4155 or e-mail address [email protected] results will also be available on SOL 2 weeks after the closing date. The solutions to this assignment will be mailed to you during September 2005. Please workthrough these solutions.


a. If you do not have the means to buy something, you do not have a demand for it.b. Demand and supply are flow variables which are measured over time.c. Supply can be defined as the quantities of a good or service that consumers plan

to buy.d. No variable in economics can be explained by only one other variable. Therefore

we always use the ceteris paribus condition.

[1] All the statements are correct[2] Only a, b and d[3] Only b, c and d[4] Only a, c and d[5] Only b and d

2.2 Which one of the following factors will not shift the demand curve?

[1] A change in the size of the population.[2] Income increases.[3] Changes in the tastes of the consumers.[4] An increase in the price of the specific product.[5] A change in the price of a related product.

35 ECS101-6/101

0

D

P

Q

C

B

D

D1

D1

Questions 2.3 and 2.4 are based on Figure 1.

Figure 1


a. A movement from point B to point C indicates a change in demand.b. A shift from curve DD to curve D1D1 indicates an increase in demand.c. The point of equilibrium is indicated by the distance between point B and point C.

[1] Only a[2] Only b[3] Only c[4] Only a and c[5] All the statements are correct


[1] A shift of the curve from D1D1 to DD indicates an increase in the population.[2] A change in technology will cause the curve to shift.[3] A decrease in population will force the curve upwards.[4] An increase in the quantity demanded is indicated by a movement from point B to

point C.[5] A change in supply will also change the DD curve.

2.5 Which one of the following statements will cause the supply curve to shift to the right?

[1] An increase in quantity supplied.[2] A change in demand.[3] A decrease in the number of companies.[4] An increase in the price of inputs, like labour costs.[5] An improvement in technology.

2.6 This question deals with complements in production. Assuming that wheat and branare complements in production. What is going to happen to the supply of bran if the priceof wheat increases?

36

[1] It will decrease.[2] It will not change.[3] It will increase.[4] It is unpredictable.


a. If the quantity demanded is 100 and the quantity supplied is 50 then there is anexcess supply of 50.

b. If the quantity demanded is 300 and the quantity supplied is 10 then there is anexcess demand of 290.

c. If quantity supplied is 500 and quantity demanded is 500, there is equilibrium in themarket.

[1] a and b[2] a and c[3] b and c[4] Only c[5] Only b


When demand and supply increase simultaneously

a. the equilibrium quantity will increase.b. the equilibrium price and equilibrium quantity will increase.c. the direction of change in the equilibrium price will be uncertain.


2.9 Fixing a maximum price for meat above the equilibrium price will

[1] result in an excess demand for meat.[2] result in an excess supply of meat.[3] not disturb the market forces.

2.10 If goods X and Y are substitutes and the price of X increases because of a decrease inthe supply of X, which one of the following will be observed, ceteris paribus?

[1] an increase in the price of Y together with a decrease in the quantity traded of Y.[2] a decrease in the price and the quantity traded of Y.[3] an increase in the price and a shift of a curve.[4] a decrease in the price of Y together with an increase in the quantity traded of Y.[5] none of the above alternatives.

37 ECS101-6/101

0

P

Q

25

20

15

10

5

10 20 30 5040

D

S

Questions 2.11 and 2.12 are based on Figure 2.

Figure 2


a. If a maximum price is set at R20, there will be a surplus of 20 units.b. If a minimum price is set at R10, there will be a shortage of 20 units.c. If a maximum price is set at R10, there will be a shortage of 20 units.

[1] Only a[2] Only b[3] Only c[4] b and c[5] a and b


a. If a maximum price is set at R5 the market will be influenced.b. At a price of R5 the quantity demanded will be greater than the quantity supplied.c. At a price of R10 there will be a shortage in the market.

[1] Only a[2] Only b[3] Only a and b[4] Only b and c[5] All the statements are correct

38

ASSIGNMENT 03

Unique Number: 230192Closing Date: 29 August 2005Content: Study Units 6, 7 and 8 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark





a. Price elasticity of demand is a measure of the responsiveness of quantitydemanded to changes in price

b. A perfectly inelastic demand curve is horizontal (ie parallel to the quantity axis).c. With elastic demand, as price falls, total revenue rises.



a. Luxury goods and services tend to have a higher price elasticity of demand.b. If the income elasticity of demand (ey) is positive, the product is a normal good.c. The income elasticity of demand is the same as the price elasticity of demand.


39 ECS101-6/101

0

P

Q

S1

S2

S3

2018

10

3

Question 3.3 is based on Figure 1 which represents the market for maize.

Figure 1


a. Suppose the supply of maize increases from S1 to S2. The total revenue of maizefarmers will decrease.

b. Suppose the supply of maize decreases from S3 to S2. The total revenue of maizefarmers will increase.

c. The direction of change in farmers' total revenue cannot be determined because thequantities are not given.

[1] None of the statements is correct[2] Only a and b[3] Only c[4] Only b and c[5] Not [1], [2], [3] or [4]


a. If producers are faced with a unit elastic demand curve, they cannot raise their totalrevenue by increasing or decreasing the price of the product.

b. If the price elasticity of demand for chips is greater than one, the manufacturers ofchips can increase their total revenue by raising the price of chips.

c. When the percentage change in quantity demanded is relatively small comparedto the percentage change in price, it can be said that the demand is relativelyinelastic.

[1] All the statements are correct[2] Only a and b[3] Only a and c[4] Only b and c[5] Only b

40


If a five percent (5%) increase in the price of sugar causes the quantity demanded to fallby twenty-five percent (25%) the demand for sugar

a. is perfectly elastic.b. has an elasticity coefficient of more than one.c. has an elasticity coefficient of less than one.d. is relative elastic.e. is relative inelastic.

[1] Only a[2] b and d[3] c and e[4] None of the statements is correct[5] Not [1], [2], [3] or [4]

3.6 The price elasticity of the demand for a good tends to be greater

a. the more substitutes the good has.b. the more complements the good has.c. the more luxurious the good is.d. the greater the necessity of the good.e. the longer the time period under consideration.f. the more durable the product is.

[1] a, b, c and f[2] b, c, d, e and f[3] a, c, e and f[4] b, c, d and e[5] Not [1], [2], [3] or [4]

Questions 3.7 and 3.8 are based on the following table.

Q TU MU

1 50 50

2 80 30

3 100 20

4 115 15

5 125 10

6 130 5

7 130 0

8 120 -10

Q = number of unitsTU = total utilityMU = marginal utililty

41 ECS101-6/101

3.7 Which of the following statements are correct?

a. The TU column reflects the law of diminishing marginal utility.b. The rational consumer wants to maximise his or her total utility.c. The consumption of the third unit has an additional utility of 20 for the consumer.

[1] All the statements are correct[2] Only a and b[3] Only a and c[4] Only b and c[5] Only b


a. The consumption of the sixth unit has an additional utility of 5 for the consumer.b. The sixth and seventh units provide the same total utility for the consumer.c. The economic motive of the consumer is to maximise the marginal utility.d. By consuming the eighth unit, the consumer experience disutility.

[1] a and b[2] b and c[3] c and d[4] b and d[5] a, b and d


a. The consumer will be in equilibrium when he/she divides his/her total incomebetween the available products in such a way that total utility is maximised.

b. The consumer is in equilibrium when marginal utility is at a maximum.c. It is impossible to indicate that a negative relationship between the price and the

quantity demanded of a product exists by means of the utility approach.

[1] a and b[2] a and c[3] Only c[4] Only a[5] Not [1], [2], [3] or [4]


a. When economists measure economic costs they only consider actual monetarypayments (ie explicit costs).

b. If marginal revenue is negative, total revenue falls.c. The economic costs of production are based on the principle of opportunity cost.

[1] All the statements are correct[2] Only a and c[3] Only a and b[4] Only b and c[5] Only c

42


a. When a firm's total revenue is equal to its total economic costs, the firm is earninga normal profit.

b. When a firm's total revenue is greater than its total economic costs, the firm isearning an economic profit.

c. Normal profit is equal to the amount that the factors of production could haveearned in their best alternative uses.



a. The opportunity cost of a firm using an available amount of money to purchase acapital good is equal to the interest that could have been earned if the money hadbeen deposited at a financial institution.

b. The marginal product of an input is the addition to total output as a result of theemployment of an additional unit of the input.

c. As more units of an input are employed, the marginal product of the input increasesindefinitely.


43 ECS101-6/101

ASSIGNMENT 04

Unique Number: 212704Closing Date: 12 September 2005Content: Study Units 9, 10 and 11 of the Study GuideQuestions: 12 questionsWeight: 30% of the semester mark





a. Perfect competition is the benchmark against which all other market structures arecompared.

b. The demand curve for the product of the firm under perfect competition ishorizontal at the level of the market price as the market price is determined by theinteraction between demand and supply.

c. Buyers and sellers in a perfectly competitive market have perfect knowledge ofmarket conditions.

[1] All the statements are correct[2] Only a and c[3] Only b and c[4] Only a and b[5] Only a

44

0

P

QQ1 Q2 Q3 Q4

Q5

MCAC

P1 P1

Questions 4.2 and 4.3 are based on the Figure 1 below, which relates to the (short-term)equilibrium of the firm under perfect competition. P1P1 is the demand curve for the product of thefirm, MC the marginal cost curve and AC the average total cost curve.

Figure 1


a. P1P1 is also the firm's average revenue curve.b. P1P1 is also the firm's marginal revenue curve.c. Profit is maximised at quantity Q3.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only b[5] Only c


a. The firm makes a loss at quantity Q1.b. The firm earns a normal profit at quantity Q2.c. The firm earns a normal profit at quantity Q5.

[1] All the statements are correct[2] Only a and c[3] Only b and c[4] Only a and b[5] Only c

4.4 To maximise profits a firm under perfect competition should produce a level of outputwhere

[1] average revenue is equal to average cost.[2] average cost is equal to marginal cost.[3] marginal revenue is equal to marginal cost.[4] average variable cost is equal to marginal cost.[5] marginal revenue is equal to average (total) cost.

45 ECS101-6/101


a. Imperfectly competitive firms have no influence over prices of their products.b. Like the perfect competitor, the monopolist can earn only normal profit in the long

run.c. Under monopolistic competition, a large number of firms supply a homogeneous

product.

[1] Only a[2] Only b[3] Only c[4] None of the statements is correct[5] a and b

4.6 Which of the following statements referring to monopolistic competition is/are correct?

a. Advertising plays an important role.b. Each firm has a certain degree of monopoly power, as it is the only producer of

that particular brand or variety of the product.c. Entry is not restricted.

[1] a and b[2] b and c[3] a and c[4] Only c[5] Not [1], [2], [3] or [4]


a. In a monopolistically competitive industry or market each firm must actstrategically.

b. When oligopolists compete, it is often in the form of non-price competition.c. Advertising and after sales services are forms of price competition.

[1] All the statements are correct[2] Only a and b[3] Only b and c[4] Only b[5] Only c

4.8 Oligopoly is a market structure where

[1] there are only a few buyers and many sellers (firms).[2] cartel formation is impossible.[3] suppliers have an incentive to advertise their products.[4] the entry of new firms is impossible.[5] only a heterogeneous or differentiated product is supplied.

46

4.9 Which one of the following occurs when labour productivity rises, ceteris paribus?

[1] The equilibrium nominal wage falls.[2] The equilibrium quantity of labour falls.[3] Firms will be induced to use more capital.[4] The labour demand curve shifts to the right.[5] Not [1], [2], [3] or [4]

4.10 Craft unions attempt to increase the wages of their members by

[1] restricting entry into the union.[2] decreasing the length of training or apprenticeship programmes.[3] restricting demand for the firm's output.[4] increasing the number of substitutes for the product produced by the firm.[5] Not [1], [2], [3] or [4]


a. The demand for labour will shift to the right if the price of capital (machinery)increases.

b. The supply of labour will shift to the right if the workplace becomes less dangerousas a result of new safety measures.

c. The supply of labour will shift to the right if more immigrants enter South Africa.

[1] Only a[2] Only a and b[3] Only b and c[4] Only a and c [5] All the statements are correct


a. Fixing a minimum wage above the equilibrium wage rate should have no effect onthe wage rate or the level of employment.

b. Fixing a minimum wage below the equilibrium wage rate will cause unemployment,since the quantity of labour supplied will be more than the quantity demanded.

c. Minimum wages are propagated as a mean of avoiding exploitation of workers.

[1] Only a[2] Only b[3] Only c[4] b and c[5] a and c

economics i (ecs101-6) · economics i (ecs101-6) tutorial letter 101/2005 (first and second...

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