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ECONOMICS 9708/01
Paper 1(MCQ) FIRST TERM EXAM
Grade AS NOV 2010
Additional Materials: MCQ Sheet 1H
Max Marks - 30
There are thirty questions on this paper. Answer all questions. For each question
there are four possible answers
A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the
separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong
answer.
Any rough working should be done in this booklet.
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Q1) The world price of wheat rose by 15% between two successive months in
2007 and the quantity bought and sold over the same time interlude decreased
by 3%. Which of the following alone could explain this?
A. There was an increase in supply from new producers and the demand for wheat
is sensitive to price (demand is elastic).
B. Consumer incomes increased and wheat is a normal good with an income
elasticity of 0.2.
C. The price of corn increased and corn is a substitute for wheat.
D. The price elasticity of demand for wheat is -0.2 and there was a poor wheat
harvest in Australia owing to a severe drought and this adversely affected the
supply in world markets. ans
A. An increase in taxation
B. An increase in interest rates
C. An increase in personal savings
D. An increase in public expenditure ans
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Q5) Which of the supply curves shown in the diagram has unitary price
elasticity?
A. B
B. C ans
C. D
D. A
Q6) If the price of a well known economics textbook rises from £25 to £30 and
sales fall from 10,000 copies per year to 9,000, calculating elasticity at the initial
price and quantity:
A. Elasticity of demand is equal to -1.
B. Elasticity of demand is equal to -10.
C. Elasticity of demand is equal to -0.5. ans
D. Demand elasticity cannot be calculated from this information.
Q7) The following statements relate to relevant cost concepts in decision
making:
(i) Materials can never have an opportunity cost whereas labour can.
(ii) The annual depreciation charge is not a relevant cost.
(iii) Fixed costs would have a relevant cost element if a decision causes a
change in their total expenditure.
Q8) A paper plant creates a chemical waste which it dumps it into a nearby
river. If this situation applied to most paper plants in the nation, then you can
conclude that:
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A. the demand for the paper is greater than the supply of paper.
B. the supply of paper is greater than the demand for paper.
C. the market price of the paper is too low because the supply of the paper fails to
incorporate all costs of production. ans
D. the market price of paper is too high because consumers are not able to pay
enough money to get pollution-free paper.
Q9) You observe that the price of a product has risen by 20% and its sales
have risen by 5%. Which one of the following can have caused this:
A. Demand is inelastic.
B. A technical advance has shifted the supply curve to the right.
C. Consumer income has risen, this is a normal good, and supply is fairly inelastic.
ans
D. Consumer income has risen, this is a normal good, and supply is highly elastic.
B. inflation occurs.
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measures the total amount consumers would be willing to pay for the equilibrium
level of output?
A. OWYZ
B. OXYZ ans
C. OVYZ
D. XYV
A. The richest 10 per cent of the population has had a bigger percentage increase
in incomes over the past 10 years than the poorest 10 per cent.
C. The proportion of people's income paid in taxes is higher under this government
than under the previous one.
D. Inflation is rising.
Q15) Economists use the term 'Black Markets' for situations where:
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A. No tax revenue can be raised in this way because sellers of cigarettes will just
lower their price by the amount of the tax and, therefore, the price of cigarettes to
consumers will not change.
B. This tax will not raise much revenue either in the short term or the long term
since demand is price inelastic.
C. This is a very good way to raise revenue, both in the short term and in the long
term, because there are no substitutes for cigarettes.
D. The tax on cigarettes may not raise as much revenue as anticipated in the years
to come because the demand for cigarettes is likely to become more elastic over
time. ans
Q17) In a free market system, rationing occurs when there are increases in:
A. Quantity
B. Demand
C. Price ans
D. Supply
A. If the current account is in deficit, then the capital account must also be in deficit.
B. The overall sum of all the entries in the balance of payments must be positive.
C. The overall sum of all the entries in the balance of payments must be zero.
ans
D. If the current account is in surplus, then the capital account must also be in
surplus.
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D. cannot be predicted
Q20) A point that lies outside the production possibility frontier
A. is possible to attain if unemployment decreases
B. will never be attained
C. shows that no trade off is involved
D. is not attainable with the nation’s current resources and technology ans
Q24) Which of the following would change the quantity supplied for a good or
service?
A. a change in the technology used to produce the good or service
B. a change in the price of inputs used to produce the good or service
C. a change in expectations about the price of the good or service
D. a change in the price of the good or service ans
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Q26) If a good is imported into (large) country H from country F, then the
imposition of a tariff in country H
A. raises the price of the good in both countries ("the "Law of One Price").
B. lowers the price of the good in both countries.
C. lowers the price of the good in H and could raise it in F.
D. raises the price of the good in H and lowers it in F. ans
Q27) Suppose the United States eliminates its tariff on ball bearings. Ball
bearing prices in the United States would be expected to
A. increase, and the volume of imports into the US to increase
B. decrease, and the volume of imports into the US to increase. ans
C. increase, and volume of imports into the US to decrease.
D. decrease, and volume of imports into the US to decrease.
Q29) Tariffs are not usually defended on the ground that they
A. improve the terms of trade of foreign nations. ans
B. protect jobs and reduce unemployment.
C. promote growth and development of young industries.
D. prevent over-dependence of a country on only a few industries.
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Q30) If a large country (U.S.) imposes a tariff on its imported good, this will
tend to
A. have no effect on terms of trade.
B. improve the terms of trade of all countries.
C. improve the terms of trade of the United States. ans
D. cause a deterioration of U.S. terms of trade.
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