UNIVERSITY OF PRETORIA

FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES

DEPARTMENT OF ECONOMICS
ECONOMICS 110
JUNE EXAMINATION

23 May 2008 Marks: 100

Time: 120 Minutes

Examiners: Mr R De Lange Mrs A De Waal

Mr F Le Roux Mr M Meiring
Mr FJ Scholtz Mr R Seymore
Mrs KL Thompson Mr G Tshiswaka-Kashalala

Consultant Examiner: Mr J Janse van Rensburg

QUESTION 1

Multiple choice questions

Answer the following questions by only writing the question number and the correct
alternative in your script. Eg.1.8 g. Note that each question has only one correct
answer.

1.1 The opportunity cost of a good is:

a. the time lost in finding it.

b. the quantity of other goods sacrificed to obtain another unit of that good.
c. the expenditure on the good.
d. the lack of opportunity to buy a good.
e. the opportunity to realise a profit or a loss.

1.2 Normative economics forms _____________ based on__________ .

a. positive statements, facts

b. recommendations, personal value judgments
c. positive statements, values
d. opinions, facts
e. opinions, scientific research

1.3 Which of the following is a monetary leakage from the circular flow of income and
expenditure in South Africa?

a. Defence expenditure by the South African government, via contracts with

local military suppliers.
b. Government purchases of textbooks for state-run schools.
c. The sale of export fruit to the European Union.
d. Investment by South African Breweries in a new South African brewery.
e. A decision by a major supermarket chain to sell Danish beer.

1
1.4 If South Africa’s GDP is greater than its GNI, then the income earned by foreign
owners of companies and foreign workers in South Africa is ________ the
income earned by South Africans who have invested or who are working abroad.

a. greater than
b. added to
c. subtracted from
d. less than
e. deflated by

1.5 The current account of the balance of payments records

a. all sales and purchases of goods and services as well as income flows to and
from the rest of the world.
b. the value of exports, but not imports.
c. the change in the country’s gold and foreign exchange reserves.
d. all purely financial flows in and out of the country.
e. all of the above.

1.6 A simultaneous decrease in both supply and demand will result in

a. an uncertain change in price and an increase in quantity.

b. a decrease in price and an uncertain change in quantity.
c. an increase in price and an uncertain change in quantity.
d. an uncertain change in price and a decrease in quantity.
e. none of the above.

1.7 A cost-reducing improvement in technology will result in a

a. leftward shift of the demand curve and an increase in quantity supplied.

b. rightward shift of the supply curve and an increase in quantity supplied.
c. leftward shift of the supply curve and an increase in quantity supplied.
d. rightward shift of the demand curve and an increase in quantity demanded.
e. None of the above.

1.8 Which of the following is not a determinant of the price elasticity of supply?

i. Price expectations
ii. Definition of the product
iii. Excess capacity
iv. Availability of inputs
v. Degree of complementarity

a. Only iii
b. i, ii and iv
c. ii and v
d. Only v
e. None of the above

2
1.9 Which of the following statements is incorrect?

a. As long as the price elasticity of demand is greater than one, the total
revenue of the seller will increase as the price increases.
b. Total revenue of the seller will remain unchanged when the price increases,
given that the price elasticity of demand is equal to one.
c. As long as the price elasticity of demand is less than one, the total revenue of
the seller will increase as the price increases.
d. Total revenue will remain unchanged if the price elasticity of demand is
negative.
e. Total revenue will increase if the price elasticity of demand is negative.

1.10 Which of the following is a feature of utility?

a. Utility can be measured.

b. Utility always rises at a constant rate.
c. When consuming the same good, utility varies across individuals.
d. Utility is a measure of satisfaction gained from producing a good.
e. When consuming the same good, utility is constant across individuals.

1.11 Indifference curves are convex to the origin because of

a. the transitivity of consumer preferences.

b. the assumption of a diminishing marginal rate of substitution.
a. the assumption of non-satiation.
d. the assumption of completeness.
e. the assumption of consistency.

1.12 Which of the following statements is correct?

a. Increasing returns to scale and economies of scale are the same concepts.
b. An example of increasing returns to scale is where a doubling of inputs will
give rise to a doubling in output.
c. A firm experiences economies of scale if costs per unit of output increase as
the scale of production increases.
d. Economies of scope refer to the cost savings achieved by producing two
related products in two closely related firms, rather than in only one firm.
e. Economies of scope refer to the cost savings achieved by producing two
related products in the same firm, rather than in two closely related firms.

1.13 The marginal cost (MC) curve intersects the

a. average cost (AC) and average fixed cost (AFC) curves at their minimum
points.
b. average cost (AC) and average variable cost (AVC) curves at their minimum
points.
c. average cost (AC) curve at its minimum point and the average variable cost
(AVC) curve at its maximum point.
d. total cost (TC) and total variable cost (TVC) curves at their minimum points.
e. average cost (AC), average variable cost (AVC) and average fixed cost
(AFC) curves at their minimum points.

3
1.14 Which of the following characteristics would you not associate with perfect
competition?

i. Influence over market price.

ii. Product differentiation.
iii. No uncertainty about market conditions.
iv. Agreements between sellers to control supply.
v. Economic profit in the long run.

a. i, ii, iii, iv and v

b. i, iv and v
c. ii, iv and v
d. i, ii, iii and v
e. i, ii, iv and v

1.15 Which of the following is not a characteristic of an oligopoly?

a. There are few sellers and many buyers in the industry.

b. To reduce uncertainty in the market, oligopolistic firms may collude.
c. A downward-sloping demand curve.
d. Imperfect information.
e. A firm in an oligopolistic market makes pricing decisions independently of the
pricing decisions of another firm in the market.
[30]

QUESTION 2

Suppose that a farmer sells 10 tonnes of barley to a brewery for R1 000 per tonne. The
brewer produces beer using the barley, and sells it to a bottling plant for R18 000. The
bottling plant packages and labels the beer and then sells it to a bottle store. The bottle
store finally sells the beer to a group of celebratory EKN 110 students for R24 000.

2.1 Complete the table below using the following information. (Only write out the
corresponding letter in your answer book, along with the correct answer). (6)

Participant Value of sales (R) Value added (R)

Farmer 10 000 10 000
Brewer a d
Bottling plant b 2 000
Bottle Store 24 000 e
Total c f

2.2 Which of the columns above represents the “GDP” of this simple transaction?
(i.e. which total, c or f?). Name the official method for calculating national GDP
that this value represents. (2)
[8]

4
QUESTION 3

3.1 Suppose the price of a product decreases from R100 to R200 but the quantity
remains unchanged at 400.

a. Calculate and interpret the arc elasticity of demand. (4)

b. Graphically illustrate the demand curve for this good. (2)

3.2 Economically interpret the following instances of elasticity: (8)

a. s = 0 (where s = price elasticity of supply)

b. xy > 0 (where xy = cross price elasticity of demand between goods x and y)
c. 0 < Y < 1 (where Y = income elasticity of demand)
d. D = (where D = price elasticity of demand)
[14]

QUESTION 4

Graphically derive the demand curve, using the ordinal approach. [10]

QUESTION 5

A farmer produces tomatoes in a perfectly competitive agricultural market. Two inputs

are used in the production process: land and labour. The market price for a bag of
tomatoes is R10. The partially-completed short-run cost and revenue schedule of the
farmer is shown below. Use the given information to calculate the values for (a) to (j).
(Only write out the corresponding letter in your answer book, along with the correct
answer).

Output TC TVC TFC AC MC TR Profit

(Bags of
(R) (R) (R) (R) (R) (R) (R)
tomatoes)
0 180 (d) (h)
25 250 (b) (i)
50 (a) 120 (e) (f) (j)
75 330 (g)
100 350 (c)
[10]

QUESTION 6

6.1 Discuss and graphically illustrate the three possible short-run profit/loss
scenarios for a firm conducting business in a perfectly competitive market.
(12)

6.2 Discuss and graphically illustrate the social welfare costs of a monopoly. (6)
[18]

5
QUESTION 7

You have been appointed as the economic advisor to the Minister of Agriculture. As a
result of the significant increase in the market price of maize to around R 1 700 per
tonne, the Minister is under pressure from various groups in society to introduce price
controls on maize and to set the price at around R 500 per tonne (i.e. a price ceiling).

7.1 Graphically illustrate the effect of the government’s intervention on the maize
market. (6)

7.2 What consequences do you expect this price ceiling will have on consumers and
on the economy as a whole? (4)
[10]

6
 UNIVERSITEIT VAN PRETORIA
FAKULTEIT EKONOMIESE EN BESTUURSWETENSKAPPE
DEPARTMENT EKONOMIE
EKONOMIE 110
JUNIE EKSAMEN
23 Mei 2008 Totaal: 100 punte
Tyd: 120 minute

Interne eksaminatore: Mnr R De Lange Mev A De Waal

Mnr F Le Roux Mnr M Meiring
Mnr FJ Scholtz Mnr R Seymore
Mev KL Thompson Mnr G Tshiswaka-
Kashalala

Konsultant eksaminator: Mr J Janse van Rensburg

VRAAG 1

Meervoudige keusevrae

Beantwoord die volgende vrae deur slegs die korrekte alternatief langs die
vraagnommer in jou antwoordboek neer te skryf. Bv.1.8 g. Let daarop dat elke vraag
slegs een korrekte antwoord het.

1.1 Die geleentheidskoste van ‘n produk is:

a. die tyd wat verbeur word om daarna te soek.

b. die hoeveelheid ander produkte opgeoffer om ‘n spesifieke produk te verkry.
c. die besteding op die produk.
d. die gebrek aan geleentheid om ‘n produk te kan aanskaf.
e. die geleentheid om ‘n wins of verlies te realiseer.

1.2 Normatiewe ekonomie maak _____________ gebaseer op__________ .

a. positiewe stellings, feite

b. aanbevelings, persoonlike waarde-oordeel
c. positiewe stellings, waardes
d. opinies, feite
e. opinies, wetenskaplike navorsing

1.3 Watter van die volgende is '

n monetêre lekkasie uit die inkome-en-
bestedingskringloop in Suid-Afrika?

a. Verdedigingsbesteding deur die Suid-Afrikaanse owerheid deur middel van

kontrakte met plaaslike leweransiers van militêre toerusting.
b. Aankope deur die owerheid van teksboeke vir staatsbestuurde skole.
c. Die verkope van uitvoervrugte aan die Europese Unie.
d. Investering deur Suid-Afrikaanse Brouerye in ' n nuwe brouery.
e. 'n Besluit deur '
n groot supermarkketting om Deense bier te verkoop.

1
1.4 As Suid-Afrika se BBP groter as sy BNI is, dan is/word die inkome wat verdien
word deur die buitelandse eienaars van maatskappye en deur buitelandse
werkers in Suid-Afrika ________ die inkome wat verdien word deur Suid-
Afrikaners wat in die buiteland geïnvesteer het of daar werksaam is.

a. meer as
b. toegevoeg aan
c. afgetrek van
d. minder as
e. gedefleer deur

1.5 In die lopende rekening van die betalingsbalans word die volgende opgeteken:

a. Alle verkope en aankope van goedere en dienste, asook inkomevloeie na en

van die res van die wêreld.
b. Die waarde van uitvoere maar nie van invoere nie.
c. Die verandering in die land se goud- en valutareserwes.
d. Al die suiwer finansiële vloeie in die land in en uit die land uit.
e. Al die bogenoemde.

1.6 ‘n Gelyktydige afname in beide aanbod en vraag sal lei tot

a. ‘n onsekere verandering in prys en ‘n toename in hoeveelheid.

b. ‘n afname in prys en ‘n onsekere verandering in hoeveelheid.
c. ‘n toename in prys en ‘n onsekere verandering in hoeveelheid.
d. ‘n onsekere verandering in prys en ‘n afname in hoeveelheid.
e. geen van bogenoemde.

1.7 ‘n Kostebesparende verbetering in tegnologie sal lei tot

a. ‘n linkswaartse verskuiwing van die vraagkromme en ‘n toename in die

hoeveelheid aangebied.
b. ‘n regswaartse verskuiwing in aanbod en ‘n toename in die hoeveelheid
aangebied.
c. ‘n linkswaartse verskuiwing in die aanbodkromme en ‘n toename in
hoeveelheid aangebied.
d. ‘n regswaartse verskuiwing in die vraagkromme en ‘n toename in die
hoeveelheid gevra.
e. geen van bogenoemde.

1.8 Watter van die volgende faktore is nie ‘n determinant van die pryselastisiteit van
aanbod nie?

i. Prysverwagtings
ii. Definisie van ‘n produk
iii. Oorskotkapasiteit
iv. Beskikbaarheid van insette
v. Graad van komplementariteit

a. Slegs iii
b. i, ii en iv
c. ii en v
d. Slegs v

2
 e. Geen van bogenoemde

1.9 Watter van die volgende stellings is verkeerd?

a. Solank die pryselastisiteit van vraag groter is as een, sal die totale
ontvangste van die verkoper toeneem as die prys toeneem.
b. Totale ontvangste van die verkoper sal onveranderd bly as die prys toeneem,
gegewe dat die pryselastisiteit van vraag gelyk is aan een.
c. Solank die pryselastisiteit van vraag kleiner is as een, sal die totale
ontvangste van die verkoper toeneem as die prys toeneem.
d. Totale ontvangste sal onveranderd bly as die pryselastisiteit van vraag
negatief is.
e. Totale ontvangste sal toeneem as die pryselastisiteit van vraag negatief is.

1.10 Watter van die volgende is ‘n eienskap van ‘n nut?

a. Nut kan gemeet word.

b. Nut styg altyd teen ‘n konstante koers.
c. Wanneer dieselfde produk verbruik word, sal die nut verskil vir individue.
d. Nut is ‘n maatstaf van bevrediging wat verkry word van die produksie van ‘n
produk.
e. Wanneer dieselfde produk verbruik word, sal die nut konstant wees vir
individue.

1.11 Onverskilligheidskrommes is konveks tot die oorsprong as gevolg van

a. die oordraagbaarheid van verbruikersvoorkeure.

b. die aanname van ‘n dalende marginale koers van substitusie.
c. die aanname van nie-versadigbaarheid.
d. die aanname van volledigheid
e. die aanname van konsekwentheid.

1.12 Watter van die volgende stellings is korrek?

a. Toenemende skaalopbrengs en skaalvoordele is dieselfde konsepte.

b. ‘n Voorbeeld van toenemende skaalopbrengs is waar ‘n verdubbeling van
insette lei tot ‘n verdubbeling van uitsette.
c. ‘n Firma ervaar skaalvoordele indien die koste per eenheid uitset toeneem as
die skaal van produksie toeneem.
d. Omvangsvoordele verwys na die kostebesparings wat verkry word deur twee
verwante produkte in twee soortgelyke firmas te produseer eerder as in slegs
een firma.
e. Omvangsvoordele verwys na die kostebesparings wat verkry word deur twee
verwante produkte in een firma te produseer eerder as in twee soortgelyke
firmas.

1.13 Die marginale koste (MC) kromme sny die

a. gemiddelde kostekromme (AC) en die gemiddelde vaste kostekromme (AFC)

op hulle minimum punte.

3
 b. gemiddelde koste (AC) en die gemiddelde veranderlike kostekromme (AVC)
op hulle minimumpunte.
c. gemiddelde kostekromme (AC) op sy minimumpunt en die gemiddelde
veranderlike kostekromme (AVC) op sy maksimumpunt.
d. totale koste (TC) en totale veranderlike kostekromme (TVC) op hulle
minimumpunte.
e. gemiddelde kostekromme (AC), gemiddelde veranderlike kostekromme
(AVC) en die gemiddelde vastekostekromme (AFC) op hulle minimumpunte.

1.14 Watter van die volgende eienskappe sal jy nie met volmaakte mededinging
versoen nie?

i. Beheer oor markpys.

ii. Produkdifferensiasie.
iii. Geen onsekere marktoestande.
iv. Ooreenkomste tussen verkopers om aanbod te beheer.
v. Ekonomiese winste in die langtermyn.

a. i, ii, iii, iv en v
b. i, iv en v
c. ii, iv en v
d. i, ii, iii en v
e. i, ii, iv en v

1.15 Watter van die volgende is nie ‘n eienskap van ‘n oligopolie nie?

a. Daar is ‘n paar verkopers en vele kopers in die bedryf.

b. Om onsekerheid te verminder, mag oligopolistiese firmas saamspan.
c. ‘n Vraagkromme met ‘n afwaartste helling.
d. Onvolmaakte inligting.
e. ‘n Firma in ‘n oligopolistiese mark neem prysbesluite onafhanklik van die
prysbesluite van ander firmas in die mark. [30]

VRAAG 2

Veronderstel ‘n boer verkoop 10 ton gort aan ‘n brouery vir R1 000 per ton. Die brouer
gebruik die gort om bier te produseer en verkoop dit aan die Bottelleringsaanleg vir R18
000. Die Bottelleringsaanleg verpak dit en verkoop dit aan ‘n drankwinkel. Die
drankwinkel verkoop uitendelik die bier aan ‘n groep feesvierende EKN 110 studente vir
R24 000.

2.1 Voltooi die onderstaande tabel deur die volgende inligting te gebruik (Skryf slegs
die ooreenstemmende letter in jou antwoordboek neer, tesame met die korrekte
antwoord). (6)

Deelnemer Waarde van Toegevoegde

verkope (R) waarde (R)
Boer 10 000 10 000
Brouer a d
Bottelleringsaanleg b 2 000
Drankwinkel 24 000 e
Totaal c f

4
2.3 Watter van die volgende kolomme verteenwoordig die “BBP” van hierdie
eenvoudige transaksie? (i.e. watter totaal, c of f?). Noem die amptelike metode
vir die berekening van nasionale BBP wat hierdie waarde verteenwoordig.
(2)
[8]

VRAAG 3

3.1 Veronderstel die prys van ‘n produk neem toe vanaf R100 tot R200 maar die
hoeveelheid gevra bly onveranderd by 400.

a. Bereken en interpreteer die boog pryselastisiteit van vraag. (4)

b. Illustreer die vraagkromme vir hierdie produk. (2)

3.2 Interpreteer die volgende elastisiteite ekonomies: (8)

a. s = 0 (waar s = pryselastisiteit van aanbod)

b. xy > 0 (waar xy = kruiselastisiteit tussen produkte x en y)
c. 0 < Y < 1 (waar Y = inkome-elastisiteit)
d. D = (waar D = pryselastisiteit van vraag) [14]

VRAAG 4

Lei grafies die vraagkromme af deur die ordinale benadering te gebruik. [10]

VRAAG 5

‘n Boer produseer tamaties in ‘n volmaak mededingende lanboumark. Twee insette

word gebuik tydens die produksieproses: grond en arbeid. Die markprys van ‘n sakkie
tamaties is R10. Die gedeeltelik-voltooide korttermyn koste- en ontvangsteskedule van
die boer word hieronder getoon. Gebruik die gegewe inligting om die waardes van (a) tot
(j) te bereken. (Skryf bloot die ooreenstemmende letter in jou anwoordboek, tesame met
die korrekte antwoord).

Uitset TC TVC TFC AC MC TR Wins

(Sakkies
(R) (R) (R) (R) (R) (R) (R)
tamaties)
0 180 (d) (h)
25 250 (b) (i)
50 (a) 120 (e) (f) (j)
75 330 (g)
100 350 (c)
[10]

5
VRAAG 6

6.1 Bespreek en illustreer grafies drie moontlike korttermyn wins/verlies scenarios vir
‘n firma wat ‘n besigheid in ‘n volmaak mededingende mark bedryf. (12)

6.2 Bespreek en illustreer grafies die sosiale welvaartskoste van ‘n monopolie.(6)

[18]

VRAAG 7

Jy is aangewys as ekonomiese adviseur vir die Minister van Landbou. As gevolg van die
aansienlike toename in die markprys van mielies tot ongeveer R1 700 per ton verkeer
die Minister onder druk van verskeie groepe in die samelewing om prysbeheer in te stel
en die prys te bepaal op ongeveer R500 per ton (i.e. ‘n prysplafon).

7.1 Illustreer grafies wat die effek van owerheidsinmenging op die mark vir mielies
wees. (6)

7.2 Watter gevolge verwag jy sal die prysplafon op verbruiker en die algemene
ekonomie veroorsaak? (4)
[10]