SET A PROPOSED HND REVISION QUESTIONS by MR ALETANU
Specialty/Option: PLO, ASM, PMA, HUR, ACC, MIS, BFI, INS, LAS, NGO, QMA, LGA
Paper: Economics Science
Instructions: Answer all Questions
SECTION A: MULTIPLE CHOICE QUESTIONS (1*20 = 20 mks)
1. Which of the following is a role played by the (A) AP is always less than MP
price mechanism? (B) AP is always greater than MP
(C) Initially, AP < MP, then AP = MP, then AP
> MP
(A) Redresses market failures
(D) Initially, AP > MP, then AP = MP, then AP
(B) Corrects externalities < MP
(C) Encourages the provision of non-lucrative 5. Supposed that a rational consumer is faced
goods with the consumption of two goods X and Y in a
(D) Indicates consumers preferences particular market. If the consumer has a total
income of 2000frs to spend on both goods. What
2. The real cost of attending a football match at is his budget constraint (or line) equation given
the Omnisport stadium in Douala would be the; that good X costs 200frs and good Y, 100frs?
(A) price of entry ticket (A) 20X + 10Y= 2000
(B) Taxi fare to and from the stadium (B) Y= 2000 - 200X
(C) Satisfaction derived from the trilling (C) 200X + 100Y= 20
encounter
(D) Y= 20 - 2X
(D) Earnings forgone, from a part time job.
6. The supply curve for labour becomes
3. The demand for labour is a derived demand regressive when?
because it is derived from the?
(A) Work is substituted for leisure
(A) Market demand for labour
(B) Demand for goods/services produced by the (B) Wage rates are low
firm
(C) Leisure is substituted for work
(C) Decision of the entrepreneur
(D) Much time is used for work than leisure
(D) Labour intensive and capital extensive
method of production. 7. Which of the following will cause the demand
for a commodity to be fairly elastic?
4. Which of the following most accurately (A) Habit forming
describes the relationship between marginal
product (MP) and average product (AP) of (B) Demand for necessities
labour in the short run period of production? As (C)Availability of substitutes
the number of workers increase;
(D)Higher levels of income
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8. Suppose that the income elasticity of demand (B) The level of prices and interest rate
(YED) for a good is equal to -0.25. What is the
nature of this good?
(C) Frequency of earning wages
(A) Normal good
(D) Price levels and income
(B) Inferior good
12. The following information is related to the
(C) Superior good retail price index of a country in the course of
two years.
(D) Complementary good
The Retail price index (RPI) of a country
9. The following is related to the cost structure
increased from 100 in 2009 to 102.125 in 2010.
of a firm under perfect market conditions. Given
Assume that 2009 is the base year. Which of the
that the Average fixed cost (AFC) and Average
following is a possible effect on the economy
variable cost (AVC) for producing four (4)
books is 30frs and 50frs respectively. If the (i) Rise in price level (ii) Fall in the cost of
Average total cost (ATC) for five (5) books is living (iii) Fall in the value of money
70frs, what is the Marginal cost for producing
(A) (i) and (iii) only
five (5) books?
(B) (i) only
(A) 30frs
(C) (ii) only
(B) 80frs
(D) (iii) only
(C) 15frs
(D) 150frs
13. The final burden of a tax is referred to as?
The following information are related to
question (10); (A) Impact of tax
(B) Tax base
(i) legal monopolies (ii) Technical barriers (iii)
(C) Tax acceptance
Bilateral monopoly (iv) exclusive dealings.
(D) Tax incidence
10. Which of the above will enable a firm to 14. When a tax system is based on the idea that
remain the sole supplier of a product and earn those who earn more should pay proportionately
abnormal profits in the long run? more, this is in conformity with which taxation?
(A) Convenience
(A) (i) and (ii) only
(B) Effectiveness
(B) (i), (ii) and (iv)
(C) Efficiency
(C) (i),(ii) and (iii)
(D) Equity
(D) (i) and (iii) only.
15. What is "cheap money"?
11. The idle balance or liquidity can be
(A) Money in the form of coins and banknotes
influenced by:
(B) Money with low purchasing power
(A) The rate of interest (C) An amount of money with low value
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(D) Money borrowed at lower interest rate (D) None of the above
16. The difference between the Gross national 20. Given that the Marginal propensity to
product (GNP) at factor cost and the Gross consumption in an economy is constant at 0.5, if
domestic product (GDP) at factor cost is? private sector investment (I) and government
expenditure (G) increase by 5million MU and 3
(A) Indirect taxes
million MU respectively. What will be the effect
(B) Subsidy on the Income(Y)?
(C) Capital consumption (A) Y will rise by 16 million MU
(D) Net property income from abroad.
(B) Y will increase by 4million MU
17. Given that in a certain year the Gross
domestic product (GDP) at current price is 3600
million MU and the Retail price index is 120. (C) Y will rise by 8million MU
What is the real per capita income, if the total
(D) Y will rise by 15million MU.
population is 600 million inhabitants?
21. The fundamental economic problem of how
to produce is concerned with
(A) 5 MU per head
(A) Profit maximization
(B) 6 MU per head
(B) Cost-effective technology
(C) 30 MU per capita
(C) Welfare maximization
(D) 18,000 MU per head
(D) Sustainable economic growth
18. In a simple closed economy with no
government, suppose investment (I) in the (E) Effective distribution of goods and services
economy is autonomous and constant at 100
22. Which of the following is NOT a
million MU? What will be the effect on the level
determinant of the type of economic system
of savings (S) and income (Y)?
under which a country operates?
(A) Both S and Y will rise
(A) The nature of the relationship between the
(B) S will remain constant, Y will fall individual and the society
(C) S will be constant, Y will increase by 100 (B) The economic agent dictating the direction
million MU of economic activity
(D) S will fall, Y will rise. (C) The extent of intervention of foreign
government in the economy
19. Which of the following will reduce an
inflationary gap? (D) The role of government in the allocation of
resources
(A) An expansionary monetary policy (E) The mechanism by which resources are
allocated
(B) An expansionary fiscal policy
23. The functional relationship between
quantities of inputs and outputs is expressed by
(C) A tight fiscal policy
a:
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(A) Demand function (B) More than zero but less than one
(B) Production function (C) One
(C) Supply function (D) Greater than one
(D) Consumption function (E) Negative
(E) Total cost function 27. A price set above the equilibrium price will
lead to
24. Which of the following do NOT justify
government participation in business activities? (A) Excess demand
(A) To promote efficient allocation of resources (B) Excess supply
(B) To provide large capital required (C) Market shortage
(C) To promote national security (D) Market equilibrium
(D) To provide social services (E) Shortage supply
(E) To reduce exploitation by private business 28. Which of the following illustrates
consumer’s constraint?
25. If the average cost (AC) of producing
commodity X is XAF 20 and the total cost is (A) Total utility curve
XAF 100, the quantity of X is
(B) Demand curve
(A) 120
(C) Budget line
(B) 80
(D) Indifference curve
(C) 50
(E) Indifference map
(D) 10
30. When a country’s net factor income from
(E) 5 abroad is added to the Gross Domestic Product
(GDP), the value obtained is
26. Which economic concept explains why a
large drug chain can produce at a lower average (A) Gross National Product (GNP)
cost than single-scale individually owned drug
(B) Net National Product (NNP)
store?
(C) Net Domestic Product (NDP)
(A) Diseconomies of scale
(D) Personal Disposal Income (PDI)
(B) Constant returns to scale
(E) Per Capita-income (PCI)
(C) Diminishing marginal returns
Use the following information to answer
(D) Economies of scale
Questions 31 and 32
(E) Scale of preference
Items are in XAF billion
27. A supply curve that is a vertical straight line
Income of Cameroonians living in Cameroon
has a price elasticity that is
250
(A) Zero
Income of foreigners in Cameroon 400
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Income of Cameroonians abroad 350 (B) Reduce the gross national product
31. The value of the Net Factor Income from (C) Improve the terms of trade
abroad is
(D) Improve capital account balance
(A) – XAF 150 billion
(E) Reduce net exports value
(B) – XAF 100 billion
36. Ghana’s currency (Cedis) is obtainable in
(C) – XAF 50 billion Cameroon from which of the following market?
(D) XAF 50 billion (A) Money market
(E) XAF 150 billion (B) Commodity market
32. The value of the Gross National Product is (C) Bond market
(A) XAF 700 billion (D) Foreign exchange market
(B) XAF 650 billion (E) Fiduciary market
(C) XAF 600 billion 37. To eliminate balance of payments deficit, the
exchange control measure is meant to:
(D) XAF 550 billion
(A) Reduce external debt
(E) XAF 500 billion
(B) Reduce import value
33. The level of economic development is low in
Central African countries because (C) Reduce foreign reserves
(A) Planning has no practical relevance (D) Reduce export volume
(B) Pattern of consumer spending is low (E) Promote currency appreciation
(C) The countries have large population size 38. Which of the following can be adopted to
solve the problem of unemployment?
(D) Implementation of plan is ineffective
(A) Upward review of reserve requirement
(E) There is a unique planning model
(B) Lowering credit earnings
34. Which of the following is NOT a measure of
economic development? (C) Reduction in the bank lending rate
(A) Per capita-income (D) Purchase of government securities
(B) Life expectancy (E) Call for special deposit
(C) Literacy rate 39. Given a non-governed economy in which
Investment (I) = 50 million and Consumption
(D) Infant mortality
(C) = 100 million + 0.25Y, the equilibrium
(E) Corruption Index national income (Y) is
35. A fall in the prices of exports while the (A) 50 million
prices of imports remain constant will
(B) 100 million
(A) Worsen the balance of payments position
(C) 200 million
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(D) 400 million (E) 500 million
40. Which of the following statements below
best explains a straight line PPC?
(A) A constant rate of production of both
goods
(B) A constant rate of opportunity cost in
the production of both goods
(C) A constant return to scale
(D) A constant fall in opportunity cost
SECTION B: ESSAY WRITING AND PROBLEM SOLVING
QUESTION ONE
a) i. Differentiate between demand pull inflation and cost push inflation (2 marks)
ii. Discuss 3 causes and 3 remedies of a demand – pull inflation (10 marks)
b) List 5 canons of taxation (5 marks)
c) How may the government use fiscal policy to reduce the level of unemployment? (5 marks)
QUESTION TWO
Consider the table below which shows the demand and supply schedule for a good:
Price (FCFA) Quantity demanded Quantity supplied
100 10 110
90 20 100
80 30 90
70 40 80
60 50 70
50 60 60
40 70 50
30 80 40
a) Calculate elasticity of demand when price increases from the original equilibrium by 10 FCFA
b) List any three factors that can influence the value of elasticity calculated in question (a) above
c) Suppose an indirect tax of 20 FCFA per unit is imposed on this good
i) By how much will equilibrium price rise
ii) What will be the government total tax revenue
d) Now, supposed that instead of a tax, a subsidy of 20 FCFA is granted to producers of the good
i) What is the total benefits of the subsidy to the producers
ii) What will be the price per unit after the subsidy? (20 marks)
QUESTION THREE (10 marks)
Country X has a production possibility frontier represented by the following diagram
Producer goods A
C
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B
Consumer goods
0
Y
a) Which basic economic principle does the PC illustrate?
b) When is it possible for country X to produce at
i) Point Y? ii) point C?
c) Which growth path should the country pursue, if it is interested in long term rather than short
term growth? Explain your answer.
d) Compare point A and B in terms of current living standards.
QUESTION FOUR
A demand equation for oranges is given by
QD = -3P+5000
And the supply equation for the same good is
Qs = 2P+2000
Where QD, Qs and P are the quantity demanded, quantity supplied and price (in bags/units and FCFA)
respectively
Required
(a) Find the equilibrium price and quantity (4marks)
(b) If government in trying to control the price of the good fixes the price at 700FCFA
i. Identify the type of price control measure the government has applied (3marks)
ii. Identify the primary economic problem associated with this type of price control and justify your
claim mathematically. (6marks)
iii. State two economic problems associated with the primary economic problem identified in (ii)
above(2marks)
QUESTION FIVE
i. Write short notes on the following: (8marks)
a. Social cost
b. Explicit cost
c. Economies of scale
d. Marginal revenue
Consider the following Output cost and revenue table for a firm:
Output TC MC TR MR
0 100 - 0 -
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1 2200 - 2000 -
2 4100 - 3800 -
3 5700 - 5400 -
4 6700 - 6800 -
5 7500 - 8000 -
6 8500 - 9000 -
7 10100 - 9800 -
8 12000 - 10400 -
9 14100 - 10800 -
Required:
(a) Calculate the marginal cost (MC) and marginal revenue (MR) a teach level of output. (4marks)
(b) At which level of output would the firm maximize its profit and why? (1marks)
(c) Is the firm making profit or loss at the profit maximizing level of out? Calculate it. (2marks)
QUESTION SIX
a. Differentiate between: (3 marks)
i. Constant GDP and real GDP
ii. Cost of living and standard of living
a. Distinguish between economic growth and economic development and how they are measured (7
Marks)
b. Explain the factors that will determine the economic growth of a country. (10 Marks)
QUESTION SEVEN (20 marks)
a) Economic policies objectives are the major targets that the government seeks to achieve. Explain
the four major economic policy objectives. (16marks)
b) What instruments does the government use to achieve these objectives? (4marks)
QUESTION EIGHT: (20 marks)
2
Suppose that in an economy induced consumption is of disposable income, autonomous consumption is
3
constant at 100million MU and investment expenditure is 100million MU.
Income(Y Consumption Saving(S Investment(I) Aggregate money demand(AMD)
) )
150
300
450
600
750
Assume that there is no government in this economy,
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(a) Write down the correct consumption and savings functions of this economy. (2 + 3mks)
(b) Copy and complete the above table. (2+2+1+2mks)
Determine the equilibrium income;
(c) From the table. (1mk)
(d) From algebraic calculations. (3mks)
Assume that government activities are introduced, where government expenditure (G) is 200million MU
1
and direct tax (T) is of income(Y).
4
(e) Calculate the new equilibrium income and state the effect on the income(Y). (4mks)
QUESTION NINE
a) What do you understand by Gross Domestic Product (GDP) and Gross National Product (GNP)
in national income accounting? (3marks)
b) You are given the following information on an economy
ITEMS AMOUNT (in million francs CFA)
Consumer expenditure 30,100
Gross trading profits of companies 5400
Gross domestic fixed capital formation 13200
Public authorities current expenditure 1260
Export of goods and services 10700
Value of physical increase in stocks and work in -800
progress
Taxes on expenditure 7300
Imports of goods and services 1220
Net property income from abroad 650
Subsidies 1300
Capital consumption 4700
Calculate the following;
I. The GDP mp
II. The GDP fc
III. The GNP fc
IV. The Net National Income ( 12 marks)
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c) Identify and clearly explain three main uses of National Income Statistics?(5 Marks)
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