SUPPLEMENTARY ONLINE SUMMATIVE ASSESSMENT

Bachelor of Public Administration

Bachelor of Business Administration

Bachelor of Commerce in Accounting

Bachelor of Commerce in Entrepreneurship

Bachelor of Commerce in Retail Management

Bachelor of Commerce in International Business

PROGRAMME
Bachelor of Commerce in Project Management

Bachelor of Commerce in Financial Management

Bachelor of Commerce in Marketing Management

Bachelor of Commerce in Supply Chain Management

Bachelor of Commerce in Human Resource Management

Bachelor of Commerce in Information and Technology Management

MODULE Microeconomic Essentials

YEAR One (1)
INTAKE January 2024 Semester 1
DATE 18 July 2024
TOTAL MARKS 100
SECTION A [100 MARKS]
Answer ALL the questions in this section.

Type ONLY the letter that represents the correct answer next to the corresponding number in your online
answer booklet. E.g. 26 B

QUESTION 1 (4 Marks)
In the South African economy, the problem of “what to produce” is solved primarily by:

a) the National Planning Commission.

b) the South African Reserve Bank.
c) people advertising their wants.
d) the pattern of consumers’ spending.

QUESTION 2 (4 Marks)
Mr. Jones owns a milling company, and he sells instant porridge in his shop. He knows that if he raises the
price of instant porridge, he will sell fewer packets of porridge. If he drops the price, he will sell more instant
porridge. Mr. Jones also studies economics and he calculates that his instant porridge has a relatively elastic
demand curve. What can Mr. Jones do to increase his total revenue?

a) Give the instant porridge away free.

b) Lower the price.
c) Do not change the price.
d) Raise the price.

QUESTION 3 (4 Marks)
Which one of the following statements is CORRECT?

a) A rise in the price of a good will cause the supply curve of that good to shift to the right (i.e. the supply
of the good will increase).
b) A fall in the price of a good will result in a rightward shift of the demand curve, ceteris paribus (i.e. the
demand for the product will increase).
c) Demand is a synonym for wants. In other words, if a consumer demands a good it simply means that he
or she wants the good.
d) A decrease in the prices of the factors of production used to produce a certain product will give rise to
an increase in the supply of the product (illustrated by a rightward shift of the supply curve).
QUESTION 4 (4 Marks)
The diagram below shows the market for cooking oil. If the movement of the supply curve for S1 to S2 took
place, but the price failed to adjust to the new equilibrium, which one of the following would likely be witnesses
in the market for product B?

a) There will be an excess supply in the market.

b) There will be an excess demand in the market.
c) The new market price does not need to adjust, as the price can remain constant and the new market will still be in
equilibrium.
d) The price is not a significant factor in determining the market equilibrium.

QUESTION 5 (4 Marks)
You might not have heard about it from your sales rep yet, but Microsoft quietly announced that starting
March 1, 2022, it will hike the price of many of its enterprise Office 365 and Microsoft 365 subscriptions.
(Consumer and education subscription prices aren’t changing — for now.)”
Source: https://www.cio.com/article/3634389/microsofts-office-365-price-increases-how-to-reduce-the-hit.html

An increase in the price of Office 365 subscriptions above the equilibrium will…
a) Shift the Office 365 subscriptions’ supply curve to the right.
b) Shift the Office 365 subscriptions’ demand curve to the right.
c) Cause a surplus of Office 365 subscriptions.
d) Cause a shortage of Office 365 subscriptions.
QUESTION 6 (4 Marks)
Study the diagram and answer the question.

This production possibilities frontier is concave to the origin because:

a) resources are equally substitutable between the production of food and films.
b) society can have more food only if it produces more films.
c) the cost of food in terms of films is constant.
d) the opportunity cost of food in terms of films increases and more films are produced.

QUESTION 7 (4 Marks)
What is the opportunity cost of producing OS consumer goods in terms of capital goods in the Figure below?

a) OR
b) OP
c) PR
d) RT
QUESTION 8 (4 Marks)
What do arrows a and b represent?

a) a - income; b - goods and services

b) a - spending; b - factors of production
c) a - spending; b - goods and services
d) a - income; b - factors of production

QUESTION 9 (4 Marks)
In Table 1.1, what is the marginal cost of the third unit?

a) 100
b) 300
c) 50
d) 700
QUESTION 10 (4 Marks)
Study the following supply schedule of fried rice in a restaurant. Which of the following statements is TRUE?

Price of a bowl of fried rice Quantity supplied

R30 75

R35 85

R40 95

R45 105

R50 115

a) If the price of a bowl of fried rice increases from R40 to R50, the quantity of fried rice supplied increases by
115 bowls.
b) The supply schedule shows the inverse relationship between quantity supplied and the price of the product.
c) At a price of R35, the quantity of fried rice demanded is 85 bowls.
d) If the price of fried rice decreases from R45 to R30, the quantity supplied will decrease by 30 bowls.

QUESTION 11 (4 Marks)
A family has inherited £15,000 from a long-lost aunt. They are weighing up whether to buy a new car or go on
a trip to Australia for a month. They decide to go to Australia. The opportunity cost of this decision is
a) the cost of going to Australia.
b) the cost of a buying a new car.
c) the benefits of going to Australia.
d) the benefits of having a new car.
QUESTION 12 (4 Marks)
The Figure below shows demand for Fruit Snacks. Which movement reflects a decrease in quantity
demanded but NOT a decrease in demand?

a) from point a to point c

b) from point a to point e
c) from point a to point d
d) from point a to point b

QUESTION 13 (4 Marks)
The basic questions of “what to produce” and “for whom” to produce are essentially interdependent because
a) a particular level of output may be produced by many different combinations of inputs.
b) different patterns of factor use generate different patterns of income distribution.
c) income and wealth are concentrated in the hands of the economically powerful.
d) different patterns of distribution generate different patterns of demand and therefore different patterns
of resource allocation.
QUESTION 14 (4 Marks)
Mr Browns owns and operates a dog grooming parlour. Figure 14.1 shows the cost and revenue curves for a
pet grooming session. Initially, Mr Browns sets his price to maximise profits.
Figure 14.1: Costs, Revenue per grooming session

Calculate the change in total supernormal profit if Mr Browns changes his objective from profit maximisation
to revenue maximisation.
a) R225
b) R117
c) R108
d) R125

QUESTION 15 (4 Marks)
Which one of the following statements is INCORRECT?
a) The income elasticity of demand indicates by how much the incomes of suppliers will change if the
price of the product changes by one per cent.
b) The income elasticity of the demand for candles in poor households in South Africa has been
estimated at -0,20. This indicates that candles are inferior goods for such households.
c) The income elasticity of the demand for tea in South Africa has been estimated at 0,21. Tea may
therefore be classified as both a normal good and an essential good.
d) The income elasticity of the demand for biltong in South Africa has been estimated at 1,36. Biltong
may therefore be classified as both a normal good and a luxury good.
QUESTION 16 (4 Marks)
Burger King Corporation is a Restaurant Company specializing in flame-broiled fats food hamburgers. It is the
second largest hamburger chain in the United States, after McDonalds. A large hamburger called
the Whopper is Burger King’s signature product. The Whopper was introduced in 1957, at a time when its
competitor McDonald’s was still selling only small hamburgers”.

Source: https://www.britannica.com/topic/Burger-King-Corporation

The table above gives the demand schedule for Whopper hamburgers

Price Quantity Demanded

A 10 0

B 8 4

C 6 8

D 4 12

E 2 16

Which of the following statements CORRECTLY describes the price elasticity of demand?
a) The price elasticity of demand is larger at point A than at point B.
b) The price elasticity of demand is constant because the slope is constant.
c) The price elasticity of demand increases moving from point A to point B to point C to point D.
d) The price elasticity of demand is larger at point D than at point A.
QUESTION 17 (4 Marks)
Suppose the figure below represents demand and supply curves in the market for beef burgers at Ivy’s
Kitchen

If the price of burger patties and at the same time, people become concerned that burgers can lead to an
increase in “bad” cholesterol, then
a) the demand curve for burgers will shift from D2 to D1 while the supply curve of burgers will not shift.
b) the demand curve for burgers will shift from D2 to D1 and the supply curve of burgers will shift from
S2 to S1.
c) the demand curve for burgers will shift from D2 to D1 and the supply curve of burgers will shift from
S1 to S2.
d) the demand curve for burgers will not shift and the supply curve of burgers s will shift from S1 to S2.

QUESTION 18 (4 Marks)
“Consumer demand for meat has continued to rise throughout the pandemic, despite higher prices, according
to a recent analysis from CoBank. Beef consumption has grown 1.4% from 2019 to 2021 even as combined
retail prices increased by more than 20%, the report found. And for chicken, both consumption and prices hit
record-high levels in 2021. But as beef prices continue to increase, consumers may begin to “trade down”
when deciding which protein to purchase, CoBank said, with chicken most likely to benefit. The USDA is
expecting a slight decline in beef consumption in 2022-23 as domestic supplies fall with shrinking cattle
herds and growing exports, CoBank noted”.

If the quantity demanded of chicken increases by 5% when the price of beef increases by 20%, the cross
elasticity of demand between chicken and beef is

a) 2.5.
b) -4.
c) 4.
d) 0.25.
QUESTION 19 (4 Marks)
What part of the MC curve can be seen as the firm’s supply curve?

a) The entire MC curve.

b) The rising part from R60 on the vertical axes.
c) The rising part from R100 on the vertical axes.
d) The rising part from R120 on the vertical axes.

QUESTION 20 (4 Marks)
Credit Suisse is currently considering raising additional equity capital, the bank said in a statement. “The
group is robustly capitalised with a CET1 ratio of 13.8% and a CET1 leverage ratio of 4.3%. Asset
Management is an essential part of our group strategy presented last November, with four core divisions.”
Capital, as economists use the term…
a) Refers to funds secured by firms such as the example of equity funding by Credit Suisse million
mentioned in the article.
b) Is the money provided by institutional investors.
c) Refers to the process by which resources are transformed into useful forms.
d) Refers to things that have already been produced that are in turn used to produce other goods and
services
QUESTION 21 (4 Marks)
The diagrams show movements from position X to Y on production possibility frontiers. In which one of the
diagrams does the movement from X to Y illustrate the most likely impact on the Haiti economy of a natural
disaster such as Hurricane Harvey?

a) b)

c) d)

QUESTION 22 (4 Marks)
If the price of “X” increases and you buy less of “Y” then…
a) “X” and “Y” are complements and the price of “Y” will increase.
b) “X” and “Y” are complements and the price of “Y” will decrease.
c) “X” and “Y” are substitutes and the price of “Y” will increase.
d) “X” and “Y” are substitutes and the price of “Y” will decrease.

QUESTION 23 (4 Marks)
The price of the iPhone 13 falls by 3 percent and the price elasticity of demand for iPhone 12 is 2.0, then
quantity demanded will fall by…
a) 5 percent.
b) 6 percent.
c) 0.6 percent.
d) 60 percent.
QUESTION 24 (4 Marks)
“U.S. worker productivity growth slowed in the second quarter and labor costs were far weaker than
previously estimated in the first quarter, the Labor Department said on Tuesday.”
Assuming labour is a variable input, an increase in labour productivity ceteris paribus, will result in...

a) A downward shift in the marginal product curve.

b) A downward shift in the marginal cost curve.
c) An upward shift in the average cost curve.
d) A downward shift in the production function.

QUESTION 25 (4 Marks)
Study the following demand and supply schedules and answer the questions that follow.

Price Quantity demanded Quantity supplied

Point a R10 65 30
Point b R20 50 50
Point c R30 35 70
Point d R40 20 90
Point e R50 5 110

What is the equilibrium price (EP) and equilibrium quantity (EQ)?

a) EP (30); EQ (70)
b) EP (20); EQ (50)
c) EP(50); EQ(50)
d) EP(40); EQ(70)

END OF PAPER