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Your module course code: ECS2601
Name of the college: CEMS
Name of the Lecturer: Ms T Moletsane

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This assessment is due Thursday, 2021-Jul-01 06:00 PM.

Once you click "Begin Assessment," you will have 2 hours or until Thursday, 2021-Jul-01
06:00 PM whichever is shorter to complete this assessment. It will be submitted at that time,
regardless of whether you have answered all the questions.

You can submit this assessment 2 time(s). Answers from this attempt will replace all previous
answers submitted. Your highest score will be recorded.

Part 1 of 1 -
Exam_ECS2601

Question 1 of 50 2 Points
A Giffen good …

 A. must have a downward sloping demand curve. which the substitution effect
dominates the income effect.

 B. is the special subset of inferior goods in which the income effect dominates
the substitution effect.
  C. is the special subset of inferior goods.

 D. is always the same as an inferior good.

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Question 2 of 50 2 Points
A catering company total cost is given by Q2 + 40Q + 100. What is the marginal cost (MC) and
average variable cost (AVC), respectively?

 A.

and .

 B.
and .

 C.

and .

 D.

and .

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Question 3 of 50 2 Points
Andile’s income increase now from R150 to R200, and the price of clothing decreases from R100
to R50, while the price of food remains unchanged. Which of the following changes will occur
with Andile’s budget line? (clothing is on the y-axis).

 A. his budget line will shift downwards only.

 B. his budget line will shift upwards and become flatter.

 C. his budget line will shift upwards and become steeper.

 D. his budget line will shift downwards and become flatter.

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Question 4 of 50 2 Points
Table 4 below shows the demand elasticities for Coke and Sprite. Use the information in the
table to answer the question below. Remember: CPED is the cross-price elasticity of demand;
YED is the income elasticity of demand, and PED is the price elasticity of demand. From the
table, we can conclude that:

Table 4.

Elasticity type Elasticity value

PED coke 0.7
PED sprite 2.1
CPED of coke with respect to sprite 0.5
YED coke - 0.3
YED sprite 1.4

Table 4.docx 12 KB

 A. The price elasticity of demand for Sprite is inelastic.

 B. Coke is an inferior good.

 C. Coke and Sprite are complements.

 D. The price elasticity of demand for Coke is elastic.

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Question 5 of 50 2 Points
In the Stackelberg model, the leader has a first-mover advantage because it …

 A. has lower costs than the follower.

 B. reacts to the follower's decision.

 C. commits to producing a larger quantity.

 D. differentiates its output.

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Question 6 of 50 2 Points
Which of the following statements is incorrect about a firm operating in a perfectly competitive
market?

 A. the demand schedule is perfectly elastic.

 B. the firm is a price taker.

 C. a price higher than the marginal cost is charged.

 D. there is no government intervention.

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Question 7 of 50 2 Points
The market demand curve is given by P = 40 - 0.2Q. What is the profit-maximising output?

 A. Profit is maximised at output level, Q*=40.

 B. Profit is maximised at output level, Q*=100.

 C. Total revenue is maximized at output, Q*=200.

 D. Profit is maximised at output level, Q*=80.

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Question 8 of 50 2 Points
Use Table 2 to answer the question. Suppose Safety 1st, a manufacturing company for surgical
face masks, with only labour input variable recorded the following data on productivity levels.
Table 2.

Labour Quantity of surgical Marginal product Average product

face masks

1 200

2 280

3 340

4 360
 Table 2.docx 19 KB

 A. 990

 B. 60

 C. 110

 D. 80
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Question 9 of 50 2 Points
The long-run price elasticity of demand for a good tends to be …

 A. smaller (in absolute value) than the short-run price elasticity.

 B. negative, while the long-run elasticity is positive.

 C. larger (in absolute value) than the short-run price elasticity.

 D. positive, while the short-run elasticity is negative.

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Question 10 of 50 2 Points
The income-consumption curve for John between Qa and Qb is given as: Qa = Qb. His
budget constraint is given as: 120 = Qa + 4Qb. How much Qa will John consume to maximize
utility?

 A.
24

 B.

 C.

30

 D.
 60

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Question 11 of 50 2 Points
Which of the following is correct regarding a firm operating in an oligopolistic market?

 A. A cartel is generally illegal.

 B. The firm has imperfect information.

 C. The firm is a utility minimizer.

 D. The firm demand is the same as its average revenue.

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Question 12 of 50 2 Points
Sure Kicks is a supplier of sneakers in two cities Pretoria and Durban. The demand functions of
the two groups are ...
QPTA= 60 - 0.25PPTA and QDBN= 100 - 0.50PDBN
Where Q is the number of customers and P is the price for sneakers. The cost of providing the Q
units of sneakers is
C = 1000 - 40Q
What is the firm’s marginal cost …

 A.

R60

 B.

R100

 C.

R0.

 D.

R40
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Question 13 of 50 2 Points
An income-consumption curve sloping upward and then sloping downward suggest ...

 A. a good is an inferior good throughout its length and different income level

 B. the good is both a normal and an inferior good throughout its length.

 C. a good is a normal good at a certain income level and an inferior good at a

certain income level

 D. a good is a normal good throughout its length and different income levels.
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Question 14 of 50 2 Points
Use table 1 below to answer the question. Calculate the price elasticity of demand (PED) when
the price is R40.

Table 1.docx 20 KB

 A. PED = 0.20

 B. PED = – 0.1

 C. PED = – 0.30

 D. PED = – 0.4
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Question 15 of 50 2 Points
1. When there is a price increase, the price elasticity of supply ...

 A. remains unchanged both in the short and long run

 B. is larger in the long run than in the short run

 C. is larger only in the short run.

 D. is smaller in the long run than in the short run

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Question 16 of 50 2 Points
At a firm's current output level of 500 units per week, it has 15 employees at a weekly wage of
R1 000 each. Raw materials, which are ordered and delivered daily, cost R 2 000 per week. The
weekly cost of the firm's capital is R2 250. Which of the following statements is correct?

 A. Total variable cost is R2 000; total fixed cost is R1 000; total cost is R3 000.

 B. Total variable cost is R2 000; total fixed cost is R4 250; total cost is R6 250.

 C. Total variable cost is R15 000; total fixed cost is R2 250; total cost is R17
250.

 D. Total variable cost is R17 000; total fixed cost is R2 250; total cost is R19
250.
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Question 17 of 50 2 Points
Suppose Tshepo spends his entire budget of R5000 on only two goods, shoes and pizza. As his
income increases and pizza is considered an inferior good, then…

 A. spending on both goods must increase as income increases.

 B. spending on the pizza must increases as income increases.

 C. spending on shoes must decrease.

 D. if one good is inferior, the other must be a normal good.

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Question 18 of 50 2 Points
Use Figure 2 to answer the question. Calculate the total surplus. If the government establishes a
price ceiling of R1.00, the resulting deadweight loss will be …

Figure 2

Figure 2.docx 104 KB

 A. 150

 B. 200

 C. 300

 D. 1.50
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Question 19 of 50 2 Points
A firm operating in a perfectly competitive market sells 50 units of sanitisers at a price of R35
each. The firm’s average total cost is R30. Calculate the firm's profits/loss.

 A. Loss of R250 in the short run.

 B. The firm is breaking even.

  C. Profit of R250 in the short run.

 D. Profit of R1 750 in the long run.

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Question 20 of 50 2 Points
Jane receives the following marginal utilities from her first five classes of the semester: 120, 100,
80, 60 and 30. What is the total utility of her three favourite classes?

 A. 300

 B. 20

 C. 90

 D. 80
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Question 21 of 50 2 Points
Use the matrix below and answer the question that follow. A firm is faced with a decision to
invest in research and development (R&D) or not to. The values in the matrix indicates losses (-)
and profits (+). What is the Nash equilibrium?

MATRIX.docx 21 KB

 A.
R&D, No R&D.

 B.
R&D, R&D.

 C.

No R&D, R&D.

 D.

No R&D, No R&D.
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Question 22 of 50 2 Points
If marginal revenue is shown by the equation MR = 50 – 4Q, what is the corresponding demand
curve equation?

 A. P = 50 – 40Q

 B. P = 100 – 4Q

 C. P = 50 – 2Q

 D. P = 25 -2Q
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Question 23 of 50 2 Points
Suppose that a firm is operating in a perfectly competitive market is making a loss in the short
run. At what point can the firm shutdown?

 A. When the firm experiences minimum efficiency.

 B. When the price equals the marginal cost.

 C. When the market price is below the average total cost.

 D. When the market price is below the average variable cost.

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Question 24 of 50 2 Points
Use Figure 1 to answer the question. How much profit will the monopolist whose cost and
demand curves are shown in Figure 1 earn at output Q1?

Figure 1
 Figure 1.docx 101 KB

 A. 0AFQ1

 B. 0CDQ1

 C. BCDE

 D. 0BEQ1
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Question 25 of 50 2 Points
Table 5 below contains output and costs for a fat cake shop. We can say with certainty that:

Table 5.docx 12 KB

 A. The average variable cost is increasing, and the average total cost is
decreasing.

 B. The average variable cost is at its minimum, and the average total cost is
decreasing.

 C. The average variable cost is decreasing, and the average total cost is at its
minimum.
  D. The average variable cost is increasing, and the average total cost is at its
minimum.
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Question 26 of 50 2 Points
Use the following two statements to answer this question:
I. For a monopolist, at every output level, marginal revenue is equal to price.
II. For a monopolist, at every output level, average revenue is equal to price.

 A.

Both I and II are true.

 B.

I is true, and II is false.

 C.

Both I and II are false.

 D.

I is false, and II is true.

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Question 27 of 50 2 Points
How will the incidence of a subsidy introduced by government affect the consumers?

 A. Decrease the price paid by consumers.

 B. Decrease consumer surplus.

 C. Decrease consumer revenue

 D. Increase the price paid by consumers.

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Question 28 of 50 2 Points
Which of the following models results in the highest level of output assuming a fixed number of
firms with identical costs and a given demand curve?

 A. Cartel

 B. Monopoly

 C. Cournot

 D. Stackelberg
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Question 29 of 50 2 Points
Consider the two goods, orange juice and apple juice with 1.8 cross price elasticity, If the price
for orange juice increase…

 A. The consumer will demand less orange juice and more of apple juice
because the two goods are substitute goods, causing the demand for apple juice
to shift to the right.

 B. The consumer will demand less orange juice, and demand more of apple
juice because the two goods are complement goods, causing the demand for
apple juice to shift to the right.

 C. The consumer demand will remain unchanged because the goods are not
related.

 D. The consumer will demand less orange juice and more of apple juice
because the two goods are substitute goods, causing the demand for apple juice
to shift to the left.
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Question 30 of 50 2 Points
When do firms make decisions to change the quantity of factors of production?

 A. In the short run and long run.

 B. In the short run when all factors are fixed.

 C. In the long run when all factors are fixed.

  D. In the long run when all factors are variable.
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Question 31 of 50 2 Points
Which of the following is correct about a firm operating in a monopolistically competitive market?

 A. The firm has a perfectly elastic demand.

 B. Long-run profits are zero.

 C. Advertising and product quality reduce firm costs.

 D. The firm is breaking even in the short run.

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Question 32 of 50 2 Points
An emerging mobile phone manufacturer is faced with a demand given by P = 200 - 0.2Qd and a
supply given by P = 40 + 0.8Qs. After the imposition of a tax on luxury goods such as electronic
devices, the supply curve of the manufacturer is given by P = 80 + 0.8Qs. Using the midpoint
formula calculate the price elasticity of demand after a change in equilibrium price and quantity.

 A.

6.14

 B.

0.68

 C.

1.23

 D.

0.95

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Question 33 of 50 2 Points
Suppose that Andile's income is R300. He consumes two goods namely clothing and food. The
price for clothing is R100 and the price of food is R50. Write down his budget line (clothing is on
the y-axis).

 A. Qclothing = 30 - 0.5Qfood.

 B. Qclothing = 300 - 0.5Qfood.

 C. Qclothing = 3 - 0.5Qfood.

 D. Qclothing = 3 - 0.2Qfood.
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Question 34 of 50 2 Points
Use Table 3 to answer the question. Andy watched four episodes of a Netflix series each costing
R100 and received the following total utilities from each episode. What is the marginal utility for
every rand spent on the third episode of the Netflix series?

Table 3.docx 18 KB

 A. 930

 B. 210

 C. 70

 D. 103.3
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Question 35 of 50 2 Points
The Bertrand model is a more plausible model of firm behaviour than the Cournot model …

 A. because the Bertrand model predicts that firms will price at marginal cost.

 B. when firms set the quantity to be sold.

 C. because firms that sell a non-differentiated product typically act as price

takers.

 D. when firms sell a differentiated product.

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Question 36 of 50 2 Points
In which of the following cases would the income and substitution effects for books have the
same sign?

 A. None of the above.

 B. When books are an inferior, ordinary good and the price of books increases.

 C. When books are a Giffen good and the price of books increases.

 D. When books are a normal, ordinary good and the price of books increases.
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Question 37 of 50 2 Points
In the short run, the number of machines a firm uses is fixed at 100 but the firm can vary the
number of workers it employs. The short run costs of producing 500 units of output will be …

 A. Equal to the long run costs of producing 500 units of output.

 B. Greater than the long run costs of producing 500 units of output.

 C. Remain the same.

 D. Less than the long run costs of producing 500 units of output.
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Question 38 of 50 2 Points
When the government regulates the price of a product to be below the market clearing price ...

 A. producers suffer less than consumers when the demand is elastic.

 B. consumers suffer more than producers when the demand is inelastic.

 C. producers suffer more than consumers when the demand is inelastic.

 D. consumers suffer more than producers when the demand is elastic.

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Question 39 of 50 2 Points
The difference between what a producer is willing to sell for a unit of a good and what must be
received when actually selling it is called..

 A. deadweight loss.

 B. net loss.

 C. producer surplus.

 D. consumer surplus.
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Question 40 of 50 2 Points
Which of the following is correct regarding a pure monopoly?

 A. Monopolies are efficient.

 B. demand is the same as the average revenue.

 C. Monopolies are natural.

 D. Monopolies have minimum efficiency.

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Question 41 of 50 2 Points
Suppose that Lizzy and Thando are the only suppliers in the market for earphones. Their supply
schedules are given as follows:
Lizzy: P=15+2Qs
Thando: P =10+3Qs

 A.
6.67

 B.

14.17

 C.
7.5

 D.

25

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Question 42 of 50 2 Points
Which of the following is true about the relationships among various cost curves?

 A. When MC exceeds ATC, ATC could be rising or falling.

 B. When ATC is falling, MC must exceed ATC.

 C. When MC exceeds ATC, ATC must be rising.

 D. When TC is rising, MC must exceed TC.

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Question 43 of 50 2 Points
Use Figure 2 to answer the question. Calculate the total surplus.

Figure 2.docx 104 KB

  A. 5.

 B. 800.

 C. 4.

 D. 600.
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Question 44 of 50 2 Points
A firm can certainly produce at a minimum cost with a combination of capital and labour by
ensuring that ...

 A. the isoquant map is equal to the indifference map.

 B. the indifference curve is tangent to the isocost.

 C. the indifference curve and isoquant are equal.

 D. the isocost is tangent to the isoquant.

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Question 45 of 50 2 Points
The marginal cost of a monopolist is constant and is R10. The marginal revenue curve is given
as follows:
MR = 100 - 2Q
The profit maximizing price is….

 A.
R65.

 B.

R55.

 C.

R60.
  D.

R70.

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Question 46 of 50 2 Points
Suppose Chris has a monthly income of R10 000 to spent on a number of products, and the
price for 1GB data bundle he consumes monthly decreases from R100 to R80… what can we
conclude on the income effect and substitution effect if data bundle is a normal good.

 A. There will be a small income effect and small substitution effect due to few
substitutes.

 B. There will be a large income effect and small substitution effect due to few
substitutes.

 C. There will be a large income effect and large no substitution effect due to
many substitutes.

 D. There will be a large income effect, and small substitution effect due few
substitutes

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Question 47 of 50 2 Points
Sure Kicks is a supplier of sneakers in two cities Pretoria and Durban. The demand functions of
the two groups are...
QPTA= 60 - 0.25PPTA and QDBN= 100 - 0.50PDBN
Where Q is the number of customers and P is the price for sneakers. The cost of providing the Q
units of sneakers is
C = 1000 - 40Q
What would be the marginal revenue in each market?

 A.

None of the above is correct.

 B.

MRPTA = 240 – 8QPTA and MRDBN = 200 – 4QDBN.

 C.
 MRPTA = 60 - 40QPTA and MRDBN = 100 - 40QDBN.

 D.
MRPTA = 1000 - 0.25QPTA and MRDBN = 1100 - 0.5QDBN.

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Question 48 of 50 2 Points
When the income-consumption curve has a positive slope throughout its entire length, we can
conclude that ...

 A. the good on the horizontal (x) axis is inferior.

 B. the good on the vertical (y) axis is inferior.

 C. both goods are inferior.

 D. both goods are normal.

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Question 49 of 50 2 Points
In a Cournot duopoly model, one characteristic of the equilibrium position is that …

 A. the output is less that the single-price monopoly output would be if only one
firm were in the market.

 B. both firms produce the same amount of output.

 C. one firm drives the other out of the market.

 D. output is the same as would exist in a competitive market.

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Question 50 of 50 2 Points
An Engel curve ...

 A. is exactly the same as the demand the curve.

  B. Plot the price of the two goods.

 C. plots the income on the vertical axis and quantity of the good on the
horizontal axis.

 D. plot the quantity of two goods purchased at different income levels.

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