Grade 12 Economics Exam

September 2010.

Time: 180 Minutes Marks: 300

INSTRUCTIONS

1 Answer SIX questions as follows:

SECTION A: COMPULSORY QUESTION (+/- 20 minutes)

SECTION B: THREE QUESTIONS OUT OF FIVE OPTIONS (+/- 80 minutes)

SECTION C: TWO QUESTIONS OUT OF FOUR OPTIONS. (+/- 80 minutes)

2 Write the number of the question next to each answer.

3 Number the answers according to the system used in this question paper.

4 Start each question on a NEW PAGE. Leave one to two lines open between sub-sections of each question.

5 Read each question carefully.

6 A neat and systematic presentation of facts is required.

7 Answer in full sentences.

8 Do not answer more than the required number of questions. Only the required number of questions, in the order in which they have been handed in, will be marked.

9 Use only a black or blue pen (graphs / diagrams may be done in pencil).

10 Non – programmable pocket calculators may be used.

THIS QUESTION PAPER CONSISTS OF 10 PAGES AND ONE ANSWER SHEET


SECTION A (COMPULSORY)

QUESTION 1

1.1 For each question there are three possible answers, A, B and C. Choose the one you consider correct and record your choice in the appropriate space on the ANSWER SHEET attached to the question paper.

1.1.1 A characteristic of public goods is that they are …

  1. excludable.
  2. rival.
  3. non-rival.

1.1.2 South Africa uses a system of national accounts recommended by the …

  1. UN.
  2. IMF.
  3. World Bank.

1.1.3 A demand for US dollar will occur when …

  1. buying US government treasury bills.
  2. buying shares in South African firms.
  3. receiving interest from the World Bank.

1.1.4 The difference between average total cost and average variable cost:

  1. is constant
  2. is total fixed cost
  3. is the average fixed cost

1.1.5 Because of its lack in market power, the perfectly competitive business is a …

  1. price setter.
  2. price taker.
  3. price competitor.

1.1.6 If two producers control a market structure, it is known as a …

  1. monopoly.
  2. cartel.
  3. duopoly

1.1.7 Economic development …

  1. is the same as economic growth.
  2. leads to an increase in poverty.
  3. is an increase in the level of economic welfare.

1.1.8 The national government's initiative aimed at economic development of specific locations in South Africa, is called …

  1. DOT.
  2. DTI.
  3. SDI.

1.1.9 The ratio of export and import prices shows the ...

  1. balance of payments
  2. terms of trade
  3. exchange rate

1.1.10 If the rand depreciates, the rate of inflation is likely to …

  1. decrease.
  2. increase.
  3. remain the same.

1.1.11 Goods that have an external benefit will be … in the market.

  1. undersupplied
  2. freely supplied
  3. oversupplied

1.1.12 Tourism could lead to socio-economic problems such as …

  1. pollution.
  2. unemployment.
  3. poverty

(12 x 2 = 24)

1.2 Give ONE word / term for each of the following descriptions by choosing from the list below. Write only the word next to the question number (1.2.1 – 1.2.5) on the ANSWER SHEET.

tertiary sector; duopoly; urban; cartel; leading indicator; CPI; rural; PPI; secondary sector; lagging indicator

1.2.1 Net new companies registered

1.2.2 Collusion between oligopolies to form a collective monopoly

1.2.3 The sector that contributes most to total production in the South African economy

1.2.4 Measures increases in the cost of production

1.2.5 Most of the indigenous tourist attractions are situated in these areas (5 x 2 = 10)

1.3 Choose a description from COLUMN B that matches an item in COLUMN A. Write only the letter (A – L) next to the question number (1.3.1 – 1.3.8) on your ANSWER SHEET.

COLUMN A / COLUMN B
1.3.1 / New economic paradigm / A / the proportion of an increase in Y that is spent on goods and services within the economy.
1.3.2 / GDE / B / a measure to restrict imports
1.3.3 / Positive externalities / C / total value of spending inside the borders of a country
1.3.4 / Economies of scale / D / bans the commercial international trade of endangered species.
1.3.5 / CITES / E / absence of restrictions on imports and exports
1.3.6 / Marginal propensity to consume / F / large-scale production resulting in lower unit costs
1.3.7 / Quota / G / total value of spending by the permanent residents of a country
1.3.8 / Free trade / H / combination of demand and supply sided policies
I / benefits enjoyed by someone other than the firms producing the goods
J / fiscal and monetary policies
K / a development strategy focusing on cooperation and integration in Africa
L / removal of laws and government controls that interfere in the efficient operation of markets.

(8 x 2 = 16)

SECTION A TOTAL: [50]


SECTION B (Answer any THREE questions from this section.)

Start this question on a NEW PAGE.

QUESTION 2: (LO1 - MACROECONOMICS)

2.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the number (2.1.1 – 2.1.4).

2.1.1 A person who enjoys the benefit of goods without paying for them is known as a (dependent / free rider).

2.1.2 An increase in the level of taxation is indicative of a (restrictive / expansionary) fiscal policy.

2.1.3 The output produced in South Africa by a French-owned company is part of South Africa's (GDP / GNP).

2.1.4 A deficit on the BOP will result in the value of foreign currency (appreciating / depreciating). (4 x 2 = 8)

2.2 List any THREE advantages of privatisation. (3 x 2 = 6)

2.3 Study the diagram below and answer the questions that follow.

2.3.1 Define the term “business cycle”. (2)

2.3.2 Identify the labels for the following periods in the business cycle illustrated above:

(a) Upswing or expansion

(b) Length or duration of a cycle (4)

2.3.3 At which point / phase in the above diagram will unemployment be at its highest? (2)

2.3.4 Name ONE exogenous factor that gives rise to business cycles. (2)

2.3.5 Name the method of predicting future business cycles based on the patterns of previous ones. (2)

2.3.6 Explain how government can stimulate or dampen economic activity in an effort to smooth out cycles. (8)

2.4 Identify and discuss FOUR macroeconomic objectives of government. (16)

[50]


QUESTION 3: (LO2 - MICROECONOMICS)

Start this question on a NEW PAGE.

3.1 Choose the correct word from those given in brackets. Write only the word next to the number (3.1.1 – 3.1.4).

3.1.1 Brands like Omo and KFC play significant roles in (perfect / imperfect) markets.

3.1.2 All things being equal, one can expect a monopoly market to have higher prices and (higher / lower) output than in a perfect market.

3.1.3 Profit is maximised when marginal revenue equals (marginal / average) cost.

3.1.4 The value of inputs that are owned by the entrepreneur and being used in the production process is known as (implicit / explicit) cost. (4 x 2 = 8)

3.2 List any THREE characteristics of an oligopoly . (3 x 2 = 6)

3.3 Study the table below and answer the questions that follow.

Quantity / Total revenue / Marginal revenue / Total cost / Marginal cost / Average cost
0 / 0 / 10 / 0
1 / 20 / 20 / 18 / 8 / C
2 / A / 20 / 30 / 12 / 15
3 / 60 / 20 / B / 16 / 15.3
4 / 80 / 20 / 66 / 20 / 16.5
5 / 100 / 20 / 90 / 24 / 18
6 / 120 / 20 / 118 / D / 19.6

3.3.1 Calculate the missing figures A – D (4)

3.3.2 What are the total fixed costs of this firm? (2)

3.3.3 What market structure is this firm operating in? How do you know? (4)

3.3.4 What is the price of the product? (2)

3.3.5 At what output does this firm profit maximise? (2)

3.3.6 Calculate the profit of the firm at the profit maximisation point. (2)

3.3.7 Distinguish between normal profit and economic profit. (4)

3.4 Explain FOUR reasons for market failures. Use applicable examples where appropriate. (16)

[50]


QUESTION 4: (LO 3 – ECONOMIC PURSUITS)

Start this question on a NEW PAGE.

4.1 Choose the correct word from those given in brackets. Write only the word next to the number (4.1.1 – 4.1.4).

4.1.1 Tariffs that are calculated as a percentage of the value of the imported goods are said to be (direct / ad valorem) tariffs.

4.1.2 Increasing the standard of living is a goal of economic (growth / development).

4.1.3 The Maputo Development Corridor is an example of a (spatial / development initiative/industrial development zone).

4.1.4 The improvement of international competitiveness of local businesses is an advantage of (export promotion / import substitution). (4 x 2 = 8)

4.2 List any THREE characteristics of a developing country. (3 x 2 = 6)

4.3 Study the cartoon below and answer the questions that follow.

4.3.1 What organisation is represented by the person sitting on square one? (2)

4.3.2 What is this organisation’s objective? (2)

4.3.3 Identify the two protectionist trade barriers highlighted in the cartoon. (2)

4.3.4 From the perspective of the cartoon, who is imposing these trade barriers and how do they work? (8)

4.3.5 The so-called North-South divide is clearly illustrated in the cartoon. What is it, and what ways is it represented? (6)

4.4 Discuss the South African government’s supply-side approach with regard to economic growth . (16)

[50]


QUESTION 5: (LO 4 – CONTEMPORARY ISSUES)

Start this question on a NEW PAGE.

5.1 Choose the correct word from those given in brackets. Write only the word next to the number (5.1.1 – 5.1.4).

5.1.1 The SARB (buys / sells) securities when it wants to support a repo rate increase with open market operations.

5.1.2 Expenditure by tourists is regarded as a/an (visible / invisible) export.

5.1.3 Countries lacking adequate infrastructure to monitor the import and export of dangerous chemicals are protected by the (Stockholm Protocol / Rotterdam Convention)

5.1.4 Fish in the sea is an example of a (renewable / non-renewable) resource. (4 x 2 = 8)

5.2 List THREE monetary policy instruments. (3 x 2 = 6)

5.3 Study the reading below and answer the questions that follow.

Air pollution costs SA R4bn in healthcare

Air pollution is responsible for more than R4-billion in health costs, the Department of Environmental Affairs said on Monday.

"Healthcare costs associated with the burning of fossil fuels amount to R4-billion," the department's national air quality officer Peter Lukey told reporters in Vanderbijlpark at the Air Quality Governance Lekgotla.

He said the poor were disproportionally affected by air pollution. "They carry a burden because firstly they are poor and secondly they are sick. In addition, the poor often live in poorly ventilated areas and use coal fires for heat and cooking.

Lukey said during apartheid times living areas for the poor were often designated in areas downwind from industrial plants as no one else wanted to live there.

Source: Mail & Guardian Online

5.3.1 Define the term “negative externality”. (2)

5.3.2 What is the negative externality identified in the reading? (2)

5.3.3 With the aid of a fully labelled graph, illustrate and explain this market failure. (6)

5.3.4 Explain how a tax could be used to “internalise” this externality. (4)

5.3.5 Explain why you think the poor seem to be the most vulnerable section of the population with regard to the negative impact of this market failure. (6)

5.4 Using diagrams to assist you, explain cost-push and demand-pull inflation. (16)

[50]

QUESTION 6: (LO1 MACROECONOMICS AND LO 3 – ECONOMIC PURSUITS)

Start this question on a NEW PAGE.

6.1 Choose the correct word from those given in brackets. Write only the word next to the number (6.1.1 – 6.1.4).

6.1.1 The MTEF shows income and expenditure estimates for a (one / three)-year period.

6.1.2 The deliberate manipulation of a currency to a higher level is known as (appreciation / revaluation).

6.1.3 Purpose-built industrial estates which are physically enclosed or linked to an airport, are called (IDZs / SDIs).

6.1.4 South Africa is a founder member of the (WTO / SADC). (4 x 2 = 8)

6.2 List the THREE leakages and the THREE injections associated with the circular flow of income and spending. (3 x 2 = 6)

6.3 Study the graphs below and answer the questions that follow.

6.3.1 Define the term “economic indicator”. (2)

6.3.2 Name ONE institution in South Africa that publishes regular detailed data on some of the most important economic indicators. (2)

6.3.3 What does the current account measure in the Balance of Payments? (3)

6.3.4 What does GDP measure? (3)

6.3.5 There is a relationship between GDP, PCE and the current account. What is it? (4)

6.3.6 Explain why this relationship exists. (6)

6.4 Identify and discuss FOUR reasons why a country may adopt a protectionist policy (16)

[50]

SECTION B TOTAL: [150]

SECTION C (Answer TWO questions from this section)

Start each question on a NEW PAGE.

INSTRUCTIONS

Essay responses should include an introduction, body and conclusion. Five marks will be awarded for the introduction and conclusion. In addition, 5 marks will be allocated for the interpretation of the topic and language usage. A maximum of 40 marks will be awarded for the body.

QUESTION 7: (LO 1 - MACROECONOMICS)

Use the theory of supply and demand to explain why exchange rate fluctuations occur under a freely floating exchange rate regime. (50)

QUESTION 8: (LO 2 - MICROECONOMICS)

“Monopoly and perfect competition represent two extremes along a continuum of market structures. At the one extreme is perfect competition, representing the ultimate of efficiency achieved by an industry that has extensive competition and no market control. Monopoly, at the other extreme, represents the ultimate of inefficiency brought about by the total lack of competition and extensive market control.”

Compare, contrast and explain the long run equilibrium position of a perfectly competitive firm with that of a monopoly. Your answers should include well labelled and relevant diagrams.