Grade 10 Economics Exam

June 2013

Time: 120 Minutes Marks: 120

INSTRUCTIONS

1Answer THREE questions as follows:

SECTION A: MULTIPLE CHOICE(+/- 40 minutes)

SECTION B: DATA RESPONSE(+/- 40 minutes)

SECTION C: ONEQUESTION OUT OF THREE OPTIONS(+/- 40 minutes)

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

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

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

5Read each question carefully.

6A neat and systematic presentation of facts is required.

7Answer in full sentences.

8Do 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.

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

10Non – programmable pocket calculators may be used.

THIS QUESTION PAPER CONSISTS OF 9 PAGES AND ONE ANSWER SHEET

SECTION A: MULTIPLE CHOICE

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

QUESTION 1

1.1The diagram shows the production possibility curves of two economies, X and Y.

Which statement about the two economies is correct?

  1. Both economies always have the identical opportunity costs.
  2. Both economies have the same future growth prospects.
  3. The opportunity costs are constant in both economies.
  4. The two economies can never produce the same combination of products.

1.2In the diagram, LM is an economy’s production possibility curve.

Which statement is correct?

  1. E only is attainable.
  2. F is economically efficient.
  3. G may be economically efficient but is not productively efficient.
  4. H is productively efficient but may not be economically efficient.

1.3What is meant by ‘ceteris paribus’ in economic analysis?

  1. A normative approach is being adopted.
  2. The effect of a change of one variable is being considered in isolation.
  3. One good has to be sacrificed to obtain more of another.
  4. One factor of production is fixed.

1.4What is the opportunity cost to an unemployed worker who becomes employed?

  1. The leisure they would otherwise have had.
  2. The value of the goods and services they produce.
  3. The wages they are paid.
  4. Zero.

1.5What distinguishes capital from other factors of production?

  1. Capital exists only in capitalist market economies.
  2. Capital results from the operation of the other factors.
  3. The rewards earned by the owners of capital are uncertain.
  4. Unlike labour or land, capital must be owned rather than hired or rented.

1.6What is likely to be greater in a planned economy than a market economy?

  1. Efficiency.
  2. Flexibility.
  3. Innovation.
  4. Stability.

1.7Which is a normative statement?

  1. An increase in the rate of inflation will lead inevitably to an increase in unemployment.
  2. A reduction in unemployment below a certain level will lead to higher inflation.
  3. Inflation can be reduced only by increasing the level of unemployment.
  4. Unemployment is more harmful than inflation.

1.8The model which economists use to represent the movement of factors of production and of income in an economy is known as the...

  1. business cycle.
  2. monetary flow.
  3. circular flow.
  4. economic cash.

1.9This is the imaginary place where the owners of the factors of production meet the people who want to buy them is known as the...

  1. production market.
  2. goods market.
  3. money market.
  4. factor market.

1.10What is consistent with an individual demand curve that slopes down from left to right?

  1. As price falls, a person switches away from rival products towards the product.
  2. As price falls, a person’s willingness and ability to buy the product will decline.
  3. As price rises, a person becomes less sensitive to price changes.
  4. As price rises, a person’s opportunity cost of purchasing the product falls.

1.11The points in the scatter diagram indicate the prices and quantities sold of an agricultural commodity in different time periods.

It may be concluded that these points were generated primarily by changes over time in

  1. advertising.
  2. consumers’ incomes.
  3. supply.
  4. the price of a substitute commodity.

1.12The table shows the market supply for a raw material and the individual demand of the threefirms, X, Y and Z, which are its only buyers.

What is the equilibrium market price of the raw material?

A. $7 B. $8 C. $9 D. $10

1.13The diagram shows an initial equilibrium point (X) in a market and a new equilibrium point (Y).

Which combination of changes in demand and supply could have caused the movement from X to Y?

demand / supply
A / decrease / decrease
B / decrease / increase
C / increase / decrease
D / increase / increase

1.14The market demand equation for a good is given by Qd = 310 - 20p and the supply equation by Qs = 10 + 10p, where p denotes the price of the good.

What is the equilibrium price?

  1. 5
  2. 10
  3. 15
  4. 20

1.15Wet weather in 2009 led to a fall in the sales of summer clothes. To support businesses the government reduced the sales tax (VAT).

How would these events be shown on a demand and supply diagram for summer clothes?

1.16A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X is the equilibrium position.

The effect is illustrated in the diagram below.

What will be the new equilibrium price and quantity supplied as a result of the subsidy?

1.17 Which area in the diagram represents the amount of consumer surplus that would occur in a market if a government enforced an effective maximum price?

  1. f only
  2. f + g + h only
  3. f + g + i only
  4. f + g + h + i + j + k

1.18If the price of bus rides is currently R3.50 per ride, then

  1. there will be a surplus of 30.
  2. there will be a shortage of 50.
  3. there will be a surplus of 50.
  4. there will be a shortage of 30.

1.19What must a government do to stabilise the price of an agricultural commodity?

1.20The greatest single event in the history of the South African economy was the discovery of...

  1. diamonds
  2. platinum
  3. gold
  4. silver

20 x 2 = (40)

TOTAL SECTION A: [40]

SECTION B: DATA RESPONSE

START EACH SECTION ON A NEW SHEET OF PAPER.

QUESTION 2

The United States Postal Service is in trouble

Since 2006, the volume of mail carried by the United States Postal Service (USPS) has fallen considerably and as a result it has reduced the number of its employees.

Table 1: USPS Volume of mail and number of employees in 2006 and 2010

One reason for the problems of the USPS has been the recession. This has prompted businesses and advertisers, which account for most of the USPS’s income, to reduce the number of letters and parcels they send. A long-term problem is that the volume of mail is not likely to go back to pre-2006 figures as the economy improves because of the strong challenge from the internet. E-mail is fast and cheap, businesses are advertising online more and they are increasingly asking customers to pay their bills online.

All of these issues are making it very difficult for the USPS, which does not receive any government subsidies. It estimated that it would lose US$8 billion in 2010.

The USPS plans to increase revenue by charging more for its services and to cut its costs by stopping Saturday deliveries and collections. Many USPS customers, including firms that use this service, are opposed to the plan. Some firms, however, stand to gain from this plan. One firm, Pitney Bowes, for example, makes products used by the USPS, such as automated sorting machines and automated franking machines. It expects demand for these products to rise if the USPS seeks to replace some of its employees with capital equipment.

2.1Did the number of employees of the USPS fall by a smaller or greater percentage than the volume of mail between 2006 and 2010? Show your workings. (4)

2.2Explain what is meant by a substitute and give two examples from the extract. (6)

2.3Explain two reasons why a firm may seek to replace some of its employees with capitalequipment. (8)

2.4It is stated that the USPS plans to charge more for its services. Explain why such a decisionmight not necessarily lead to an increase in revenue. (8)

2.5Discuss, with the aid of a diagram, whether it would be a good idea for a business, such as the USPS, to be supported by a government subsidy. (14)

TOTAL SECTION B: [40]

SECTION C

ANSWER ONE QUESTION FROM THIS SECTION.

START EACH SECTION ON A NEW SHEET OF PAPER.

QUESTION 3

3.1Using a normal demand curve explain how consumer surplus occurs. (16)

3.2With the help of diagrams, discuss whether consumers will benefit from the introduction on a product of (i) an indirect tax, and (ii) an effective minimum price.

(24)

OR

QUESTION 4

4.1Explain, with the help of a production possibility diagram, how the opportunity cost ofproducing different combinations of goods can be measured. (16)

4.2Discuss the ease with which a planned economy may be changed into a market economy. (24)

OR

QUESTION 5

5.1Discuss why in many countries some services, such as education and healthcare, are supplied both by the government and the private sector. (16)

5.2With the aid of a diagram, explain the difference between the Monetary Flow and the Real Flow of goods and services in the South African economy. Make use of a three sector model. (24)

TOTAL SECTION C: [40]

GRAND TOTAL: [120]

Grade 10 Economics Exam

June 2013

ANSWER SHEET

NAME: ______TEACHER: OFH / MJW / WHS

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20. / A / B / C / D

[20 x 2 = 40]

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Grade 10 Economics: June 2013