THE UNIVERSITY OF BOLTON INSTITUTE OF MANAGEMENT BA (Hons) ACCOUNTANCY SEMESTER 2 EXAMINATIONS 2017/18 PRINCIPLES OF ECONOMICS MODULE NO: ACC4015

Transcription

1 THE UNIVERSITY OF BOLTON INSTITUTE OF MANAGEMENT BA (Hons) ACCOUNTANCY SEMESTER 2 EXAMINATIONS 2017/18 PRINCIPLES OF ECONOMICS MODULE NO: ACC4015 TW24 Date: Tuesday 22 May 2018 Time: 10:00am to 12:00noon INSTRUCTIONS TO CANDIDATES: Part 1: Multiple choice questions. Answer all 30 questions. All questions should be answered in the answer booklet. This part accounts for 30% of the total marks. Part 2: Essays Answer any two questions from the choice of four questions. This part 2 accounts for 70% of the total marks. This is a Closed book exam.

2 Page 2 of 14 PART 1 - MULTIPLE CHOICE (30 marks) Attempt all 30 questions, selecting one answer for each. Answer all questions in the answer book provided noting the question number followed by the letter of the answer you have selected. IMPORTANT: 1. Where two or more individual statements are correct in a particular question, select the statement which includes them. 2. Marking: each correct answer receives one mark. Incorrect answers and unanswered questions receive zero marks. Questions 1-30 are worth 1 mark each 1) The return that an entrepreneur can expect to earn, on average, is called A) normal profit. B) accounting profit. C) profit. D) economic profit.

3 Page 3 of 14 2) An electrician quits her current job, which pays 40,000 per year. She can take a job with another firm for 45,000 per year or work for herself. The opportunity cost of working for herself is A) 45,000. B) 5,000. C) 85,000. D) 40,000. 3) A company could produce 99 units of a good for 316 or produce 100 units of the same good for 320. The marginal cost of the 100th unit is A) 4.00 B) 320. C) D) cannot be calculated with this information. 4) In perfect competition, the price of the product is determined where the industry A) supply curve and industry demand curve intersect. B) average variable cost equals the industry average total cost. C) fixed cost is zero. D) elasticity of supply equals the industry elasticity of demand. 5) A key difference between a monopoly and a perfectly competitive firm is that the monopolist

4 Page 4 of 14 A) has a marginal revenue curve that lies below its demand curve. B) does not face fixed costs in the short run. C) faces a perfectly elastic demand for its product. D) has no MC curve. 6) Price discrimination A) is common in perfectly competitive markets. B) is possible only if all groups of demanders have the same price elasticity of demand for the product. C) is more likely for services than for goods that can be stored. D) is illegal because it always violates monopoly control laws. 7) Which of the following is NOT a characteristic of monopolistic competition? a) the firm might advertise its product. b) the product of one firm is somewhat different from that of another firm. c) there are many firms in the market. d) the firms act as price-taking firms.

5 Page 5 of 14 8) In monopolistic competition, each firm's marginal revenue curve lies its demand curve because of. a) above; barriers to entry b) above; product differentiation c) below ; barriers to entry d) below; product differentiation 9) The long run is a time frame in which A) The quantities of all resources can be varied. B) The quantities of some resources are fixed and the quantities of other resources can be varied. C) All costs are sunk costs. D) The quantities of all resources are fixed. 10) In oligopolistic markets, A) all firms are price takers. B) there are no barriers to entry. C) there are only a few firms. D) there are many firms.

6 Page 6 of 14 11) Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the workforce, the equals. A) unemployment rate; 25/ B) workforce; 75 C) workforce; 25/ D) unemployment rate; 25/ ) Unemployment as measured includes the total number of people who A) would like to have a full-time job but are working part-time. B) are available and looking for work but unable to find employment. C) would like to have a job but have stopped seeking work. D) have jobs or are currently looking for jobs. 13) Frictional unemployment is the result of A) a slowdown in the rate of economic expansion. B) irresponsible workers with poor work habits. C) technological change or foreign competition. D) normal labour market turnover. 14) The retail prices index (RPI)

7 Page 7 of 14 A) is the ratio of the average price of a typical basket of goods to the cost of producing those goods. B) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2. C) measures the increase in the prices of the goods included in GDP. D) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. 15) If the RPI was at the end of 2004 and at the end of 2005, the inflation rate over these two years was A) 19.0 percent. B) 3.9 percent. C) 7.7 percent. D) 4.2 percent. 16) Aggregate expenditures include all of the following EXCEPT A) consumption of food. B) purchases of guns by the government. C) purchases of intermediate goods. D) purchases of a piece of capital equipment.

8 Page 8 of 14 17) Goods that are produced this year, stored in inventories, and then sold to consumers next year A) count in both this year's and next year's GDP. B) are not counted as a part of GDP. C) count in next year's GDP. D) count in this year's GDP. 18) In the circular flow of economic activity, aggregate expenditure includes A) saving and investment. B) income and saving. C) consumption and investment. D) consumption, investment, and saving. 19) Which of the following is not a direct determinant of demand? A) The type of market. B) Taste. C) Income. D) Price.

9 Page 9 of 14 20) Which of the following is not a function of the market? A) Allocates scarce resources. B) Determines how much to produce. C) Determines for whom to produce. D) Ensures equity in the distribution of goods and services. 21) If the price of a good is increased by 4.5% inducing 5.4% fall in demand; we can say that the demand for the good is A) price inelastic. B) price elastic. C) perfectly price elastic. D) unitary price elastic. 22) The working-age population can be divided into two groups, A) People looking for work and those in the armed forces. B) People in the workforce and people with a job. C) People in the workforce and people looking for work. D) People in the workforce and people who are not in the workforce.

10 Page 10 of 14 23) Which one of the following conditions will increase the incomes of producers following an increase in price? A) If demand is elastic. B) If supply is perfectly inelastic. C) If demand is inelastic. D) If supply is inelastic. 24) What would happen to total income if demand for a good was unit elastic, and the price of the good reduced? A) Income stays the same B) Income reduces. C) Income increases D) none of the above. 25) The variables that determine a household's budget line are A) its preferences and prices. B) its preferences and income. C) prices and income. D) None of the above are correct.

11 26) The price effect is equal to the Page 11 of 14 A) substitution effect plus the income effect. B) substitution effect. C) change in real income minus the change in money income. D) marginal rate of substitution minus relative prices. 27) The substitution effect reflects a movement along a given A) budget line. B) horizontal line. C) indifference curve. D) vertical line. 28) If two goods are perfect complements, the shapes of the indifference curves are A) bowed toward the origin. B) right-angled lines. C) bowed away from the origin. D) straight lines.

12 Page 12 of 14 29) If the RPI basket of goods cost 300 in the reference base period and 450 in a later year, the RPI in the later year equals A) 250. B) 150. C) 225. D) ) When firms in monopolistic competition are earning an economic profit, firms will A) enter the industry, and demand will decrease for the original firms. B) exit the industry, and demand will increase for the firms that remain. C) enter the industry, and demand will increase for the original firms. D) exit the industry, and demand will decrease for the firms that remain. End of Part 1 Part 2 is overleaf

13 Page 13 of 14 Part 2 Essays (70 Marks) Answer any TWO questions from this selection: Question 1 a) Why has globalisation increased? (5 marks) b) What has been the impact of globalisation on the UK Economy? (10 marks) c) What is national comparative advantage? (5 marks) d) Discuss the tools that Governments can use to restrict international trade. (15 marks) Total (35 Marks) Question 2 a) Explain the criteria used by the United Nations to describe the Least Developed Countries. (5 marks) b) Explain the main features of the Least Developed Countries. (10 marks) c) What are the advantages and disadvantages of enlarging the EU? (10 marks) d) What have been the main difficulties in granting Turkey membership of the EU? (10 marks) Total (35 Marks)

14 Question 3 Page 14 of 14 a) Define Gross Domestic Product (GDP). (5 marks) b) Describe the Income approach to measuring GDP. c) Describe the Expenditure approach to measuring GDP. d) Describe the limitations of Real GDP. (10 marks) (10 marks) (10 marks) Total (35 Marks) Question 4 a) Define frictional unemployment, structural unemployment, and cyclical unemployment. Give examples of each type of unemployment. (5 marks) b) Why does unemployment arise and what makes some unemployment unavoidable? What is the natural unemployment rate? (5 marks) c) Explain why firms may consider internationalisation. You are required to give 5 reasons worth five marks each. How can each reason help firms to survive in the market? (25 Marks) Total (35 Marks) END OF QUESTIONS