FINAL Examination Paper (COVER PAGE) Programme : Diploma in Quantity Surveying. Time : 8.00 am am Reading Time : 10 Minutes

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1 FINAL Examination Paper (COVER PAGE) Session : January 2013 Programme : Diploma in Quantity Surveying Course : ECO1141 : Principles of Economics Date of Examination : April 30, 2013 Time : 8.00 am am Reading Time : 10 Minutes Duration : 2 Hours 10 Minutes Special Instructions : This paper consists of SIX (6) questions. Answer any FOUR (4) questions in the answer booklet provided. All questions carry equal marks. Materials permitted : Non-programmable calculator Materials provided : Nil Examiner(s) : Mr. Mehdi Tasaloti Moderator : Mr Adrian Tan This paper consists of 6 printed pages, including the cover page.

2 ECO1141 (F) / Page 1 of 5 INTI INTERNATIONAL UNIVERSITY DIPLOMA IN QUANTITY SURVEYING PROGRAMME ECO1141 : PRINCIPLES OF ECONOMICS FINAL EXAMINATION : JANUARY 2013 SESSION This paper consists of SIX (6) questions. Answer any FOUR (4) questions in the answer booklet provided. All questions carry equal marks. Question 1 What do economists mean when they discuss "scarcity"? Graph the production possibilities frontier for the data below. Consumer Goods Capital Goods Explain the difference between a change in demand and a change in quantity demanded. What leads to each of these changes? (d) (e) Suppose that the productivity used to produce computers advances. How does this change affect the supply of computers and the supply curve of computers? Last year a very severe ice storm hit the north counties of New York state, and the states of Vermont and Maine. Electric poles were down and no one had power for days. It was reported that the price of kerosene heaters skyrocketed and the number purchased increased during this time. Using a supply and demand diagram, show the impact of the ice storm on the market for kerosene heaters.

3 ECO1141 (F) / Page 2 of 5 Question 2 Given the following information about a firm and complete the table below. Output Price ($) TC TFC TVC AFC AVC ATC MC TR AR MR Profit (20 marks) What are economies of scale? What is the main source of economies of scale? Question 3 Explain FOUR (4) characteristics of a perfectly competitive market. (8 marks) In the long run, perfectly competitive firms cannot earn an economic profit. Why? (3 marks) How does a firm in monopolistic competition determine its price and quantity? (4 marks)

4 ECO1141 (F) / Page 3 of 5 (d) Identify whether the statements are TRUE (T) or FALSE (F). The fundamental cause of monopolies is barriers to entry. A monopolist maximizes profit by producing an output level where marginal cost equals price. Monopolists can achieve any level of profit they desire because they have unlimited market power. (d) The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market. (e) Monopolistic competition is characterized by many buyers and sellers, product differentiation, and barriers to entry. (f) Product differentiation always leads to some measure of market power. (g) In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero. (h) When an individual firm in a competitive market increases its production, it is likely that the market price will fall. (i) Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost. (j) In the short run, if the market price is below the firm s average total cost of production, the firm will always shut down. Question 4 Define GDP and explain the FOUR (4) components of calculating GDP using expenditure approach.

5 ECO1141 (F) / Page 4 of 5 Suppose that the below table represents the goods and services produced in a very simple economy in Assume that steel is used as an input in the production of autos. Using that information, calculate GDP for the year Product Quantity Price per Unit Steel 1,000 $100 ipods 5, Autos ,000 Legal services 100 2,000 Explain FOUR (4) goods and services that are omitted in the GDP calculation. Question 5 Define the term money and list THREE (3) functions of money. (7 marks) The table below gives the U.S. CPI for six years. Calculate the inflation rates between 1997 to 1998, 1998 to 1999, 1999 to 2000 and 2000 to Year CPI Explain FIVE (5) types of inflations. (8 marks) Question 6 How does the Current Population Survey determine if a person should be counted in the labor force? Define Unemployment and explain FOUR (4) types of unemployment.

6 ECO1141 (F) / Page 5 of 5 Based on the information in the below table Category Total population Working- age population Labor force Employed Unemployed Number of people (millions) (i) (ii) What is the unemployment rate? What is the labor force participation rate? ~ THE END ~ ECO1141 (F)/JAN 2013/MEHDI TASALOTI/

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