Postgraduate Diploma in Marketing December 2017 Examination Economic and Legal Impact (Econ) Date: 20 December 2017 Time: 0830 Hrs 1130 Hrs Duration: Three (03) Hrs ) Total marks for this paper is 100 marks. There are three parts in this question paper. All questions in Part One and Part Two are COMPULSORY. Part One includes 20 Compulsory multiple choice questions. Select the most appropriate answer from the given choices and mark it in the given space in the answer book. Part Two includes 06 Compulsory short answer questions. Part Three includes 02 Essay Type Questions. Answer only 01 Question from this part. Instructions to candidates 1 State your Registration Number on the front cover of the answer book and on each and every additional paper attached to it. Your name must not appear anywhere in the answer book or answer scripts 2. Always start answering a question on a new page 3. You are reminded that answers should not be written in pencil or red pen except in drawing diagrams 4. Answer the questions using: Effective arrangement and presentation Clarity of expression Logical and precise arguments Clear diagrams and examples where appropriate 5. Illegible hand writing and language errors will be penalised
PART ONE Read the question and select the most appropriate answer out of the four given choices. Tick your choice in the given space in the answer booklet. Question 01 Question 01.1 Factor payments for land, labour, capital, and entrepreneurship respectively are: a. Rent, wages, interest, and profits b. Rent, salaries, rates, and revenue c. Rates, wages, interest, and revenue d. Rent, salaries, wages, and profits Question 01.2 The fundamental problem in economics is: a. How businesses make profits from scarce resources b. How consumers decide what commodities to consume c. Making choices about the use to be made of scarce resources d. How governments decide to spend money and collect taxes Question 01.3 A point inside the production possibility curve shows: a. That the economy is efficient and makes full use of resources b. The economy is inefficient and does not make full use of resources c. The economy has grown and expanded its production capabilities d. The economy has invested in new technology Question 01.4 Microeconomics: a. Studies the behaviour of the whole economy b. Studies how markets make decisions c. Studies how governments makes policy decisions d. Studies the behaviour of individual economic units, households and firms Page 2 of 9
Question 01.5 A production possibility curve: a. Shows how much of one commodity a producer can produce with his budget b. Shows how much of two commodities the economy can produce when all productive resources are fully employed c. Shows how much of two commodities producers can sell in the market d. Shows the producer how to produce two commodities to satisfy consumer needs in the market Question 01.6 A market is a: a. Place where consumers buy goods and services b. Place where firms sell goods and services c. Situation where firms and consumers meet to discuss on how to consume and produce goods and services d. Situation where potential buyers and potential sellers of a good or service come together for the purpose of exchange Question 01.7 The demand curve: a. Slopes downwards from right to left b. Slopes downwards from left to right c. Slopes upwards from left to right d. None of the above Question 01.8 An increase in income causes: a. Shift of the demand curve b. Movement along the demand curve c. Shift of the supply curve d. Change in the slope of the demand curve Question 01.9 Income elasticity of demand: a. Is positive for inferior goods b. Is negative for normal goods c. Is zero for inferior goods d. None of the above is true Page 3 of 9
Question 01.10 Cross price elasticity of demand is: a. Negative for substitutes b. Zero for complements c. Negative for complements d. All of the above Question 01.11 Marginal Revenue is the: a. Price per unit sold b. Quantity sold divided by the price c. Addition to total revenue earned by from the sale of one extra unit d. Dividing total cost by total inputs used Question 01.12 Economic profit is obtained: a. Sales revenue minus explicit cost b. Sales revenue minus both explicit cost and implicit cost c. Sales revenue minus implicit cost d. Sales revenue minus average cost Question 01.13 According to economics, the objective of the firm is to: a. Maximize profits b. Maximize revenue c. Minimize costs d. Maximize customer satisfaction Question 01.14 Perfect competition has: a. Many firms selling differentiated products b. Many firms selling either differentiated or homogenous products c. Many firms selling homogenous products d. Many firms selling both homogenous and differentiated products Page 4 of 9
Question 01.15 Oligopolies are where: a. A few large firms dominate the market b. Large number of firms exist in the market c. Firms decisions are independent d. There are only two firms in the market Question 01.16 An example for perfect competition in Sri Lanka is: a. Soap industry b. Paddy industry c. Railways industry d. Airline industry Question 01.17 Monopolies a. Make only normal profits in the long run: b. Sell homogenous products c. Sell differentiated products d. None of the above is true Question 01.18 Firms in Monopolistic competition: a. Make supernormal profits in the long run b. Sell homogenous products c. Engage in non-price competition d. None of the above is true Question 01.19 Barriers to entry are: a. Factors which make it difficult for suppliers to enter a market b. Factors which make it difficult for employees to find jobs c. Factors which make it difficult for customers to find products d. None of the above is true Page 5 of 9
Question 01.20 In the kinked demand curve, the curve above the price charged by the firm is: a. Perfectly elastic b. Perfectly inelastic c. Inelastic d. None of the above (Total 20 Marks) Page 6 of 9
PART TWO This part includes SIX compulsory short answer questions. Answer all questions. Question 02 a. State and briefly explain the four factors of production. b. Scarcity leads to choice. Explain this statement. Question 03 a. List five determinants of demand for foreign tours by Sri Lankans. b. State how each would impact on the demand. Question 04 a. State five assumptions of a free market system. b. Briefly explain why markets fail. Question 05 a. Graphically explain average cost and marginal cost in the short run. b. Briefly explain the behaviour of drawn cost curves. Question 06 a. Monopolists can make supernormal profits in the long run. Explain this statement with the aid of a graph. b. State the arguments against monopolies. Page 7 of 9
Question 07 a. With the aid of a graph explain the short run equilibrium of a monopolistic competition. b. With the aid of a graph explain the long run equilibrium of a firm in a monopolistic competition. (Total 60 Marks) Page 8 of 9
PART THREE This part includes TWO essay type questions Answer only ONE question from this part Question 08 a. Briefly explain the importance of and the factors that influence the price elasticity of demand. b. The demand and supply of tea determines the market price and total quantity sold in the market. With the aid of graphs show how the following independent events impact the market of tea. i. Increase in prices of coffee ii. Reduction in import duties for fertilizer iii. Research highlights benefits of the consumption of tea (15 Marks) (Total 20 Marks) Question 09 a. Compare and contrast characteristics of perfect competition and monopolistic competition. b. Graphically explain the short run equilibrium in a perfect competition and how it becomes a long run equilibrium. (Total 20 Marks) (Total 100 Marks) -END- Page 9 of 9