Postgraduate Diploma in Marketing June 2017 Examination Economic and Legal Impact (Econ)

Postgraduate Diploma in Marketing June 2017 Examination Economic and Legal Impact (Econ) Date: 21 June 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 All natural resources are called: a) Capital b) Labour c) Land d) Entrepreneurship Question 01.2 Scarcity is defined as: a) Not having enough money b) Is the excess of human wants over what can be actually produced c) Is the excess of what can be actually produced over human wants Question 01.3 Opportunity cost is explained as: a) The cost of an item in terms of the price paid for inputs b) The cost of an item in terms of the alternatives forgone c) The cost of an item in terms of the environment pollution d) All of the above Question 01.4 Macroeconomics: a) Studies behaviour of an individual household of the economy b) Studies the behaviour of an individual firm of the economy c) Studies the behaviour of an individual firm and an individual household of the economy Page 2 of 8

Question 01.5 Unemployment in the economy will be shown on the production possibility frontier by: a) A point inside the curve b) A point on the curve c) An outward shift of the curve d) An inward shift of the curve Question 01.6 A change in the price of a product will impact the demand curve: a) As a shift of the demand curve b) By the demand curve becoming steeper c) As a movement along the demand curve Question 01.7 Price elasticity of demand measures: a) How quantity demanded of the commodity changes to a change in price of the commodity b) How price of the commodity changes to a change in quantity demanded of the commodity c) How income changes to a change in price of the commodity d) How price of the commodity changes to a change in income Question 01.8 Market price is determined where: a. Cost and revenue of the firm are equal b. Demand and supply are equal c. Production and cost of the firm are equal d. Opportunity cost and revenue of the firm are equal Question 01.9 Cross-price elasticity of demand: a) Measures how the price of one good affects the demand of another good b) Measures how the price of the good affects the demand of the same good c) Measures how the demand of one consumer affects the demand of another consumer d) Measures how the demand of one good affects the price of another good. Page 3 of 8

Question 01.10 Reduction in cost of production will result in a: a) Movement along the supply curve b) An inward (leftward) shift of the supply curve c) An outward (rightward) shift of the supply curve Question 01.11 A firm will maximize profits where: a) Marginal Cost = Total Revenue b) Marginal Revenue = Total Cost c) Marginal Cost = Marginal Revenue Question 01.12 Marginal revenue can be explained as: a) Change in total revenue caused by a change in total spending b) Change in total cost caused by a change in sales quantity c) Change in sales quantity caused by a change in total revenue Question 01.13 Monopolistic competition: a) Has many sellers selling differentiated products b) Has a few firms selling homogeneous products c) Has many firms with barriers to entry d) Has a few firms with price competition Question 01.14 Oligopolies: a) Have a large number of firms selling homogenous products b) Have only one firm in the industry c) Have either supernormal profits or losses in the long run d) Have few firms selling either homogeneous or differentiated products Question 01.15 Monopoly market structure: a) Has free entry and free exit b) Has barriers to entry and exit c) Homogeneous products Page 4 of 8

Question 01.16 A firm in monopolistic competition: a) Tries to sell at a higher price than other firms b) Tries to sell at a lower price than other firms c) Engages in non-price competition d) All of the above Question 01.17 A firm in monopolistic competition: a) Makes supernormal profits in the long run b) Makes losses in the long run c) Makes supernormal profits or normal profits in the long run d) Makes normal profits in the long run Question 01.18 An example for an oligopoly market in Sri Lanka is: a) Paddy industry b) Vegetable industry c) Fisheries industry d) Telecommunication industry ` Question 01.19 The similarity between perfect competition and monopolistic competition is: a) Both markets have barriers to entry b) Both markets have free entry and free exit c) Firms in both markets produce homogeneous products d) Firms in both markets produce differentiated products Question 01.20 Collusion in an oligopoly market is when: a) Firms split the output between them and charge the same price b) Firms have the same advertising strategy c) Firms have the same price d) Firms encourage other firms to enter the market (Total 20 Marks) Page 5 of 8

PART TWO This part includes SIX compulsory short answer questions. Answer all questions. Question 02 a. Briefly explain what is meant by a production possibility curve with the aid of a graph. (05 Marks) b. Briefly explain how economic growth can be shown using the production possibility curve. (05 Marks) Question 03 a. List the determinants of demand for internet services provided by one firm in Sri Lanka? (05 Marks) b. State the nature of the relationship (positive or negative) between the determinants of demand and the demand for internet services? (05 Marks) Question 04 a. Graphically show the market equilibrium of the market for carrots. (02 Marks) b. Explain with the aid of graphs how the following independent events will impact the market. i. Increase in consumer preference for consumption of carrots ii. Development of new technology which makes cultivation of carrots easier (08 Marks) Question 05 a. With the aid of a graph explain the short run equilibrium of a firm in a perfect competition. (06 Marks) b. With the aid of a graph explain the long run equilibrium of a firm in a perfect competition. (04 Marks) Question 06 a. Briefly explain economies of scale. (02 Marks) b. Explain with suitable examples, the different types of internal economies of scale. (08 Marks) Page 6 of 8

Question 07 a. List the characteristics of a perfect competition market. b. Briefly explain three (03) factors that determine the success of a price cartel. (04 Marks) (06 Marks) (Total 60 Marks) Page 7 of 8

PART THREE This part includes TWO Essay Type Questions Answer only ONE question from this part Question 08 a. Briefly explain the (03) three types of economic systems with related practical examples. (12 Marks) b. Explain four (04) reasons for market failure. (08 Marks) (Total 20 Marks) Question 09 a. Briefly explain the arguments for and against monopolies (3 each). (12 Marks) b. A monopolist can make supernormal profits in the short run and long run. Explain this statement with the aid of graphs. (08 Marks) (Total 20 Marks) (Total 100 Marks) -END- Page 8 of 8