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National College of Ireland
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Higher Certificate in Business – Full-time1–4Year 2 – HCBS 2
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Autumn/ Repeat Examinations
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Monday A
15th August 2016
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2.00pm
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Economics
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NC
Patricia Doherty
Tony Delaney
Duration of exam:
Attachments:
Two Hours
None
Answer all questions in Section A on the answer sheet provided (40%)
Answer one question from Section B (30%)
Answer one question from Section C (30%)
You should answer only the required number of questions.
If you answer more than the required number of questions you should cancel (put a line through) the
question(s) you do not want marked.
If you do not cancel extra questions, the examiner will mark the questions in the order presented in
your answer book until the required number of questions have been marked.
Page 1 of 7
SECTION A. Answer all 20 questions. Each question carries two marks.
1. The production possibility frontier illustrates that:
A) the economy will automatically end up at full employment.
B) an economy's productive capacity increases one-for-one with its population.
C) if all resources of an economy are being used efficiently, more of one good can be produced only if
less of another good is produced.
D) economic production possibilities have no limit.
Use the following to answer question 2.
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Figure: Guns and Butter
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2. (Figure: Guns and Butter) Look at the figure Guns and Butter. If the economy is operating at point B,
producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce
18 pounds of butter:
A) indicates that you can have more butter and guns simultaneously.
B) makes it clear that this economy has decreasing opportunity costs.
C) necessitates a loss of eight guns per period.
D) necessitates a loss of four guns per period.
3. An economy is said to have a comparative advantage in the production of one good if it:
A) can produce more of all goods than another economy.
B) can produce less of all goods than another economy.
C) has the highest opportunity cost of producing a particular good.
D) has the lowest opportunity cost of producing a particular good.
Page 2 of 7
4. Which of the following statements is CORRECT?
A) A change in demand is a movement along the demand curve, and a change in quantity demanded
is a shift of the demand curve.
B) Both a change in quantity demanded and a change in demand are movements along the demand
curve, only in different directions.
C) Both a change in quantity demanded and a change in demand are shifts of the demand curve, only
in different directions.
D) A change in quantity demanded is a movement along the demand curve, and a change in demand
is a shift of the demand curve.
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5. If chicken and beef are substitutes, then a fall in the price of chicken will
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A) an increase in the demand for beef.
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B) a decrease in the demand for beef.
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C) a decrease in the quantity demanded of beef.
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D) no change in the demand for beef.
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D increase in your income from a new job. If as a
6. After graduation from college, you might have
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result you decide that you will purchase
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hamburger is a(n) _____ good. N
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B) substitute
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C) complementary
D) inferior
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7. The price elasticity of demand measures the:
A) responsiveness of the change in quantity demanded to a change in price.
B) change in price versus a change in quantity demanded.
C) responsiveness of the change in the slope of the demand curve to a change in price.
D) change in the slope of the demand curve versus a change in the quantity demanded.
8. If the estimated price elasticity of demand for foreign travel is 4:
A) a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.
B) the demand for foreign travel is inelastic.
C) a 10% increase in the price of foreign travel will increase quantity demanded by 40%.
D) a 20% increase in the price of foreign travel will increase quantity demanded by 80%.
9. Gross domestic product is defined as:
A) consumer spending + government purchases of goods and services + financial spending + exports
– imports.
B) consumer spending + government transfers + investment spending + exports – imports.
C) disposable income + taxes + investment spending + exports + imports.
D) consumer spending + government purchases of goods and services + investment spending +
exports – imports.
Page 3 of 7
10. You are a college student and not working or looking for work. You are:
A) unemployed.
B) in the labour force but not employed.
C) not part of the labour force.
D) counted in the labour force as underemployed.
11. Structural unemployment:
A) results when there are more job hunters than jobs.
B) affects those entering the labor force for the first time.
C) is zero when the economy is in full employment.
D) is caused by short-run economic fluctuations.
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12. When inflation rises quickly, borrowers will _____ and lenders will _____.
A) be hurt; benefit
B) benefit; be hurt
C) be hurt; be hurt
D) benefit; benefit
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13. When you are using money to purchase a new MP3 player, money is serving as a:
A) store of value.
B) medium of exchange.
C) unit of account.
D) double coincidence of wants.
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14. The slope of the demand curve for money is:
A) vertical.
B) horizontal.
C) positive.
D) negative.
15. Perfect competition is characterized by:
A) rivalry in advertising.
B) fierce quality competition.
C) the inability of any one firm to influence price.
D) widely recognized brands.
16. A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive
firm.
A) more; more
B) less; more
C) more; less
D) less; less
Page 4 of 7
17. Fiat money is:
A) money backed by gold.
B) money that only the government will accept to pay taxes.
C) paper money with no intrinsic value.
D) used only in the United States as a medium of exchange.
18. The short-run Phillips curve represents the relationship between the unemployment rate and the
rate of change in:
A) the interest rate.
B) output.
C) wages only.
D) the aggregate price level.
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19. According to a Keynesian economist, a recessionary gap
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A) a monetary rule.
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B) supply-side tax increases to balance the budget.
C) decreases in government spending.
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D) discretionary fiscal policy.
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20. The most important use of GDP
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B) the level of unemployment.
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C) changes in the price level.
D) rates of return in financial markets.
Page 5 of 7
SECTION B - Microeconomics
Answer one question.
Question 1
a) In microeconomics, what is the essential criterion that distinguishes the ‘long-run’ from the
‘short-run’?
5 marks
b) What is meant by ‘diminishing returns’ to an input?
5 marks
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c) What is the characteristic shape of the marginal cost curve and why does it take on that shape?
5 marks
d)
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Ciarans’s Curry Corner pays rent of €200 per week and leases
7 kitchen equipment at a cost of
1week
€100 per week. Each worker it employs costs €150 per
and ingredient costs are €1 per
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curry meal. The production function for the business
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Curry meals A
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For each quantity of output, calculate:
i.
Total Cost
ii.
Average Total Cost
iii.
Marginal Cost
15 marks
[TOTAL 30 marks}
Question 2
a) In economic terms, what is a ‘perfectly competitive’ market’?
b) Distinguish between goods that are ‘substitutes’ and ‘complements’. Give examples.
6 marks
6 marks
c) Describe three factors that could cause the demand curve for a normal good in a competitive
market to shift to the right.
9 marks
d) Describe three factors that could cause the supply curve for a similar good to shift to the left.
9 marks
[TOTAL 30 marks}
Page 6 of 7
SECTION C - Macroeconomics
Answer one question.
Question 3
a) Describe the methods used by the Irish authorities to measure unemployment.
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b) Distinguish between structural unemployment and frictional unemployment
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c) How might a minimum wage impact on structural unemployment?
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5 marks
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d) Sketch the short-run Phillips Curve and comment.0
on the relationship it illustrates.
5 marks
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Question 4
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a) Describe the key roles played by a modern central bank.
b) Why is price stability of great importance in economic management?
15 marks
10 marks
c) Explain how the equilibrium interest rate is determined in the money market, using a diagram to
illustrate your answer.
5 marks
[TOTAL 30 marks}
Page 7 of 7