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Postgraduate Diploma in Marketing
December 2016 Examination
Economic and Legal Impact (Econ)
Date: 21 December 2016
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
The production possibility curve is generally:
a. Linear
b. Concave to the origin
c. Convex to the origin
d. None of the above
Question 01.2
Factors of production are:
a. Land, labour, material and money
b. Man, material, method and money
c. Capital, human resources, machinery and material
d. Land, labour, capital and entrepreneurship
Question 01.3
Micro economics studies:
a. Firm level economics
b. Country level economics
c. National income
d. Unemployment and inflation
Question 01.4
A movement along the demand curve occurs when:
a. Price of the commodity increases
b. Price of the commodity decreases
c. Price of the commodity varies while the other factors remain constant
d. Cost of production fluctuates
Page 2 of 9
Question 01.5
A totally elastic demand curve is:
a. A horizontal line
b. Downward sloping line
c. A curve with a flat bottom
d. A vertical line
Question 01.6
The law of supply explains:
a. The relationship between the quantity supplied and the price of the commodity while
the other factors remain constant
b. The reason for shifting of the supply curve
c. The relationship between the price of a commodity and the quantity supplied of the
same
d. The reasons for the slope of the supply curve
Question 01.7
Price elasticity of supply explains:
a. Reasons for variations in the quantity supplied of a good
b. Factors affecting the slope of the supply curve
c. Quantity supplied and its relationship with the sales revenue
d. Responsiveness of the quantity supplied to the changes of price while the other
factors remain constant
Question 01.8
Marginal Revenue (MR) is calculated by:
a. Total revenue divided by total quantity
b. Average revenue divided by total quantity
c. Incremental revenue divided by the total quantity
d. Incremental revenue divided by the incremental quantity of sale
Question 01.9
In economics, the short run is defined as:
a. A period not exceeding three calendar years
b. A period less than one year
c. A period in which machinery cannot be change
d. A period in which at least one of the factors of production cannot be changed
Page 3 of 9
Question 01.10
Income elasticity of demand explains:
a. Relationship between income and quantity demanded
b. Responsiveness of quantity demanded of a product to the change of consumer income
c. Responsiveness of quantity demanded to the changes in income variations
d. Responsiveness of the quantity demanded to the change of income while the other
factors remain constant
Question 01.11
One of the main characteristic of the oligopoly is:
a. Non price competition
b. Homogeneous products
c. A large number of firms in the market
d. None of the above
Question 01.12
Long run equilibrium of a firm operating in perfect competition is reached when:
a. AC= MR
b. MC=M
c. MC=MR=AC
d. TC=TR
Question 01.13
Economies of scale can best be described as:
a. Cost advantages received by a company when it reaches higher scale of production
capacity
b. Purchasing more raw material
c. Decline of marginal cost
d. Higher total revenue when selling more
Question 01.14
A monopolistic firm always faces a demand curve that:
a. Is parallel to the horizontal axis
b. Increases to the right of the graph
c. Declines from left to the right of the graph
d. None of the above
Page 4 of 9
Question 01.15
Perfect competition is characterized by:
a. Homogeneous products and a large number of producers
b. Free entry and exit
c. Perfect knowledge of the consumer
d. All of the above
Question 01.16
The long run average cost curve:
a. Is a straight line
b. Is convex to the origin
c. Is parallel to the vertical axis
d. None of the above
Question 01.17
GDP measures:
a. The total value of goods and services produced in a year
b. The total value of goods and services produced by the citizens of a country
c. The total financial value of goods and services produced by the residents of a country
d. All of the above
Question 01.18
Opportunity cost is best defined as:
a. The cost foregone
b. The benefits associated with the alternatives
c. The cost of an item measured in terms of the alternatives foregone
d. All of the above
Question 01.19
A treasury bill:
a. Is a short term debit instrument issued by the Central Bank
b. Is a bill with a fixed face value
c. Has a predetermined maturity period
d. All of the above
Page 5 of 9
Question 01.20
Benefits to share owners include:
a. Dividends
b. Capital appreciation
c. Bonus shares
d. All 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. What is a production possibility curve? Draw a graph and explain.
(05 Marks)
b. How do you define scarcity of resources in Economics? Give practical examples to support
your answer.
(05 Marks)
(10 Marks)
Question 03
a. What are the factors that determine the supply of rice in Sri Lanka?
(04 Marks)
b. What are the factors that affect the shift of the supply curve? Support your answer with
an appropriate graph.
(06 Marks)
(10 Marks)
Question 04
a. Define the price elasticity of demand and illustrate the formula used to calculate it.
(04 Marks)
b. Briefly explain the relationship between price elasticity of demand and the total revenue
of the firm.
(06 Marks)
(10 Marks)
Question 05
a. What are the reasons for the development of a monopoly?
(03 Marks)
b. How does a monopolistic firm reach equilibrium?
(07 Marks)
(10 Marks)
Page 7 of 9
Question 06
a. What is the difference between the short run and the long run in economics?
(02 Marks)
b. What are the factors that contribute to the internal and external economies of scale?
(08 Marks)
(10 Marks)
Question 07
a. What are the main factors/sources that contribute to the economies of scale?
(04 Marks)
b. What are the cost implications of different gradients/slopes of the long run average cost
curve? Use a graph to support your answer?
(06 Marks)
(10 Marks)
(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. What are the differences between GDP and GNP? Briefly explain the usefulness of GDP
as an economic measurement.
(10 Marks)
b. What are the main functions of money? Briefly discuss each of the functions.
(10 Marks)
(Total 20 Marks)
Question 09
a. What is an excess demand? What is the process used to reach equilibrium when an
excess demand is experienced in the market. Use graphs to support your answer.
(10 Marks)
b. What is meant by the “invisible hand” in an open economy? Explain its role with
practical examples.
(10 Marks)
(Total 20 Marks)
(Total 100 Marks)
-END-
Page 9 of 9