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National College of Ireland
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BA (Honours) in Marketing Practice – Full Time0–4Year 1 – BAHMRP 1
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Semester One Examinations – 2016/2017
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Thursday 12th January 2017
2:00pm – 4:00pm
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Economic
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Duration of exam:
Attachments:
John Sisk
Michelle Ahern
Two Hours
None.
•Section A contains 10 multiple choice questions. Each correct answer is worth 2 marks. The
student should answer ALL of these questions. No negative marking will be used. Total marks for
this section is 20 marks. When answering this section you must use the answer sheet provided at
the back of this exam paper and hand up the entire exam paper plus answer sheet.
•Section B Microeconomics consists of TWO long questions. Each question is worth 40 marks. The
student must answer ONE of these questions. Total marks for this section is 40 marks.
•Section C Macroeconomics consists of TWO long questions. Each question is worth 40 marks. The
student must answer ONE of these questions. Total marks for this section is 40 marks.
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.
NON-PROGRAMMABLE CALCULATORS MAY BE USED IN THIS EXAMINATION
Page 1 of 7
Section A [20 Marks]
ANSWER ALL QUESTIONS
You must use the attached answer sheet for Section A.
1) A price floor is imposed by governments to help:
a) producers, can be referred to as a minimum price and leads to a surplus
b) producers, can be referred to as a maximum price and leads to a shortage
c) consumers, can be referred to as a maximum price and leads to a surplus
d) consumers, can be referred to as a minimum price and leads to a shortage
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2) As income increases, the demand for an inferior good will:
a) increase
b) decrease
c) will not be affected
d) will cause a movement along the demand curve for an inferior good
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3) Which of the following statements is true?
a) all costs are fixed in the short run
b) all costs are variable in the long run
c) all costs are variable in the short run
d) all costs are fixed in the long run
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4) The market for Pizza is initially in equilibrium. An increase in the cost of cheese would have what
effect the equilibrium price and quantity of pizza.
a) an increase in both the equilibrium price and quantity
b) a decrease in both the equilibrium price and quantity
c) a decrease in equilibrium price and an increase in equilibrium quantity
d) an increase in equilibrium price and a decrease in equilibrium quantity
5) Suppose that the price of a car falls by 5% and that quantity demanded increases from 100 to 150.
We can conclude that:
a) demand is elastic with a coefficient of -10, so total revenue of sellers rises
b) demand is inelastic with a coefficient of -10, so total revenue of sellers falls
c) demand is elastic with a coefficient of –0.10, so total revenue of sellers falls
d) demand is inelastic with a coefficient of –0.10, so total revenue of sellers rises
6) Cyclical unemployment occurs when:
a) wages are above the equilibrium wage
b) wages are below the equilibrium wage
c) demand for labour fluctuates at different times of the year
d) there is a change in the business cycle
Page 2 of 7
7) If the Consumer Price Index (CPI) was 111 at the end of the last year and 112.5 at the end of this
year, the inflation rate over the two years was:
a) 1.12%
b) 1.35%
c) 1.80%
d) none of the above
8) Ireland has an absolute advantage in the production of milk over Spain if:
a) it can produce milk using less resources than Spain
b) it can produce milk using more resources than Spain
c) both countries use the same amount of resources
d) none of the above
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9) The Human Development Index (HDI) is a composite index
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achievements in three basic aspects of human development:
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a) health, environmental measures and knowledge
b) income, working hours and wage rate per
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c) health, knowledge and income LO
d) knowledge, food distribution andNlife expectancy.
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10) A trough, in relation to theI business cycle is commonly defined as:
a) a period when three
NCsuccessive quarterly economic growth rates are negative
b) a period when the annual growth rate is above 6%
c) a period where output stops falling and the economy is at its lowest point from which recovery
begins
d) a period where output stops growing and the economy is at its highest point from where growth
begins to decline.
Page 3 of 7
SECTION B MICROECONOMICS [40 MARKS]
ANSWER ONE QUESTION ONLY
Question 1 (40 marks)
(a)
Using demand and supply analysis, state the effect each of the following has on the equilibrium
price and quantity of ice cream. Illustrate your answer using a separate diagram for each part
of the question below.
(i)
(ii)
(iii)
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An increase in the cost of sugar, an ingredient used in the
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A decrease in the price of ice-cream wafers;6.
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An improvement in the technologyDused in the factory to produce the ice-cream.
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(4 marks)
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(b)
(i) Define price elasticity of demand (4 marks), (ii) Explain the difference between “elastic” and
“inelastic” when calculating price elasticity of demand (6 marks) (iii) List two factors which
influences the price elasticity of demand (3 marks)
(13 marks)
(c)
Illustrate a movement along a Demand Curve and explain what could cause this.
(8 marks)
(d)
Price elasticity of demand was calculated for insulin and an answer of 0 was obtained. Provide
an interpretation of what this figure means, Support your answer with an illustration.
(7 marks)
[Total 40 marks]
Page 4 of 7
Question 2 (40 marks)
Output
(Q)
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VC
TC
AC
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600
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MC
1000
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1250
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1800
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400
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(a) Copy the above table into your answer booklet and fill in the blank spaces for:
(i)
(ii)
(iii)
(iv)
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Fixed Cost (FC)
Variable Cost (VC)
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(5 marks)
(3 marks)
Total Costs (TC)
(1 mark)
Average Cost (AC)
(3 marks)
(v)
Marginal Cost (MC)
(3 marks)
(b) Explain the relationship between marginal cost and average cost. Use a diagram to support
your answer.
(8 marks)
(c) List three characteristics which can be used to classify a market.
(d) Illustrate and explain the long-run equilibrium of a perfectly competitive firm
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(6 marks)
(11 marks)
SECTION C MACROECONOMICS [40 MARKS]
ANSWER ONE QUESTION ONLY
Question 1 (40 marks)
(a) List the three main objectives of macroeconomic policy
(4.5 marks)
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(b) Illustrate and explain the circular flow of income and in your answer outline and describe
the flows between households and firms.
(15 marks)
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(c) (i) Define leakages and injections in the circular flow of income.(4.5 marks) (ii) Describe
the leakage and injection in the foreign trade sector and how these effect economic activity
(6 marks)
(10.5 marks)
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(d) (i) Define Unemployment (4 marks) (ii) How is unemployment measured in Ireland
(2 marks) (iii) List two consequences of unemployment.(4 marks)
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(10 marks)
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Question 2 (40 marks)
(a)
Define Gross Domestic Product (GDP) and give two uses of GDP statistics, other than
used to compare living standards between countries.
(8 marks)
(b)
Define Fiscal Policy.
(4 marks)
(c)
Assume the economy is in long-run equilibrium, illustrate and briefly explain the effect
of adopting an expansionary fiscal policy, include in your answer the potential policy
dilemma resulting from implementing an expansionary fiscal policy. (Consider the
impact of implementing this on the three key macroeconomic objectives of
government).
(16 marks)
(d)
Using a simple example, illustrate and explain how banks ‘create’ money.
Page 6 of 7
(12 marks)
Answer sheet
Name:
_________________________________ Course:
_______________________
Student ID: ____________________________
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Please shade only one box per question 
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