Postgraduate Diploma in Marketing June 2012 Examination Specimen Paper Economic and Legal Impact Paper I (Econ)

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1 Postgraduate Diploma in Marketing June 2012 Examination Specimen Paper Economic and Legal Impact Paper I (Econ) Date: ** ** **** Time: 1400 Hrs 1700 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 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. Page 1 of 9

2 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 1.1 Scarcity exists in every society because there are a) limited wants and abundant resources. b) limited resources and unlimited production capabilities. c) limited resources and unlimited wants. d) limited production capabilities and an unlimited quantity of economic resources. Question 1.2 The Production Possibility Frontier depicts a) the maximum amount of alternative combinations of two goods that an economy can produce at a point in time. b) the limited amount of resources that an economy has at a point in time. c) the alternative combination of capital and labour inputs used in producing goods and services over time. d) the economy s employment level at a point in time. Question 1.3 The intersection of a market demand curve and a market supply curve for a commodity determines a) the equilibrium price for the commodity, b) the equilibrium quantity for the commodity, c) the point of neither surplus nor shortage for the commodity, d) all of the above. Page 2 of 9

3 Question 1.4 Which of the following statements is not true when price is above the equilibrium price? a) There is a shortage of the commodity. b) The quantity supplied exceeds the quantity demanded of the commodity. c) The pressure on the commodity price is downward. d) There is a surplus of the commodity. Question 1.5 Supply is initiated by a) customers with the intention of maximizing profit. b) suppliers with the intention of maximizing profit. c) customers with the intention of maximizing utility. d) suppliers with the intention of maximizing utility. Question 1.6 The demand curve is downward sloping due to a) income effect. b) income and substitution effect. c) substitution effect. d) consumption effect. Question 1.7 Perfect inelastic demand indicates a) a horizontal curve showing different quantities demanded at a constant price. b) an upright curve showing quantity changes little with a large movement in price. c) a vertical curve showing a constant quantity demanded at different prices. d) a flatter curve showing a large decrease in quantity demanded with a small increase in price. Page 3 of 9

4 Question 1.8 The value of perfectly inelastic supply a) is equal to zero. b) ranges between 0 1. c) reports infinity. d) is equal to 1. Question 1.9 Average revenue is equal to a) unit selling price multiplied by total output sold. b) total output sold divided by total revenue. c) total revenue divided by unit selling price. d) total revenue divided by total output sold in units. Question 1.10 Monopoly is a market stricture in which a) there are many buyers and sellers. b) there is only one producer/seller for a product. c) there are only few firms that make up an industry. d) there are no entry barriers to the market. Question 1.11 Marginal Cost is: a) the cost for producing one single unit throughout a process b) the additional cost incurred in producing an additional unit in the production process c) the costs which are not depending on the level of output d) the costs which are depending on the level of output Page 4 of 9

5 Question 1.12 The two key strategies to achieve a larger return on production that Adam Smith identified are: a) Profit and Sales b) Internal and Eexternal Economies of Scale c) Division of Labour and Specialization d) Capital and Labour Question 1.13 Perfect competition is characterized by: a) limited buyers and sellers b) only one producer in the market c) a few firms in the market d) a large number of buyers and sellers Question 1.14 A firm will always earn abnormal profit at an output level at when: a) marginal revenue is equal to marginal cost b) total cost is greater than total revenue c) average revenue is greater than average cost d) average variable cost is less than average revenue Question 1.15 In national income accounting, Three Sector Economy refers to: a) Firms, Households and Government b) Firms, Households and Imports c) Firms, Households and Exports d) Exports, Imports and Firms Page 5 of 9

6 Question 1.16 Marginal Propensity to Consume + Marginal Propensity to Save (MPC + MPS) is always: a) less than 1 b) equal to 1 c) equal to 0 d) more than 1 Question 1.17 One of the most notable examples of hyperinflation which occurred in 1923, is the inflation in: a) India b) Zimbabwe c) England d) Germany Question 1.18 Devaluation is: a) a deliberate upward adjustment to a country s official exchange rate relative to other currencies b) a deliberate downward adjustment to a country s official exchange rate relative to other currencies c) a deliberate adjustment to a country s official exchange rate relative to the price levels of foreign trade d) a deliberate adjustment to a country s official exchange rate relative to the prices of imports in international trade Page 6 of 9

7 Question 1.19 Expansionary fiscal policy creates: a) a budget surplus due to increase in government revenue b) a budget deficit due to the increase in government expenditure c) a budget surplus due to the increase in government taxes d) a budget surplus due to the reduction in government expenditure Question 1.20 Monetary policy is the process by which the Central Bank or monetary authority of a country controls: a) the supply of money b) the availability of money c) cost of money or rate of interest d) all of the above (Total 20 Marks) Page 7 of 9

8 PART TWO Answer all questions Question 02 Question 2.1 Explain the importance of understanding the determinants of demand in marketing decisionmaking. Question 2.2 What are the three methods of calculating national income of a country? Question 2.3 Briefly explain the concepts of inflation, deflation and hyperinflation. Question 2.4 What do you mean by income elasticity of demand? Distinguish between normal goods and inferior goods. Question 2.5 Define Monopolistic Competitive Market Structure and list its three characteristics. Question 2.6 Explain Average Propensity to Consume (APC) and Marginal Propensity to Consume (MPC). (Total 60 Marks) Page 8 of 9

9 PART THREE Answer a total of 1 (one) questions from this part Question 03 Define Economies and Diseconomies of Scale. Discuss main types of economies of scale referring to internal and external economies of scale. (Total 20 Marks) Question 04 Discuss in brief the importance macro economics concepts to marketers? (Total 20 Marks) (Total 100 Marks) -END- Page 9 of 9

ECONOMICS EXAMINATION OBJECTIVES

ECONOMICS EXAMINATION OBJECTIVES The following objectives of the examination are to test whether the candidates have acquired a basic understanding of economics with special emphasis on Hong Kong conditions