CONFIDENTIAL BA/JUL2021/ECO415

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : ECONOMICS
COURSE CODE : ECO 415
EXAMINATION : JULY 2021
TIME : 1 HOUR 30 MINUTES

VENUE : GOOGLE CLASSROOM / UFUTURE / OTHERS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) parts: PART A (28 Questions), and PART
B.

2. Answer all questions in the platform provided.

3. Do not copy the work of your friends or sharing your answers to other candidates.

4. Students must submit their completed answers within the time given.

5. Students are only allowed to submit their answers once. Therefore, kindly check
your answers before submitting.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 7 printed pages
PART A: MULTIPLE CHOICE QUESTIONS (35 marks)

1. An increase in the price of a product will reduce the amount of it purchased because
a. the higher price will signal to consumers that the good is of low quality.
b. the higher price means that real incomes have risen.
c. consumers will substitute other products for the one whose price has risen.
d. consumers substitute relatively high-priced for relatively low-priced products.

2. Which of the following statements is correct?

a. An increase in the price of C will decrease the demand for complementary
product D.
b. A decrease in income will decrease the demand for an inferior good.
c. An increase in income will reduce the demand for a normal good.
d. A decline in the price of X will increase the demand for substitute product Y.

3. Refer to the below diagram of the market for corn. If the price in this market is $4 per
bushel, then there will be

a. a surplus of 8 thousand bushels.

b. a shortage of 8 thousand bushels.
c. a shortage of 4 thousand bushels.
d. a surplus of 12 thousand bushels.

4. Which of the following statements is correct?

a. If demand increases, equilibrium price will fall.
b. If supply increases, equilibrium price will fall.
c. If demand decreases, equilibrium price will rise.
d. If supply declines, equilibrium price will fall.

5. Which of the following is an appropriate monetary policy if the Bank Negara Malaysia
(BNM) wants to increase the money supply?
a. An increase in the required reserve ratio.
b. An increase in the discount rate.
c. Purchases of bonds in open market operations.
d. Higher taxes on interest income.

6. The government is pursuing an expansionary policy if it:

a. decreases its spending and increases its tax revenues.
b. increases its spending or increases its tax revenues.
c. decreases its spending or reduces its tax revenues.
2
 d. increases its spending and/or reduces its tax revenues.

7. Central bank should implement contractionary monetary policy to reduce inflation by:
a. Purchasing of securities in open market operation.
b. Reducing discount rate.
c. Reducing required reserve ratio.
d. Increasing bank rate.

8. Reduction in the required reserve ratio will cause

a. An increase in the demand for money.
b. Decrease in the discount rate.
c. Decrease in money supply.
d. An increase in excess reserves.

9. Which of the following policies by the Bank Negara would help to overcome
unemployment?
a. Sales of securities in open market operation.
b. A decrease in the discount rate.
c. An increase in reserve ratio.
d. None of the above.

10. The term “merchandize account” refers to the:

a. importing and exporting of goods.
b. importing and exporting of goods and services.
c. current account trade balance.
d. capital outflows minus inflows.

11. Which of the following is not an argument used in favour of protectionism?

a. To protect an “infant” industry.
b. To protect domestic jobs.
c. To reduce the prices paid by domestic consumers.
d. To protect against “unfair” competition because of cheap foreign labour.

12. A primary reason why nations conduct international trade is because:

a. Some nations prefer to produce one thing while others produce another.
b. Resources are not equally distributed to all trading nations.
c. Trade enhances opportunities to accumulate profits.
d. Interest rates are not identical in all trading nations

13. Which of the following statements is true?

a. A tariff is a physical limit on the quantity of a good allowed to enter a country.
b. An embargo is a tax on an imported good.
c. A quota is a law that bars trade with another country.
d. When a nation exports more than it imports it is running a balance of trade
surplus.

14. If the price elasticity of demand for some good is estimated to be 4, then a 1%
increase in price will lead to a:
a. 20% increase in quantity demanded.
b. 0.25% decrease in quantity demanded.
c. 0.5% increase in quantity demanded.
d. 4% decrease in quantity demanded.

3
15. If the cross price elasticity between goods B and A is -2 and the price of good B
increases by 5%, the quantity demanded of good A will:
a. increase by 5%
b. increase by 10%
c. decrease by 2%
d. decrease by 10%

16. A consumer's weekly income is $300, and the consumer buys 5 bars of chocolate per
week. When weekly income increases to $330, the consumer buys 6 bars per week.
The income elasticity of demand for chocolate by this consumer is about
a. 2.
b. 1.91
c. 0.52.
d. 0.

17. If coffee and tea are substitutes, what do we know for certain about the cross-price
elasticity of demand forcoffee with respect to the price of tea?
a. It is equal to 0.
b. It is negative.
c. It is positive.
d. they are both inferior goods.

18. For which product is the income elasticity of demand most likely to be negative?
a. computer software
b. used clothing
c. apps for iPhones
d. bread

The following data table relates to the supply schedule of a product.

Price ($ per unit) Quantity Supplied

(units per week)
5 100
10 200
15 250
20 300
25 350
30 500

19. Over which of the following price ranges is the price-elasticity of supply equal to 1?
a. $10 to $15
b. $20 to $25
c. $25 to $30
d. $5 to $10

4
Use the diagram below for question 20 – 22.

20. In the figure above, the marginal product of the second worker is
a. 10 units
b. 2 units
c. 5 units
d. 1 unit

21. In the above figure, after the second worker is hired, the marginal product of labor is
a. Constant
b. Increasing
c. Zero
d. Diminishing

22. In the figure above,

a. f is an efficient point.
b. g is an efficient point d.
c. d is an efficient point.
d. there are no efficient points.

23. Aziz works in his own home as a homemaker and full-time caretaker of his children.
Officially, he is
a. unemployed
b. employed
c. not in labor force
d. in the labor force

24. The labor force includes

a. employed workers and persons who are officially unemployed.
b. employed workers but excludes persons who are officially unemployed.
c. full-time workers but excludes part-time workers.
d. permanent employees but excludes temporary employees.

5
 25. When oil and energy prices rise, the economy tends to experience
a. natural inflation.
b. demand-pull inflation.
c. cost-push inflation.
d. unanticipated inflation.

26. As output increases, the slope of the curve showing the firm's average fixed cost is
a. first negative then positive.
b. always positive.
c. always negative.
d. first positive then negative.

Use the diagram below for question 27 – 28.

27. In the above figure, the total fixed cost curve is curve
a. B
b. A
c. C
d. none of the curves in the figure

28. In the above figure, the total variable cost curve is curve
a. A
b. B
c. C
d. none of the curves in the figure

6
PART B

Chicken prices skyrocket in Penang markets.

GEORGE TOWN: Fresh chicken at wet markets here now cost between RM10.50 and
RM12.00 per kg. The price has increased at least six-fold, each time about 30 sen per kg
since the end of March.

Poultry seller A.T. Lim, in his 40s, said they too were unsure of the reason behind the price
increase, noting that they received their supplies at RM9.50 per kg, some even RM10 per
kg. "There have been multiple hikes since late last month. Now, we have no choice but to
set the retail price at RM10.50 per kg and some even higher.

"We do see price increases every fasting month, but this is the highest hike ever," he told the
New Straits Times this afternoon.

Lim said due to the steep increase, many customers have also stayed away from chicken
meat." In my case, my business has dropped by 30 per cent, but what choice do I have? It is
not that I am making huge profits," he said.

Sources: NST online 16 April 2021

https://www.nst.com.my/news/nation/2021/04/682854/chicken-prices-skyrocket-
penang-markets

a) Briefly discuss two (2) possible factors that have caused chicken farmers to
increase the price of fresh chicken to the poultry sellers?
(3 marks)

b) Based on the situation described in the article, what will happen to the price and
quantity in the market? Draw the appropriate diagram to support your
explanation.
(4 marks)

c) With appropriate illustration, briefly discuss an appropriate form of price control

to protect consumer especially during the festive season.
(4 marks)

d) Based on your answer in (c), briefly explain two (2) outcomes of exercising such
form of price control.
(4 marks)

THE END