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You must sign below and return this booklet with

the Answer Sheet. Failure to do so may result
in disqualification. TEST CODE O2I1 60 1O
FORM TP 2011166 Signature MAY/.IUNE 20II
cARIBBEAN EXAruin,q,rl br,,rs couNCI L
ADVANCBD PROFICI ENCY EXAMINATION
ECONOMICS

Unitl-Paper0l
90 minutes

07 JUNE 201{ (a.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

I
This test consists of 45 items. \bu will have 90 minutes to answer them.
2. In addition to this test booklet, you should have an answer sheet.
3. Do not be concerned that the answer sheet provides spaces for more answers than there
are
items in this test.
A
+. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each
item
you are about to answer and decide which choice is best.

On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.

Sample ltem

Prime cost is calculated by adding direct factory expenses to cost of

Sample Answer
(A) goods used
(B)
(C)
goods bought
materials used @@oo
(D) materials produced

The best answer to this item is "materials used", so answer space (C) has been shaded.

6. If you want to change your answer, be sure to erase your old answer completely and fill in

t 7.
your new choice.
When you are told to begin. turn the page and w'oik as quickly and as carefully as you cf,n.
If you cannot answer an item, omit it and go on to the next one. You can come back to the
harder item later. Your score will be the total number of correct answers.
d- .You may do any rough work in this booklet
o You may use silent non-programmable calculators to answer questions.

DO NOT T'URN -THIS P,A.GE UNTIL }'OU ARE TOLD TO DO SO.

{..

l. Which ofthe fbllowing situatrons is MOST 4. Which of the fbllowing BEST describes
Iikely to result rvhen there are limited the'marginalist principle'?
resources?
(A) Average cost equals avemge revenue.
(A) People must make choices (B) Marginal cost equals average
(B) The poor will become poorer revenue.
(c) Only the rich can acquire every- (c) Average cost equals rnarginal
thing they desire revenue.
(D) Some firms will be forced out of (D) Marginal cost equals marginal
the business revenue.

Item 2 refers to the production possibility f,. Which of the following is an example of a
fr-ontier for a country that produces normative economic statement?
cookies and milk onlv.
(A) An increase in the minimum wage
will increase inflation.
(B) A reduction in the price of goods
will benefit consumers.
(C) Government should give free
medicine to senior citizens.
(D) An increase in interest rates will
attract foreien investors.

Item 6 refers to the following diagram

which shows the price of cellular phones
Cookies
and the quantity demanded.
2. Which of the foliowing is MOST likely to
account for the change from curve I to II? P
Price
of
(A) Death of cows due to disease Cellular
(B) A successful anti-cookies campaign Phone
(C) An increase in the population of
cows
(D) A rise in input prices for cookie
production

" Q;----_- a
3. The use of land to build hospitals reduces the Quantity Demanded
amount available for factory construction.
This statement BEST illustrates the concept 6 At a price of S50 fora cellular phone, the
of quantity demanded is 100. The shaded area
in the diagram represents
(A) choice
(B) scarcity
(A) econornic rent
(C) rationing (B) market surplus
(D) shortage
(C) excess demand
(D) consumer surplus

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 3-
Items 7 - 8 refer to the production 9. A production possibility fiontier that borvs
possibi Iity frontier below. outwards indicates

(A) a change in the resources available

to the producer
(B) increasing opportunity cost as nlore
ofone good is produced
(c) constant oppoftunity cost as lxol'e
of either good is produced
(D) decreasing opportunity cost as
more of one good is produced

10. A combination of output that is inside a

production possibility frontrer is termed

(A) technical efficiency

Good X
(B) productive efficiency
(C) productiveinefficiency
7. Which of the following statements about (D) allocative inefficiency
the points is true?

(A) M is inefficient. ll. Which of the following is an exanrple of a

(B) R is technically inefficient. price ceiling?
(C) N is allocatively inefficient.
(D) Q is productively inefficient. (A) Rent controls
(B) Farm price supports
(C) A tax on the market
8. If Point Q moves to Point O it can safely (D) Minimum wage laws
be assumed that

(A) the state of technology has not 12. Which of the following BEST explains the
changed term.' indifference curve'?
(B) the prices of the factors of
production have increased (A) Goods for w,hich the budget line is
(c) available resources have been fully the same
utilized (B) Goods for which consumption is
(D) adverse weather conditions have indifferent
caused damage to resources (C) Goods which give the consumer
maximum satisfaction
(D) The combination of two goods
which gives the consumer the
same level of satisfaction

,'---,'-\ /-,\: 1-l^, TI Ir

,l'

4-
Iterris l3 - l4 ref'er to the fbllowing diagrarn.

Price

Quantity
13. Which of the foliowing indicates the point 14. Assuming that a firm is earning normal
of optimum production? profits, at which point would marginal
revenue equal marginal cost?
(A) I
(B) rr (A) I
(c) rrr (B) rr
(D) rv (c) rrr
(D) rv

Item 15 refers to the graph below.

=^

dD 6l
cEh
2s

!-

Quantit-v of lce Cream

(number of cones)

15. In the graph above, at which quantit-v is the

consumer maximizing utilityl'

(A) I
(B) 3
(c) 4
/n',
\u)
i

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^r
 16. Wlirch ol'tirc lbiiou ins rlarket structut'cr is Itcins 20 - 2l let-er to tlre fbllorr:rng rablc.
cltaracteriscd hy scr cral fir-rris u hiclt ale roti
srnall t<l influe trcc thc llarkcl'l
Firms lllarket Share '71,

l {{l

i,A) Pel'l'ect cornpetition l-s

(B) DLropcil istic corlpetitiot -l l0
(L i Oi i uopol isti. contilelirion
+ 1(l
(D) Morr(.'poii stic .-onrpetitton
,5 3

6 ?
17. Which of tlre toilou,llts staterxer.its is ccr-lecl
20. What is the percentage of tire Fcur-Frr-lrr
about soc;ai costs'.)
Concentrati on Ratio'.,

(Aj Social costs equal prir,,are costs. (A) 5%

(B) Sociai costs equal external cosrs. iB) ?5%
(C) Prir,'ate costs minus external costs (C) 75ato
equal social costs. (D) 95o/o
(Dt Pri.,'ate costs plus exrernal costs
equal social costs. 21. Baseci on rne size of rhe llerfinciahl-
Hirschman Index rn the table abo.,,e; how
would this market be described?
18. Wlrich of rhe following BEST defines rhe
term'external cost'? (A ) Concentrated
(B) Nor concentrated
(A) The inciease rn total cost that arises (C) Highlr concenrrated
from an errr-a unit of pr-oductiou (D) Slightlyconcenrrated
(B) The total cost to societl..of'
producing an extra unir of a good
Item 22 ref-ers to the graph below. whiclr
Or ser-u'ice
shou's a nronopoiistically compeiitir.e firnr
(C) A cost resultin_q fi'om an aciivitv in the long-run equilibrium.
that is imposed on parries outside
that acrivity Price
(D) The amount a consrimer pavs to
consurne an additional amount of
a pafticrrlar good or service

l9 V/hiclr of tlie follou.'ing statements ourlines

air important characteristic of a pri.",are
good'?

rai Its consumption by oue person ''-D

diminishes the cluanrrtr.' avaiiable
ic otirer pei-sons Qr Q2 Quantitv
(Bl Its consumption has extemal effecrs
ZZ. Using the marginalist approach to detemrjne
orr the cc.'nsiliIptiOn cr- orcdr-icti i;n
equiiibriLrm price and quanrit\'. whai is rhe
oi other gcods aiea betr^,een Q, arici Q- caiiec.l'l
It is pi r:i icr"-i h , ,lrc l-.r':., at; ii,..l.i,:'
i]; ir rs consiimeci bi,e\,eryone iu equai (At Shut-ciown point
i.l .llilllii\ a' r,.i ..rital;i'. tfl F".c,:si Lrtacii\
, .- , L.i ii iiiL.l-:,r:',1 !r. riiri
r i,-t.i i,'i ttiii:t;;-i^, il'ltil: ii,=i11r .i;21"
 23. Which of the lbllorving is NOT a cause of 27. A situation in which people enjoy tlre benefits
rnarket fai Iure'.) of public goods without paying for them. is
known as the
(A) Ta.xation
(B) Monopol-v (A) non-rival problem
(C) Externalities (B) free-rider problem
(D) Imperf'ect knowledge (C) non-excludableproblerr
(D) drop-in-the bucket problem

24. If a finn cannot prevent a consumer from

enloving the benefits of a good it prociuced Item 28 refers to the graph below which
at low cosr. the good is sho\^,s the Social Marginal Costs (SMC),
the Private Marginal Cosrs (pMC) and the
(A) excludable Social Marginal Benefits (SMB).
(B) non-excludable
(C) rival in consumption
(D) non-rival in consumpiion

Price
25. A situation is defined as 'pareto efficient'
ifit is

(Al rmpossible to make anyone better

off rvithout making someone else
worse off
(B) possible to make someone better
off rvithout making someone else
worse off
(c) possible to make someone worse
off and everyone better off
(D) irnpossible to make anyone better
off without making someone pay Quantity

28. An analysis of the graph reveals that

26. Tlie decision rule for orofit maximisation
in a firm is (A) Output Q, is efficienr because
SMC > PMC
(A) total revenue : total cost (B) Output Q, is efficient because
(B) average revenue : total costs PMC : SMB
(c) marginal revenue : marginal costs (C) Output Q, is efficient because
(D) average total revenue: total costs SMB > PMC
(D) Output Q, is efficient because
SMB : SMC

\
 7-
29 A governnlent wishes to calculate the JJ. Functional distribution of income measures
share of an industry's output sold b,v sorne the distribution of income according to
selected number of the industry's firrns.
What ffleasure slrould the government (A) its functjons
employ? (B) its source
(C) the social class of persons who
(A) Concentration Ratio receive it
(B) Consumer Price Index (D) the levels of income received bv
(C) Human Development Index individuals
(D) Herfindahl-Hirschman Index
/l

34. In the factor market, land is similar to

30. Which of the following contributions is an labour in that
exampl e of pri vatisati on?
(A) both are fixed in supply and are
(A) Dereguiation and franchising indestructible
(B) Franchisingandredistribution (B) the determinants of supply of both
(C) Contracting out and regulation of them are similar
(D) Deregulationandnationalisation (C) the owners of both may be repre_
sented by a trade union
(D) both are demanded for therr
31. If an investor borrows S I
000 at an interest contribution to production
rate of 14 pet cent per annum, the annual
interest payment is
Item 35 refers to the following diagram
(A) $ 14 depicting a labour market.
(B) $ l4o
(c) $1 000 Wage I

(D) $1 680

?) The concept of "asymmetric information"

indicates that information is

(A) available freely

(B) evenly distribured
(C) not available freely
(D) unevenly distributed
35 Which of the following economic concepts
does the shaded area in the triangle
represent?

(A) Poverty
(B) Economic renr
(C) Transfer earnings
(D) Consumer surpius

'aa-, ar.\' ?-,-] -]-uE -l\

rEr"'-j- D^ .^ r
 -u
36. An outward shifi in the demancl
curve 1'or
any prodrrct causes to the graph belovv shou,in-rr
at.l P3.*tirs
demand and supply fbr a fbctor
rhe
of proau.iio,.,
(A) outra;ard shift irr the derived
denranci
curve for one factor Lrrilized in Price
the
production of the commodity
/R\ irrward shift in rhe derived demancl
curve for all factors utilized in
the
production of the commoditv
(c) outward shift in the derived demand
curve for all factors utilized in
the
production of the commoditv
(D) inu,ard shift in the derived demand .D
curve for one factor utilized in
the
production of the commodity
''.'
Quantit-v--

38. A shift of the demand

lEry refers ro rhe following diagram
of D,D, will result in
curv,e from DD to
a Lorenz culve.

(A) a decrease in economrc rent

(B) an rncrease in economic rent
100 - (c) a decrease in transfer eamlngs
(D) an increase in transfer earninss
o^
x.>
39. Miss Bent feels unwell and vrsits
her local
:JE doctor who, after an examination,
Qt discovers
an rncurable illness. The doctor
does not tell
her of his diagnosis, instead f.,. pr.*i.,
costly medicine.

What economic concept does the

above
-tt--;o--?o -- do rffi --= statement describe?
percenfage of Households
(A) inefficiency
37. By examining the portion of the
(B) Moral hazard
that is shaded, an economist can
entire area (C) Adverse selecbon
the
detennine (D) Asymmetric information

(A) Gini coefficient

(B) concentration ratio
(c) elasticity coefhcient
(D) margrnal rate of substrtution
ii

9-
40. Which of the fbllou,ing is NOT likely io cause Item 44 refers to the diagram below
ashift in the suppiy curve for labour,/ applying indifference curve analysis to
labour supply.
(A) Cost of labour
(B) Increase in birth rate I ncome
(C) Increased population growth d Budget line
(D) Migration of skilled workers

11. The higher the demand for houses, and hence

the higher their price. rhe higher will be the
demand for bricklayers.
Leisure
The concept explained above BEST
describes 44. Which of the following represents labour
supply?
(A) derived demand
(B) increase in demand (A) o-a
(C) increase in factors demanded (B) o-c
(D) increase in quantity demanded (C) a-b
(D) c-d
42. Which of the following is NOT a measure
of poverty? Item 45 refers to the graph below in which
the Marginal Revenue Product (MRp)
(A) The poverty line Curve has shifted from MRp, to MRp,.
(B) The Gini coefficient
(c) The UNDP's Human Develonment Wage
,,:
I

Index
(D) Accessibility and affordabiiiry of
I

basic needs

43. Which of the following facts can positively

MRP2
affect social welfare?

I
Quantity of I-abour
l- An improvement in the terms of
trade
II. A fall in crirne statistics 45. Which of the following factors are MOST
III. An increase in environmental Iikely to have caused this movement?
degradation
IV. A fall in the level of consumption I. A rise in worker productivity
U. A fall in the price of the final good
(A) I and Il only III. A rise in the price of the final good
(B) I and Iil only IV. A rise in the size of the labour force
(c) II and III only
(D) {l and IV only (A) I and Il only
(B) I and III only
(C) II and IV only
(D) III and IV only
IF YOU FINISH BEFORE TI]VIE IS CALLED, CHECK YOUR WORK ON THIS TEST.