AUGUSTEXAMINATIONS2012ECONOMICSFORMANAGEMENT-Solutions-TIMEALLOWED:TwoHoursINSTRUCTIONSTOCANDIDATES.Readthequestionsandanyadditionalinstructionscarefully..Allquestionscarryequalmarks..Toreachthemaximumnumberofmarksyouhavetoidentifythecorrectoptionforallquestions.Eachquestionhasfiveoptionsandonlyoneofwhichiscorrect..Timeavailableis120minutes..Universityapprovedcalculatorsarepermitted.PAPERCODEECON722PAGE1OF9CONTINUED/ENDQuestion1Theeconomist’sassumptionofrationalchoiceisbasedontheexpectationthatindividuals:a)useeconomicmodelstomaketheirchoices.b)makechoicesanddecisionsinpursuitofself-interest.c)collectallpossibleinformationpriortomakingachoiced)allhavethesamepreferences.e)Noneoftheabove.Question2Opportunitycostisaconsequenceof:a)selfishconsumers.b)narrow-mindedproducers.c)greed.d)scarcity.e)inefficiencies.Question3Iftherewereariseinthepriceofsugar(aninputusedintheproductionofcandybars),thesupplycurveforcandybarswouldsifttothe_____,theequilibriumquantitywould______,andtheequilibriumpricewould_____.a)left;fall;riseb)left;fall,fallc)left;rise;falld)right,fall,risee)right;rise;fallQuestion4Aspricefalls,quantitydemandedrisesalongamarketdemandcurvebecause:I.thelowerpriceencouragesconsumerstobuymoreunitsofthegood.II.asthepricefalls,consumersenterthemarket.Whichofthefollowingiscorrect?a)OnlyIapplies.b)OnlyIIappliesc)BothIandIIapply.d)NeitherIandIIapply.e)EitherIorIIcanapply,butnotsimultaneously.PAPERCODEECON722PAGE2OF9CONTINUED/ENDQuestion5IfthepriceofaproductincreasesfromGBP5.00toGBP5.50andasaresultthequantitysuppliedincreasesfrom200to210,thesupplyforthisproductinthispricerange:a)isperfectlyprice-inelastic.b)isprice-inelastic.c)hasapriceelasticityofunity.d)ispriceelastic.e)isperfectlyprice-elastic.Question6Thetwofactorsthataffectthepriceelasticityofthedemandcurvefacingthefirmarethea)responsivenessofrevenue,andtheresponsivenessofcost,tochangeinpric