1
ARHOLIADAU EXAMINATIONS
Ionawr 2012 January 2012
EC10120 ECONOMIC PRINCIPLES AND SKILLS 1
Time allowed: TWO hours
Answer QUESTION ONE, and TWO questions from Section B
Casio FX83ES/GT and FX85ES/GT calculators only may be used.
SECTION A
1. a) Using clearly labelled diagrams, explain the long-run equilibrium position for (i) a
monopoly firm and (ii) a perfectly competitive firm, in terms of price and output. (18 marks)
b) Distinguish between economic profit and normal profit. Explain how excess profits can only
persist in the long run in a monopoly. (15 marks)
(Total 33 marks)
SECTION B
2. 'Economics is about scarcity, choice and opportunity cost.' Explain what this means and give
examples to illustrate your answer. How can the principles of choice based on opportunity cost
be related to the decisions of parents with small children about whether or not to seek paid
employment? (33 marks)
3. Why do markets fail? Briefly explain how these failures might be dealt with. Relate your answer
to ONE of the following areas: higher education, transport, or health. (33 marks)
4. Explain how governments might intervene in international trade to protect infant industries and
to help domestic firms either to gain first-mover advantages or to overcome entry barriers
created by foreign firms in global industries where economies of scale are important. What are
the costs and benefits to the economy of such intervention? (33 marks)
Turn Over
