ECONOMICS PAPER 2
GRADE 12
NATIONAL SENIOR CERTIFICATE
JUNE 2018

INSTRUCTIONS AND INFORMATION

1. Answer FOUR questions as follows:
   SECTION A: COMPULSORY
   SECTION B: Answer any TWO of the three questions.
   SECTION C: Answer ONE of the two questions.
2. Answer only the required number of questions. Answers in excess of the required number will NOT be marked.
3. Answer the questions in full sentences and the format, content and the context of your responses must comply with the cognitive requirements of the questions.
4. Number the answers correctly according to the numbering system used in this question paper.
5. Write the question number above each answer.
6. Read ALL the questions carefully.
7. Start EACH question on a NEW page.
8. Leave 2–3 lines between subsections of questions.
9. Use only black or blue ink.
10. You may use a non-programmable pocket calculator.
11. Write neatly and legibly.

SECTION A (COMPULSORY)
QUESTION 1 30 MARKS – 20 MINUTES
1.1 Various options are provided as possible answers to the following questions. Choose the correct answer and write only the letter (A–D) next to the question number (1.1.1–1.1.8) in the ANSWER BOOK, for example 1.1.7 D.
1.1.1 Microeconomics studies the behaviour of …

1. sectors.
2. industries.
3. the world economy.
4. individual businesses.

1.1.2 Internal costs are known as … costs.

1. private
2. social
3. public
4. additional

1.1.3 A firm will shut down if it cannot meet its … costs.

1. marginal
2. average variable
3. total
4. average fixed

1.1.4 A major non-profit competition strategy used in monopolistic competition is …

1. door-to-door.
2. saving.
3. cost-cutting.
4. advertising.

1.1.5 Selling of identical products to different consumers at different prices is price …

1. fixing.
2. discrimination.
3. setting.
4. taking.

1.1.6 Market equilibrium occurs when the …

1. individual business changes the price.
2. producer is a price taker.
3. quantity demanded is equal to quantity supplied.
4. producer sets its own price.

1.1.7 Maximum profit is always earned at that point where marginal revenue is equal to … cost.

1. total
2. average
3. marginal
4. fixed

1.1.8 By imposing price controls the government can … the economic profits of producers to make the industry more competitive.

1. reduce
2. increase
3. eliminate
4. maximise (8 x 2) (16)

1.2 Choose a description in COLUMN B that matches an item in COLUMN A. Write only the letter (A–I) next to the question number (1.2.1–1.2.8) in the ANSWER BOOK, for example 1.2.9 J.

(8 x 1) (8)
1.3 Give the correct concept for each of the following phrases.
1.3.1 The additional unit of output which is produced as one more unit of the variable input is combined with the fixed input
1.3.2 A price set below the equilibrium price/market price to make goods affordable
1.3.3 The maximum return the owner of a firm expects to receive to keep on operating in the industry
1.3.4 Benefits to society often not calculated by an individual
1.3.5 An individual who benefits from a good or service even if one does not pay for it
1.3.6 A market structure where the industry is dominated by two large producers (6 x 1) (6)
TOTAL SECTION A: 30

SECTION B
Answer any TWO of the three questions from this section in the ANSWER BOOK.
QUESTION 2 40 MARKS – 30 MINUTES
2.1 Answer the following questions.
2.1.1 List any TWO examples of perfectly competitive markets. (2)
2.1.2 How can the government use taxes to reduce production and consumption? (2)
2.2 Study the table below and answer the questions that follow.
REVENUE OF A MONOPOLY

A monopoly, the only seller, lowers the price in order to increase the demand for its products.
2.2.1 How many sellers are in a monopoly? (1)
2.2.2 Which revenue is equal to the price? (1)
2.2.3 What is the formula for calculating marginal revenue? (2)
2.2.4 Briefly explain economies of scale as a barrier to entry in a monopoly. (2)
2.2.5 How are consumers affected by the existence of monopolies? (4)
2.3 Study the information below and answer the questions that follow.

2.3.1 Identify from the extract, TWO groups of workers who are not included in this minimum wage agreement. (2)
2.3.2 Briefly describe the concept minimum wage. (2)
2.3.3 Explain the impact of a minimum wage on demand and supply of labour. (2)
2.3.4 Why is the national minimum wage good for South Africa’s economy? (2 x 2) (4)
2.4 Distinguish between a perfect market and a monopoly with regard to prices, profit, quantity and cost. (4 x 2) (8)
2.5 How will new entrants in the perfect competitive market impact on the profit level of existing businesses? (8)
[40]

QUESTION 3 40 MARKS – 30 MINUTES
3.1 Answer the following questions.
3.1.1 List TWO types of monopolies. (2)
3.1.2 What will the effect be if a firm in a perfect market decides to increase the price of its product? (2)
3.2 Study the information below and answer the questions that follow.

3.2.1 Who developed the theory on the demand curve of an oligopolistic firm? (1)
3.2.2 What is the demand curve of an oligopolist firm called? (1)
3.2.3 Briefly explain an inelastic demand. (2)
3.2.4 Explain mutual dependence as a characteristic of oligopoly. (2)
3.2.5 Draw a fully labelled kinked demand curve. (4)
3.3 Study the information below and answer the questions that follow.

3.3.1 Which authority did not allow the merger of Jasco and Cross Fire? (1)
3.3.2 What was the reason for the denial of the merger? (1)
3.3.3 Explain any other TWO objectives of the Competition Policy, other than the one in the extract. (2 x 2) (4)
3.3.4 In your opinion, how will the economy benefit from fair competition? (2 x 2) (4)
3.4 Distinguish between the short and long term/run. (2 x 4) (8)
3.5 Explain with the aid of a well-labelled graph, the effect of providing subsides to producers as a form of government intervention during market failure. (8)
[40]

QUESTION 4 40 MARKS – 30 MINUTES
4.1 Answer the following questions.
4.1.1 List TWO examples of community goods. (2)
4.1.2 Why would society accept the existence of differentiated products as opposed to homogeneous products? (2)
4.2 Study the information below and answer the questions that follow.

4.2.1 Identify the market structure above. (1)
4.2.2 Is the difference between the products above, real or artificial? (1)
4.2.3 Explain branding as a non-price strategy used by monopolistic competitors. (4)
4.2.4 Why does monopolistic competition not have full control over the price? (4)
4.3 Study the graph below and answer the questions that follow.

4.3.1 At which price will the individual business sell its products? (1)
4.3.2 How is the slope of the demand curve of the industry? (1)
4.3.3 Briefly explain the phrase, ‘businesses are price takers’. (2)
4.3.4 How are prices determined in the industry? (2)
4.3.5 In your ANSWER BOOK redraw the graph of an individual business and insert curves that show the business making economic profit. (4)
4.4 Explain the use of a Cost Benefit Analysis (CBA). (8)
4.5 Why will it not benefit a monopoly to increase its price excessively? (8)
[40]
TOTAL SECTION B: 80

SECTION C
Answer any ONE of the two questions from this section in the ANSWER BOOK.
Your answer will be assessed as follows:

 
QUESTION 5 40 MARKS – 40 MINUTES
‘Oligopoly market structures are found throughout the world. Much of the world’s primary manufactured and tertiary output is produced by oligopolistic industries.’

Examine in detail the oligopoly under the following headings:

• Nature of the product (6)
• Control over price (6)
• Collusion (14) (26 marks)

How can firms in an oligopoly increase their market share in the economy?
(10 marks) [40]

QUESTION 6 40 MARKS – 40 MINUTES
‘Reliance on markets for the provision of goods and services is not always a good decision.’

Discuss the following factors that lead to misallocation of resources in the market.

• Imperfect competition (8)
• Merit and demerit goods (10)
• Immobility of factors of production (8) (26 marks)

With the aid of a well-labelled graph explain productive inefficiency as a consequence of market failure. (10 marks) [40]

TOTAL SECTION C: 40
GRAND TOTAL: 150