Economics Revision Pack Grade 12

Directorate: Curriculum FET ECONOMICS REVISION BOOKLET 2020 TERM 2 Grade 12 This revision program is designed to assist you in revising the critical content and skills covered during the 2nd term. The purpose is to prepare you to understand the key concepts and to provide you with an opportunity to establish the required standard and the application of the knowledge necessary to succeed in the NCS examination. Please Note: All the ‘.3’ to ‘.5’ questions are categorised as either Middle-order or Higher – order type of questions. These require a deep understanding of the subject content and the ability to apply knowledge. The revision program covers the following topics: • Perfect markets • Imperfect markets • Market failures

2 1. Study the graph below and answer the questions that follow. 1.1 Identify the marginal revenue curve in the graph above. Hint: Marginal: Additional / Extra (1) & Revenue = Income ________________________________________ 1.2 Which curve is also known as the supply curve? Did you realise that an individual firm (1) has this? Which one? Why? ________________________________________ 1.3 Why will the individual firm not produce more than 60 units? Hint: Check the position of (2) cost and revenue curves. ___________________________________________________________________________ ___________________________________________________________________________ 1.4 How does the market demand curve differ from the curve of the individual firm? (2) Do you know the difference between market demand and an individual demand? ___________________________________________________________________________ ___________________________________________________________________________ Similar to a why question. Why is point A there? 1.5 What is the significance of point A? (2 x 2) (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

3 2. Study the graph below and answer the questions that follow. 2.1 Identify the market structure in the graph above. Identify (the answer is in the graph) (1) Market structure vs. Type of market ________________________________________ 2.2 Give the value of the market price depicted above. (1) What comes to mind when you think of value for something? How do you ________________________________________ determine market price? 2.3 How will this equilibrium position change in the long run (long term)? (2) This question is about firms entering or leaving the market. ___________________________________________________________________________ ___________________________________________________________________________ 2.4 What conditions must exist for this firm to shut down? Firstly, decide what a (2) shutdown point is. ___________________________________________________________________________ ___________________________________________________________________________ Calculate means work it out systematically. Do 2.5 Calculate the economic loss faced by this firm. you know the difference between: Economic (4) loss; Economic profit and Normal profit?

4 3. Study the graph below and answer the questions that follow. Refer to the questions above and realise that the concepts are the same but different ways of asking the questions. 3.1 Define the term marginal cost. Refer to question 1.1 – Opposite of Marginal revenue (2) ___________________________________________________________________________ ___________________________________________________________________________ 3.2 Identify the point on the graph where the firm will shut down. (2) __________________________________ 3.3 Why will the firm shut down at the point identified in QUESTION 3.2? (2) ___________________________________________________________________________ ___________________________________________________________________________ 3.4 How is the supply curve of a perfectly competitive firm determined? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

5 4. Study the graph below and answer the questions that follow. 4.1 Provide the above graph with an appropriate heading. (2) _______________________________________ 4.2 Which point indicates profit maximisation? Alternative concept: Loss Minimisation (2) Point _______________________________________ 4.3 How will price and quantity in this market structure change in the long run? (2) ___________________________________________________________________________ ___________________________________________________________________________ 4.4 Determine the total profit/loss made by this firm. Show ALL calculations. (4) Remember that you will have to be the one deciding (after you have calculated) if this is a loss or profit situation. One easy way to determine this is to check our ‘star’ curve – the AC curve. Its position will tell you the answer. Check where the bottom part of the AC curve lies.

6 5. Study the article below and answer the questions that follow. Key word: Study! Pioneer apologises for anti-competitive behavior Newly appointed Pioneer Foods Group chairperson Zitulele KK Combi on Monday vowed to “turn a page” and commit to the principles of transparent, competitive behaviour and cooperate fully with the regulators. Pioneer recently confirmed that it had received notification from the Competition Commission that it had referred its investigation into the wheat milling market to the Competition Tribunal for adjudication. Pioneer Foods is named as a respondent in the case together with other industry participants. The Competition Tribunal also imposed a penalty of R195-million on Pioneer Foods for its involvement in a bread cartel and market dominance. Speaking at a press conference in Cape Town, Combi said: “I will personally engage the Competition Commission authorities to try to settle the matters amicably, if at all possible, and will ensure that Pioneer Foods continues to cooperate fully with the regulators. Source: Mail & Guardian – March 2010 5.1 Name the institute in the extract that investigates anticompetitive behaviour in South Africa.(1) ___________________________________________________________________________ 5.2 Identify ONE aspect that was influenced negatively by Pioneer Foods Group anticompetitive behaviour. (1) ___________________________________________________________________________ 5.3 What is the role of the Competition Tribunal? Do you still remember the other two institutions (2) under this topic: Commission and Appeals Court? ___________________________________________________________________________ ___________________________________________________________________________ Here be guided the word “market share”. A % portion 5.4 What is meant by market dominance? controlled by a firm in the market. Dominance comes from (2) dominate which means to ‘overpower others’ in the game. ___________________________________________________________________________ ___________________________________________________________________________ 5.5 How will Pioneer Foods Group anticompetitive behaviour affect the industrial sector? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

7 6. Study the graph below and answer the questions that follow. Hint: Make sense of the graph first before you answer the questions. 6.1 How is profit calculated? (1) _____________________________________ 6.2 Which profit does the firm earn at point B? (1) Check position of C (cost) vs R (revenue) as a clue _____________________________________ Hint: How much revenue do you make at point zero? – 6.3 Why is the TR curve starting at zero? no production at this point. (2) ___________________________________________________________________________ ___________________________________________________________________________ 6.4 When is profit maximised in the graph above? Hint: Loss Minimizing Point Q 4.2 (2) ___________________________________________________________________________ ___________________________________________________________________________ 6.5 What are the implications of producing beyond point B? Implications: What does it mean if (4) this happens? Check point A vs B! ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

8 7. Study the table below and answer the questions that follow. 7.1 In which run are the two firms operating? Run could be Long or Short Run. Still remember (1) the definitions of each? Why this answer? ________________________________________ 7.2 Give an example of a fixed cost. (1) ________________________________________ The trick here is to know what the definition 7.3 With reasons, identify a firm that will shut down. of a shutdown point is. Go back to the (4) definition. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ This question requires your 7.4 What, do you think, are the implications of a shutdown? (4) informed view point. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

9 8. Study the graph below and answer the questions that follow. By now you should be able to look at a graph and decide what market or even market structure it represents. 8.1 The above equilibrium position indicates a (short / long) run. How do you know where (1) the equilibrium position _______________________________________ is? 8.2 Indicate the profit maximization point. (1) _______________________________________ 8.3 Why will the monopolist produce at quantity 50 instead of quantity 60? (2x2) (4) Once again, why requires you to explain the reasons. This question is about loss or profit ___________________________________________________________________________ making. How much the firm would make in either quantities will determine your reasoning. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 8.4 Calculate the profit or loss of this monopolist. Show ALL calculations. (4)

10 9. Read the extract below and answer the questions that follow. TRANSNET: MONOPOLY BEST IN ITS HANDS Transnet, South Africa’s state transport company, defended its monopoly of the country’s eight ports and said it would make no sense for private operators such as France’s Boll ore SA to enter the market. “We are sitting on natural monopolies as the ports don’t compete with each other”, Transnet’s Chief Executive Officer said. “Is a natural monopoly better in private or state hands?” Source: www.iol.co.za/business/companies 9.1 Which service is Transnet offering? In other words, what do they do? (1) ___________________________________________ 9.2 A monopoly can either be natural or … Remember the two types of monopolies? (1) ___________________________________________ 9.3 Differentiate between the natural monopoly and the one in QUESTION 9.2. (4) The word Differentiate means show the differences between. What aspects are key in showing this difference? Perhaps think about Costs to enter the market vs the Law created by those in power ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 9.4 How, in your opinion, are consumers affected by a monopoly? Your view here is very important but it must be informed by your knowledge of how monopolies affect consumers. (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________________________ _ ___________________________________________________________________________

11 10. Study the graph below and answer questions that follow. 10.1 What type of market is represented by the graph above? (2) Please note: Type not structure ______________________________________ 10.2 Explain why the MR curve lies below the AR curve. (4) It always helps to check the numbers in answering this question. The graph tells you essentially the answer. The demand curve or movement along the curve will determine what happens to the marginal revenue curve. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 10.3 Calculate the profit/loss of the above producer, and show all your calculations. (4)

12 11. Study the table below answer the questions that follow. 11.1 For which market structure are these costs and revenues? (1) ____________________________________________ 11.2 At what level of output is the firm making normal profit? Give a reason for your answer. (4) Hint: In Business Studies, the refer to this point as a ‘break-even’ point – zero profit made. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 11.3 Calculate the values of A–E. (5) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

13 12. Study the pictures below and answer the questions that follow. Hint: A cartoon is visual literacy. It requires that you take note of all the elements portrayed. The answers to the questions are in the cartoon itself. 12.1 Identify TWO barriers of entry as portrayed by the cartoon. Barrier means (2 x 1) (2) something that prevents entry into _______________________________________ a space. _______________________________________ 12.2 What type of monopoly is depicted in the above cartoon? Refer to Q 9.2 (2) _______________________________________ When describing something, you can use your own words. 12.3 Briefly describe the term monopoly. It is different from defining it. (2) ___________________________________________________________________________ ___________________________________________________________________________ 12.4 Why can’t a monopolist charge excessively high prices for his products? (2 x 2) (4) This is strange! A monopolist has a 100% control of the market. Surely s/he can charge any price? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________

14 13. Study the illustrations below and answer the questions that follow. 13.1 Identify the products produced by the businesses above. (1) ___________________________________ 13.2 Which market structure is depicted above? (1) ___________________________________ 13.3 Why will a new business find it difficult to enter into this type of market? (2) ___________________________________________________________________________ ___________________________________________________________________________ 13.4 What does interdependency of businesses in this market structure imply? (2) ___________________________________________________________________________ ___________________________________________________________________________ 13.5 Explain, without the use of a graph, why businesses in this industry will be reluctant to decrease the price of their product. Hint: imagine various selling prices and quantities. Calculate revenue at each of these selling prices and quantities. (2 x 2) (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________

15 14. Study the graph below and answer the questions that follow. 14.1 To which market structure is the kinked curve related? A kink means a sharp (1) twist or a bent curve _________________________________ 14.2 What is the output level in the graph above? The quantity which businesses will have to (1) produce for feasibility reasons. Do your _________________________________ calculation before you answer. 14.3 What would the effect be on total revenue if the oligopolist increased his price from R50 to R60? Show calculations. Remember how to calculate TR and check the differences between revenue made at either of the two price levels. (4) 14.4 Advise the oligopolist on how to increase his market share in this industry. (4) Given the above calculation, does an increase or decrease of prices work? If not, how else can businesses in this market make profits? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

16 15. Read the article below and answer the questions that follow. Competition Commission raids glass companies in collusion investigation. The Competition Commission has begun an investigation into alleged collusive conduct involving Glasfit, PG Glass, Shatterprufe and Digicall. This is typical cartel behaviour. Shatterprufe allegedly supplied PG Glass and Glasfit with automotive glass, while Digicall processed automotive glass-related insurance claims on behalf of PG Glass and Glasfit. The investigation pertains to claims made by some independent glass fitment operations, alleging that PG Glass carried out collusive activities preventing competition in the automotive glass repair and fitment market. [Adapted from www. bdlive.co.za, 23 March 2016] 15.1 Name the organisation that investigates anti-competitive behaviour of companies in South Africa. (1) ___________________________________________ 15.2 What anti-competitive conduct was investigated, according to the extract? (1) ___________________________________________ 15.3 Briefly discuss the term cartel. Example: OPEC (2) ___________________________________________________________________________ ___________________________________________________________________________ 15.4 What corrective measures can be instituted against these companies if they were found guilty? (2) ___________________________________________________________________________ ___________________________________________________________________________ 15.5 How can the collusive behaviour of these glass companies affect the economy? (2x2)(4) Consequences of collusion on the economy ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

17 16. Study the extract below and answer the questions that follow. THE IMPACT OF OLIGOPOLIES ON THE ECONOMY The pharmaceutical industry is becoming an oligopoly due to the staggering costs of developing and marketing new drugs and because of patents that protect new products from competitors. It can cost more than R1 billion to develop a new drug, get it approved by the Food and Drug Administration and bring it to market, according to Forbes magazine. With those kinds of upfront costs, only a handful of companies, including Pfizer, Merck and Novartis, can afford to create and sell new products. The government grants those companies extended patents on their drugs, and these patents protect drug developers from competitors for many years. The smartphone market is similarly dominated by a handful of companies, the most powerful two being Google Android and Apple. These companies have deep relationships with the handset providers and are able to have their systems pre-installed on each phone. As with computer operating systems, these relationships become self-reinforcing as they grow. [Adapted from Business Report, October 2014] 16.1 Which type of industries mentioned in the extract are said to be oligopolistic? (2 x 1) (2) ______________________________________ ______________________________________ 16.2 Define the term oligopoly. Oli = a Few (Greek origin) (2) ___________________________________________________________________________ ___________________________________________________________________________ 16.3 Why it is important for these companies to have trademarks for their products? (2) ___________________________________________________________________________ ___________________________________________________________________________ 16.4 How do cartels and price leadership differ in terms of the way prices are manipulated? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________ ___________________________________________________________________________

18 17. Study the graph below and answer questions that follow. 17.1 Identify the maximum price from the graph. If there is a maximum price, there must also be a (1) minimum price. Ceiling Prices vs Floor Prices. ________________________________________ 17.2 Which quantity will be supplied when the maximum price is enforced? Why are these (1) enforced? ________________________________________ 17.3 Which role does the government play in redistribution of wealth? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________ 17.4 How will the maximum price affect the economy? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________

19 18. Study the graph below and answer the questions that follow. Hint: Check the direction of the arrows. Leftward movement = Decrease and rightward / upward = increase. 18.1 Identify the price of cigarettes before a tax was imposed on it. You must know how to (1) read and identify original ______________________________________ equilibrium point 18.2 What quantity is demanded after the government imposed a tax on cigarettes? (1) _____________________________________ 18.3 Clearly distinguish between merit goods and demerit goods. Prefix ‘de’ implies opposite (4) of what merit means. ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 18.4 Use the graph above and explain how a tax on cigarettes will reduce market failure. (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________

20 19. Study the cartoon below and answer the questions that follow. Market (s & d) is not doing what it is supposed to do This is testing your knowledge of 19.1 Which cause of market failure is illustrated above? (2) reasons for market failure. Ensure that you understand these! ____________________________________________ 19.2 Briefly describe the term market failure. (2) ___________________________________________________________________________ ___________________________________________________________________________ 19.3 How can labour as a factor of production become more mobile? (2) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 19.4 How does the South African government attempt to solve the problem of income inequality? (2 x 2) (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

21 20. Study the information below and answer the questions that follow. 20.1 Identify any TWO sectors in South Africa where minimum wages are applied in the extract above. (2 x 1) (2) Minimum means at the bottom but look at where it is positioned on the graph. ___________________________________ ___________________________________ 20.2 Briefly describe the term minimum wage. (2) ___________________________________________________________________________ ___________________________________________________________________________ 20.3 What is the advantage of having a national minimum wage instead of a minimum wage per sector? (2) ___________________________________________________________________________ ___________________________________________________________________________ 20.4 Refer to the graph above and explain the implication of the R3 500 minimum wage imposed by the government. Hint: Base your discussion on the graph (2 x 2) (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

22 21. Study the information below and answer the questions that follow. Note: Numbers (data) are very important to understand in such a question. 21.1 In the information above, who is more likely to use a CBA when making decisions? (1) Sometimes, the answer is in the questions. Pay ____________________________________ attention and use this to your advantage. 21.2 Identify ONE project in the data above that the government is considering for this community. (1) ____________________________________ 21.3 Give a reason why a CBA will NOT be of use to the mechanic in the cartoon. (2) ___________________________________________________________________________ ___________________________________________________________________________ 21.4 According to the data above, which project would be best for the community? (2) ___________________________________________________________________________ 21.5 Why do you think it is important to do a CBA when deciding about large projects? (4) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________