Directorate: Curriculum FET

ECONOMICS
REVISION BOOKLET MARKING GUIDELINE
2020 TERM 2

Note to the Learner and Tutor

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.

The revision program covers the following topics:

• Perfect markets
• Imperfect markets
• Market failure
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Dear Learner / Tutor:

The assumption is that learners know the content arlready, and that they only
need guidance on how to approach examination questions, how to apply their
knowledge and how to be more critical thinkers
Below is an extract from the current national examination Guideline document,
which you need to engage with throughout the sessions and when you tutor or
study.
Many middle and higher order questions are provided, and we would like you to
give yourselves ample opportunities to practise these but also, please make
some time at the end of the session to ask questions to your tutor on various
‘muddy points’. Most of the session time will be spent on you working through
the learning material.
The material is examination focused and aims to deal with concepts dealt with
during Term 2, Micro-economics. The idea is that by now you are preparing for
both the Preliminary examinations and the end of year examinations.
Higher-order QUESTIONS (Page 7-Economics Examination Guideline 2017): - A
differentiated approach

Features of higher-order questions:

➢ require you to engage with unrehearsed or unfamiliar contexts.
➢ ask for deep thinking.
➢ grounded in lower-order skills and linked to prior knowledge of subject
matter content.

Types of higher-order-thinking questions: (What? How? Why?) Analysis: these

questions ask you to dissect key information and analyse essential concepts,
themes and processes; for example:
➢ how is x related to y?
➢ what are the major reasons for?
➢ what is the impact of b on c?
➢ what is the problem faced by …?
➢ what is the main idea? theme?
➢ what are some of the problems of …?
➢ how is … similar to/different from …?
➢ why did … changes occur?
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Evaluation: these questions require learners to formulate and justify judgements

and criticisms based upon clearly-articulated evaluative criteria. For example:

➢ provide a better solution for …?

➢ what are the consequences of …?
➢ what are the pros and cons of …?
➢ what are the alternatives for …?
➢ how effective are…?

Creativity/Synthesis: these questions require learners to formulate a holistic

summary of key ideas; provide an integrated, cohesive, sustained response,
make inferences; reformulate, reconstruct or create scenarios. own voice is
critical. For example:

➢ based on these facts, what predictions would you make?

➢ propose a solution to this problem.
➢ how can the errors be fixed?
➢ what alternative will you suggest …?

TO THE TUTOR:

Thank you for offering up your time and for sharing your skills and experience
with our learners. This will afford them with an opportunity to improve their
performance results considerably.

TO THE LEARNER:

Thank you for sacrificing your time to study the subject content. The idea with
this is to ensure that you succeed in getting through your Grade 12 academic
year. Enjoy Economics!
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1. Study the graph below and answer the questions that follow.

1.1 Identify the marginal revenue curve in the graph above. (1)
AR / P 

1.2 Which curve is also known as the supply curve? (1)

MC curve

1.3 Why will the individual firm not produce more than 60 units? (2)
Point B is the profit maximisation point 
Any quantity more than 60, marginal cost will exceed marginal revenue 

1.4 How does the market demand curve differ from the curve of the individual firm? (2)
The demand curve for the individual firm is horizontal  while the demand curve for the
market slopes downward from left to right 

1.5 What is the significance of point A? (2 x 2) (4)

Point A represents the shut-down point of a business
At this point the competitor cannot cover the average variable cost (AVC)
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2. Study the graph below and answer the questions that follow.

2.1 Identify the market structure in the graph above. (1)

Perfect market / Perfect competition

2.2 Give the value of the market price depicted above. (1)
R50 

2.3 How will this equilibrium position change in the long run (long term)? (2)
It will change to normal profit due to firms leaving the industry.
In the long run firms will leave the industry, which will increase the revenue, thereby
reducing the loss

2.4 What conditions must exist for this firm to shut down? (2)
When it cannot meet its average variable cost / price is less than/equal to AVC / TR <
AVC
When the firm's total revenue is less than its variable costs
When MR = AVC = MC

2.5 Calculate the economic loss faced by this firm. (4)

Unit loss: R40
OR TR – TC
Total loss: 100 x 40 = R4000 OR = 5000 – 9000 =
= – 4000 
(Allocate 2 marks if only unit loss is given)
(Allocate 4 marks if only the correct final answer is given) (4)

3. Study the graph below and answer the questions that follow.
 6

3.1 Define the term marginal cost. (2)

Marginal cost is the amount by which total cost increases when one extra product is
produced
Accept any relevant definition

3.2 Identify the point on the graph where the firm will shut down. (2)
Point S 

3.3 Why will the firm shut down at the point identified in QUESTION 3.2? (2)
• A firm shuts down when it cannot meet its average or total variable costs
• At point S the average revenue is less than average variable cost

3.4 How is the supply curve of a perfectly competitive firm determined? (4)
• The short-run supply curve of an individual producer is that part of the marginal cost
curve that is above the minimum average variable cost
• The supply curve starts from Point S upwards on the MC curve
• At any point below the shut-down point the firm will not sell any goods
• The firm will sell if the price is above the shut-down price level
• If market price is rising as a result of an increase in market demand, this causes a shift
in market prices
• This means that quantity produced by the business increases as prices increase
• The new equilibrium points plot the businesses supply curve at different market
prices

4. Study the graph below and answer the questions that follow.
 7

4.1 Provide the above graph with an appropriate heading. (2)

Economic profit in the perfect market

4.2 Which point indicates profit maximisation? (2)

a 

4.3 How will price and quantity in this market structure change in the long run? (2)
Price will decrease due to an increase in competition  and the quantity will increase due to
mass production at lower unit costs 

4.4 Determine the total profit/loss made by this firm. Show ALL calculations. (4)
(Price x Quantity) - (Cost x Quantity)
(R12 x 130) - (R10 x 130)
R1 560 - R1 300
= R260
OR
Price per unit: P - C
R12 - R10 = R2 
= 2 x 130 
= R260 

5. Study the article below and answer the questions that follow.

Pioneer apologises for anti-competitive behavior

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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)
Competition Commission
5.2 Identify ONE aspect that was influenced negatively by Pioneer Foods Group
anticompetitive behaviour. (1)
Increase of bread prices.
5.3 What is the role of the Competition Tribunal? (2)
The Competition Tribunal accepts or rejects the investigation and recommendation of the
Competition Commission / grant exemptions / prevent or allow mergers / adjudicate any
misconduct / issue an order for cost.
(Accept any other correct relevant response)
5.4 What is meant by market dominance? (2)
Market dominance is when one or more firms have significant control in the market.
(Accept any other correct relevant response)

6.5 How will Pioneer Foods Group anticompetitive behaviour affect the industrial sector? (4)
Increase the input cost of all wheat manufacturers in the industry.
Causing a decrease in trade exports of related industries.
Decreasing employment
(Accept any other correct relevant response)
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6. Study the graph below and answer the questions that follow.

6.1 How is profit calculated? (1)

TR-TC 

6.2 Which profit does the firm earn at point B? (1)

Normal profit 

6.3 Why is the TR curve starting at zero? (2)

Total revenue starts at zero because if there is no production there is no revenue
earned. 

6.4 When is profit maximised in the graph above? (2)

Profit is maximised when the gap between TR and TC is the greatest / where area A is the
greatest

6.5 What are the implications of producing beyond point B? (4)

Beyond point B total costs are more than total revenue, producing beyond this point
the firm will suffer a loss. 
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7. Study the table below and answer the questions that follow.

7.1 In which run are the two firms operating? (1)

Short run 

7.2 Give an example of a fixed cost. (1)

Rent 
Accept any correct example

7.3 With reasons, identify a firm that will shut down. (4)
Firm B will shut down 
Variable costs are greater than the total revenue 

7.4 What, do you think, are the implications of a shutdown? (4)

A firm stop production for a certain period - is usually temporary
It does not mean that a firm is going out of business. 
It still retains capital assets, but cannot avoid paying its fixed costs. 
Accept any relevant explanation
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8. Study the graph below and answer the questions that follow.

8.1 The above equilibrium position indicates a (short / long) run. (1)
Long term

8.2 Indicate the profit maximization point. (1)

B or MR=MC

8.3 Why will the monopolist produce at quantity 50 instead of quantity 60? (2x2) (4)
The monopolist will produce at output level 50 because it is where he will obtain maximum
profits (MR=MC).
It is lower than output level 60 where average cost is at its lowest. The firm realises higher
profit levels because it will sell at a higher price

8.4 Calculate the profit or loss of this monopolist. Show ALL calculations. (4)
Unit profit: 150 – 100 = 50
Total profit: 50 x 50 = 2500
OR
Profit = TR-TC
= (50 x 150) – (50 x 100)
= 7500 – 5000
= 2500
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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? (1)

Transport 

9.2 A monopoly can either be natural or … (1)

Artificial 

9.3 Differentiate between the natural monopoly and the one in QUESTION 2.3.2. (4)
Natural monopoly
High development costs prevent others from entering the market and therefore the
government supplies the product

Artificial monopoly
The barriers of entry are not economic in nature, for example, patent, licensing, create
monopolies
Accept any relevant differentiation

9.4 How, in your opinion, are consumers affected by a monopoly? (4)

Consumers are often exploited because a monopoly is the only supplier of a product A
monopoly does not produce at the minimum point of the long-term average cost curve and
produces few quantities but demands higher prices
Therefore, consumers have to pay high prices for few goods
Some consumers are excluded from the market because they are not willing or able to pay
the higher price
Accept any relevant explanation
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10. Study the graph below and answer questions that follow.

10.1 What type of market is represented by the graph above? (2)

Imperfect markets

10.2 Explain why the MR curve lies below the AR curve. (4)
The demand curve for an imperfect market is a downward sloping demand, which implies
that, if it wishes to increase its sales by an additional unit, it must decrease the price of the
product. 
The lower price applies to all its customers. 
Its marginal revenue, that is, the amount by which total revenue increases if it sells an
additional unit, will therefore be less than the price, 
(NB. PRICE = AR).  So, the marginal revenue curve will be below the average revenue. 

10.3 Calculate the profit/loss of the above producer, and show all your calculations. (4)
Profit/Loss = Revenue – Cost
Revenue = 30 x 8 = 240 
Cost = 35 x 8 = 280 
Profit/Loss = 240 – 280 = -40 (Loss) 
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11. Study the table below answer the questions that follow.

11.1 For which market structure are these costs and revenues? (1)
Imperfect market 

11.2 At what level of output is the firm making normal profit? Give a reason for your answer. (4)
Quantity 5 
The reason is that TR=TC /it is where profit is zero 

11.3 Calculate the values of A–E. (5)

A = 12 
B = 32 
C = 15 
D = 6,5 
E = -15 
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12. Study the graph below and answer the questions that follow.

12.1 Indicate the profit maximisation point of the monopolist. (1)

MR=MC / c

12.2 How many units will be produced at the maximisation point? (1)
100 

12.3 Determine whether the business is making an economic profit or an economic loss.
Show ALL calculations. (4)
Total Revenue: 6 x 100 = 600
Total Cost: 4 x 100 = 400

Profit = Total Revenue – Total Cost

= 600 - 400
= 200 
OR 6 – 4 = 2 x 100 
= 200 

The business is making economic profit 

Accept a graphical motivation

12.4 What favourable conditions may the monopolist enjoy in comparison to other market
structures? (4)
• The monopoly is the only supplier of that product
• At liberty to set own prices / charges higher prices 
• Decide on production levels / restrict its output 
• Laws protection
• Protected by barriers of entry
• Favourable geographical area
• Does not produce at the lowest possible cost
• The monopoly is least efficient at allocating resources and perfect competition is the
most efficient at allocating resources
Accept any other relevant answer
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13. Study the pictures below and answer the questions that follow.

13.1 Identify TWO barriers of entry as portrayed by the cartoon. (2 x 1) (2)

Patent rights 
Exclusive resources 

13.2 What type of monopoly is depicted in the above cartoon? (2)

Artificial monopoly.✓ A monopoly with patent rights

13.3 Briefly describe the term monopoly. (2)

In a monopoly there is only one producer or seller for a product. 

13.4 Why can’t a monopolist charge excessively high prices for his products? (2 x 2) (4)
A monopolist is exposed to market forces. 
Consumers have limited budgets and will look for alternatives if the price becomes too
high. 
(Accept any other correct relevant response.)
 17

14. Study the illustrations below and answer the questions that follow.

14.1 Identify the products produced by the businesses above. (1)

Cement products 

14.2 Which market structure is depicted above? (1)

Oligopoly 

14.3 Why will a new business find it difficult to enter into this type of market? (2)
The initial set-up cost is high which means that new entrants will have to sell at a higher
cost than established businesses (barriers to entry) e.g. licenses 
Companies already in the market will use branding to crowd-out new competition 
Advertising extensively is costly 
(Accept any other correct relevant response)

14.4 What does interdependency of businesses in this market structure imply? (2)
Only a few sellers dominate the market, therefore each seller is influenced by the action of
the other sellers 
(Accept any other correct relevant response)

14.5 Explain, without the use of a graph, why businesses in this industry will be reluctant to
decrease the price of their product. (2 x 2) (4)
Businesses in this industry will be reluctant because:
decreasing the price might lead to a price war which will drive prices down 
a decreased price can result in lower profits 
due to the kinked nature of the demand curve, they will lose more revenue than they would
gain via increased sales      
(Accept any other correct relevant response)
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15. Study the graph below and answer the questions that follow.

15.1 To which market structure is the kinked curve related? (1)

Oligopoly/imperfect market 

15.2 What is the output level in the graph above? (1)

50 

15.3 What would the effect be on total revenue if the oligopolist increased his price from R50 to
R60? Show calculations. (4)
At the price of R50 and quantity 50, the total revenue will be R2 500: (50 x 50 = 2 500)
At the price of R60 and quantity 20, the total revenue will be R1 200: (60 x 20 = 1 200)
The net effect on income = R2 500 – R1 200 = R1 300

15.4 Advise the oligopolist on how to increase his market share in this industry. (4)
The oligopolist should consider using the following:
• Non-price measures to attract customers increase their market share
• Build brand loyalty, product recognition and product differentiation
• Advertising and marketing
Examples of non-price competition include:
• extended shopping and business hours
• doing business over the internet 
• after-sales services 
• offering additional services 
• loyalty rewards for customers
• door-to-door deliveries 
(Accept any other relevant response)
(Allocate the max of 2 marks for examples) (2 x 2) (4)
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16. 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]

16.1 Name the organisation that investigates anti-competitive behaviour of companies in South
Africa. (1)
Competition Commission

16.2 What anti-competitive conduct was investigated, according to the extract? (1)
Collusive conduct or anti-competitive behaviour

16.3 Briefly discuss the term cartel. (2)

Secret negotiations between sellers in an attempt to control market conditions, such as
price and output 
(Accept any other relevant answer.)

16.4 What corrective measures can be instituted against these companies if they were found
guilty? (2)
A fine can be imposed.

16.5 How can the collusive behaviour of these glass companies affect the economy? (2x2) (4)
• Collusive behaviour reduces competition in the country.
• This can lead to price increases.
• Inflation takes place which can affect the economy negatively, value of money
decreases.
• Reduced output can also lead to unemployment.
• Competition will be eliminated which could result in poor quality of goods.
• Supply will be reduced which will affect employment.
(Accept any other relevant answer.)
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17. 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]

17.1 Which type of industries mentioned in the extract are said to be oligopolistic? (2 x 1) (2)
• Pharmaceutical companies
• Smart phone companies

17.2 Define the term oligopoly. (2)

This is a market structure in which a small number of large sellers dominate the market

17.3 Why it is important for these companies to have trademarks for their products? (2)
• To protect the imitation of their products
• To stop others from entering their market

17.4 How do cartels and price leadership differ in terms of the way prices are manipulated?
(2 x 2) (4)
• In price leadership the dominant firm set the price and the other firms often follow (tacit
collusion)
• In a cartel the firms formally meet and agree on the price for their products (overt
collusion)

18. Study the graph below and answer questions that follow.
 21

18.1 Identify the maximum price from the graph. (1)

P1

18.2 Which quantity will be supplied when the maximum price is enforced? (1)
Q1 

18.3 Which role does the government play in redistribution of wealth? (4)
The government makes use of traditional methods to redistribute wealth e.g. levying of
taxes and providing free services
Implement redress methods to enforce redistributione.g. BEE and affirmative action 
(Accept any other correct relevant response) (Max 4)

18.4 How will the maximum price affect the economy? (4)
Maximum prices allow the poor greater access to certain goods and services. 
Sellers will not be willing to sell at the maximum price as a result less of that particular good
will be supplied 
A black market can be formed where sellers offer their goods or services at a price that is
higher than the maximum price. 
(Accept any other correct relevant response) (Any 2 x 2)

19. Study the graph below and answer the questions that follow.
 22

19.1 Identify the price of cigarettes before a tax was imposed on it. (1)
R100 

19.2 What quantity is demanded after the government imposed a tax on cigarettes? (1)
200 

19.3 Clearly distinguish between merit goods and demerit goods. (4)
Merit goods:
• Are highly desirable for general welfare, but not highly rated by the market, e.g. health
care
• The market produces less than the desired quantity
• If people had to pay the market price, less would be consumed (Max 2)

Demerit goods
• Are highly undesirable for the general welfare of society
• These goods are normally overconsumed and supplied
• Consumers are unaware of the true cost or negative externalities, diseases, etc.
(Max 2)
(Accept any other correct relevant response) (2 x 2)

19.5 Use the graph above and explain how a tax on cigarettes will reduce market failure. (4)
Market failure will be reduced because:
The tax on cigarettes will increase the price of the good which will shift the supply to the left
(SS to S1S1) 
At the new equilibrium (e1) fewer units are demanded (200) which is socially more
desirable 
(Accept any other correct relevant response)

20. Study the cartoon below and answer the questions that follow.
 23

20.1 Which cause of market failure is illustrated above? (2)

Incomplete information/lack of information 

20.2 Briefly describe the term market failure. (2)

The best available (optimal) production outcome has not been achieved / misallocation of
resources 
(Accept any other correct relevant response)

20.3 How can labour as a factor of production become more mobile? (2)
Training/attaining skills/increased wages/travelling facilities or infrastructure/
technology 
(Accept any other correct relevant response)

20.4 How does the South African government attempt to solve the problem of income
inequality? (2 x 2) (4)
The government can attempt to solve the problem of income inequality by:
• implementing a progressive tax system which has reduced the income gap between
income earners 
• levying indirect taxes on consumption (e.g. VAT), while certain basic items that the
poor often consumes, were excluded 
• providing free primary health care in provincial hospitals and clinics 
• making provision for those who cannot afford to pay by offering a free basic education

• making transfer payments and subsidies payable to the poor and previously
disadvantaged 
• implementing minimum wages 
• implement job creation programmes 
• implementing BBBEE and labour laws 
(Accept any other correct relevant response)

21. Study the information below and answer the questions that follow.
 24

21.1 Identify any TWO sectors in South Africa where minimum wages are applied in the extract
above. (2 x 1) (2)
• Civil Engineering 
• Contract Cleaning services 
• Domestic Workers 
• Farm Workers 
• Forestry 
• Hospitality 
• Leadership Allowance 
• Private Security 
• Wholesale and Retail 
• Taxi 
• Bargaining Council Minimum Wages 

21.2 Briefly describe the term minimum wage. (2)

It is the minimum remuneration a worker should earn legally per hour, day or week for work
done 
(Accept any other correct relevant response)

21.3 What is the advantage of having a national minimum wage instead of a minimum
wage per sector? (2)
Prevent discrimination among workers in the different sectors 
That national minimum wage could be higher which will improve the standard of living 
(Accept any other correct relevant response)

21.4 Refer to the graph above and explain the implication of the R3 500 minimum wage
imposed by the government. (2 x 2) (4)
The wage rate will be higher than the market rate of R2 500
At this rate more people will avail themselves, therefore the supply of labour will increase
from 200 to 300 
On the other side, the demand for labour will decrease from 200 to100 
This will create an oversupply of workers, supply exceeds demand / unemployment will
increase 
(Accept any other correct relevant response) 
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22. Study the information below and answer the questions that follow.

22.1 In the information above, who is more likely to use a CBA when making decisions? (1)
Government 

22.2 Identify ONE project in the data above that the government is considering for this
community. (1)
A-Road / B-park / C-hospital / D-airport 

22.3 Give a reason why a CBA will NOT be of use to the mechanic in the cartoon. (2)
Cost-benefit analysis is applicable on large government projects on not on a one-man
business 
A mechanic only considers private costs and private benefits 
CBA involves external benefits/costs 
(Accept any other correct relevant response)

22.4 According to the data above, which project would be best for the community? (2)
C / hospital 

22.5 Why do you think it is important to do a CBA when deciding about large projects? (4)
It is important to do a CBA because:
• resources are scarce; therefore, we must consider (evaluate) the cost and benefits of a
project before allocating resources to a project 
• it allows planners to work out if going ahead with the proposed project is a good
decision 
• it helps to bring greater objectivity to decision making 
• it ensures that the project's benefits exceed the cost of implementing the project 
(Accept any other correct relevant response)