CIA 4U
UNIT 2: ECONOMIC INSTITUTIONS
TEST MAKEUP
Knowledge
Thinking
/10
Application
/12
/16
As a replacement to the mark on your last test you may complete all or part of this assignment.
The assignment you hand in will replace the mark that appeared on your test. If completing Part
A you must hand in your SCANTRON card for the multiple choice section only.
PART A:
KNOWLEDGE (10 marks)
1. What is the essential difference between the following graphs?
Graph A
Graph B
P
P
S
P1
P2
D2
D
D1
Q
a)
b)
c)
d)
Q
Graph A shows a change in demand; Graph B a change in the quantity demanded.
Graph A shows an increase in quantity demanded; Graph B an increase in demand.
Graph A shows an decrease in quantity demanded; Graph B an decrease in demand.
Graph A shows an decrease in quantity demanded; Graph B an increase in demand.
2. Which of the following best defines supply?
a) the cost of producing a good or service
b) the cost of producing a good or service at a particular price
c) the quantity a producer is willing and able produce at a given price
d) the quantity a producer is willing and able to produce at various prices.
3. Which of the following is a characteristic of a good for which demand is inelastic?
a) It is a necessity.
b) Consumers more often spend a small amount of their budget on the item.
c) The period of time for which the demand exists is long.
d) It has some substitutes.
4. Arrange the order of the following market structures from most competitive to least
competitive: 1) monopolistic competition, 2) oligopoly, 3) monopoly, 4) perfect competition.
a) 1, 2, 3, 4
b) 4, 1, 2, 3
c) 2, 1, 3, 4
d) 3, 2, 1, 4
2
5. A tax that is payable on tobacco, gasoline and liquor is called:
a) a progressive tax
b) a sales tax
c) a proportional tax
d) an excise tax
6. Under which of the following situations would the government intervene with a price floor?
a) The equilibrium sets a price that creates a surplus for the good or service.
b) The equilibrium sets a price that is not affordable by consumers.
c) The equilibrium sets a price that does not provide incentive for producers to produce.
d) The equilibrium sets a price that creates a shortage for the good or service.
7. Suppose the demand for good A decreases due to an decrease in consumer incomes. Which of
the following situations for good A will result?
a) Temporary shortage, price increases, increase in quantity supplied, higher equilibrium
price.
b) Temporary surplus, price decreases, decrease in quantity supplied, lower equilibrium price.
c) Temporary shortage, price increases, decrease in quantity supplied, higher equilibrium
price.
d) Temporary surplus, price decreases, increase in quantity supplied, higher equilibrium price.
8. If the price of good X rises, what can we assume about the demand for good Y?
a) It will fall, if the goods are complements.
b) It will rise, if the goods are complements.
c) It will rise, if good Y is a substitute for good X.
d) It will not be affected by the demand for good X.
9. In the long term, which of the following is true of most consumer goods?
a) Demand is inelastic, supply is elastic.
b) Demand is elastic, supply is elastic.
c) Demand is inelastic, supply is inelastic.
d) Demand is elastic, supply is inelastic.
10. Which of the following is a public good?
a) A gas station.
b) A park.
c) A parking lot.
d) A restaurant.
PART B:
Thinking (14 marks)
Using the demand and supply schedule, answer the following questions on lined
paper.
Column 1
20
40
70
100
120
130
(2)
1.
DEMAND AND SUPPLY SCHEDULE FOR HAMBURGERS
Price
Column 2
($ per hamburger)
2.00
200
1.80
150
1.60
120
1.40
100
1.20
70
1.00
40
Identify columns 1 and 2.
3
(2)
(4)
2.
3.
(4)
4.
(1)
(1)
5.
6.
PART C:
What is the equilibrium price and quantity?
Using the data in schedule, draw a graph to illustrate the market. Be sure to show
the equilibrium point.
On separate graphs, explain the state of the market when the cost of cones
is:
a)
$1.80
b)
$1.20
Suppose the cost of hamburger buns falls. Show the effect on the market.
Suppose the price of hotdogs falls by 10%. Show the effect on the market.
Application (16 marks)
(5)
1.
Platinum is a white metal that is easily shaped and formed. Almost half of
platinum consumed was used in the production of automotive catalytic converters to clean exhaust
emissions of carbon monoxide and nitrous oxides. Close to another half went into the production
of jewellery, almost 90 percent of which is sold in Japan. The remainder was used in the
production of consumer products such as glass, plastics, computer chips and fibre optic cables.
Using demand and supply graphs, show the initial impact of the following on the market for
platinum. (Assume only one curve will change)
a) Ford has developed a catalytic converter that does not require platinum and is
cheaper to manufacture.
b) Rumours are circulating that Russia no longer has the large inventories of platinum
that it once had.
c) Platinum reaches a record high price of $1500 USD per ounce.
d) Strikes and labour unrest are reported at the mines of Impala Holding Ltd. of South
Africa – the world’s second largest producer of platinum.
e) The cost of gold has increased by 10%
(5)
2.
For the following statements determine whether or not it is an example of a
negative or positive externality. Give a reason for your answer
a) The Canadian government allows Rogers cable to be the only television
provider.
b) Each household in the Peel region is allowed 3 garbage bags a week free of
charge.
c) The coal burning power plant is shut down and more windmills are placed
around Lake Ontario.
d) The government provides tax rebates for people who buy energy efficient
appliances.
e) A builder puts a tree on the front lawn of every house in a subdivision.
(6)
3.
For the following goods, identify whether their demand is elastic or inelastic. You
must give a reason for your decision.
a)
Coffee
b)
Shoe Laces
c)
Sports Cars