Econ 1012B
Practice Questions #2
1. Suppose there is a surplus of desirable apartments and that they are being allocated by
the market. In order for the market to coordinate the demand for apartments, the price
of apartments will have to
A) rise. B) fall. C) stay the same. D) controlled.
2.
A)
B)
C)
D)
Which of the following statements about market economies is false?
It is based on private property and the market.
It does not need a rationing mechanism.
It gives private property rights to individuals.
It relies on market forces to coordinate economic activity.
3. The main characteristics of command economies in practice include all of the
following EXCEPT:
A) government ownership of the means of production.
B) labour allocation by individual choice.
C) capital allocation by government planning.
D) government-determined, rather than market-determined, distribution of income.
E) A and B
4.
A)
B)
C)
D)
You can determine all the following using a production possibility table EXCEPT:
what combination of outputs can be produced.
how much less of one output can be produced if more of another output is produced.
what combination of outputs is best.
how much output can be produced from a given level of inputs.
5. Each of the following rows represents the choice faced by policy makers given
current Canadian institutions and technology. What is the opportunity cost of
reducing unemployment from 8 percent to 4 percent?
Unemployment
Inflation
10
3
8
4
6
5
5
7
4
10
A) 4 percentage points of unemployment.
B) 6 percentage points of unemployment.
C) 6 percentage points of inflation.
D) 4 percentage points of inflation.
6. Investment in capital goods is one way to increase the standard of living in the
future. Investment in capital goods, however, means that we must forgo consumption
today. One of the tradeoffs facing an economy is between consumption today and
consumption in the future. The following table presents such a trade off. Which of
the following statements based upon the table is TRUE?
A)
B)
C)
D)
E)
Current
Future
consumption
consumption
800
100
750
260
650
340
600
380
550
400
The opportunity cost of increasing current consumption from 750 to 800 is greater
than the opportunity cost of increasing current consumption from 550 to 600.
The opportunity cost of increasing future consumption from 100 to 260 is greater
than the opportunity cost of increasing future consumption from 380 to 400.
The opportunity cost of increasing current consumption by 50 is the same whether
you start at 550 or start at 750 consumption units.
The opportunity cost of increasing future consumption by 50 is the same whether
you start at 260 or 340.
None of the above.
7. Evan can grow both roses and carnations in his garden. His production possibility
table is given below. If he is currently producing 110 roses, his opportunity cost of
producing 40 more roses is
Number
Number
of roses
of carnations
0
155
60
135
110
109
150
78
180
0
A) 20 carnations. B) 26 carnations. C) 31 carnations.
none of the above
D) 78 carnations.
E)
Use the following to answer question 60:
C
Number of Chickens
50
40
30
A
D
20
B
10
0
0
10
20
30
40
Number of Turkeys
50
8. Refer to the graph above. Suppose that the opportunity cost of producing 10 chickens
is always 8 turkeys. Given this, the relevant production possibility curve must be
A) A B) B C) C D) D
Number of
Economics Problems
Use the following to answer question 64:
6
5
4
3
2
1
0
0
2
4
6
8
10
12
Number of Math Problems
9. Refer to the graph above. Laura's production possibility curve for doing math and
economics problems in one night is shown in the graph. Her opportunity cost of
finishing 6 math problems instead of 4 math problems is
A) 1 economics problem.
C) 3 economics problems.
B) 2 economics problems.
D) 4 economics problems.
Number of articles
read in a week
Use the following to answer questions 10-11:
15
13
11
9
7
5
3
1
B
C
A
4
8
12
16
20
24
Number of CDs
listened to in a week
10. Refer to the graph above. Given Vineetstan's production possibility curve of
listening to CDs or reading magazine articles in one week, when moving from point
B to point A the opportunity cost of listening to each CD in terms of reading articles
is
A)
1
article.
2
B) 1 article.
C) 2 articles.
D) 3 articles.
11. Refer to the graph above. Given Vineetstan's production possibility curve, when
moving from point C to point B the opportunity cost of reading the articles in terms
of not listening to CDs is
A)
1
2
.
B) 2. C) 2/3.
D) 3.
Use the following to answer questions 74-75:
A
Good Y
B
D
C
Good X
12. Refer to the graph above. In the graph, the opportunity cost of good X in terms of
good Y is
A) higher along segment AB than along segment BC.
B) lower along segment AB than along segment BC.
C) the same everywhere on the two segments.
D) always increasing as we move from A to C.
13. Refer to the above graph. In the graph, a movement from ___ to ___ produces an
increase in efficiency.
A) B, D. B) A, B. C) C, D. D) D, B.
14. If you move from a point inside the production possibility curve to a point on the
production possibility curve, it follows that
A) efficiency is increased because the economy is now on the production possibility
curve.
B) efficiency is increased only if production of both goods increases.
C) efficiency is increased as long as the combined output of both goods increases.
D) efficiency is reduced if less of one good is produced.
Use the following to answer question 85:
40
38
Rye
30
22
12
0
9
14 17 20
19
Eggs
15. The graph above indicates that the economy can produce
A) both 20 units of eggs and 5 units of rye, although this would be less efficient than
producing 40 units of rye.
B) both 10 units of eggs and 20 units of rye, although this would be less efficient than
producing only 40 units of rye.
C) both 20 units of eggs and 5 units of rye, and this would be more efficient than
producing 40 units of rye.
D) both 10 units of eggs and 20 units of rye, and this would be more efficient than
producing only 40 units of rye.
Use the following to answer questions 88-89:
C
Guns
Guns
C
A
Butter
(a)
B
B
D
Butter
A
(b)
16. Refer to the graphs above. The discovery of a new supply of resources used only in
the production of guns can be shown by which movement?
A) From A-B to C-D in Graph A.
C) From A-B to A-C in Graph B.
B) From C-D to A-B in Graph A.
D) From A-C to A-B in Graph B.
17. Refer to the graphs above. Destruction of some of the resources necessary to
produce both guns and butter would result in what movement?
A) From A-B to C-D in Graph A.
C) From A-B to A-C in Graph B.
B) From C-D to A-B in Graph A.
D) From A-C to A-B in Graph B.
18. Which of the following would be most likely to shift Iraq's production possibility
curve in?
A) Damage done to its human and capital resources during the U.S.-led invasion.
B) Attacks by insurgents opposed to the U.S. presence.
C) Aid given by foreign countries.
D) All of the above.
E) A and B.
19. This production possibility table illustrates
Eggs
Rye
10
0
8
10
6
20
4
30
2
40
0
50
A) increasing marginal opportunity cost. C) constant marginal opportunity cost.
B) decreasing marginal opportunity cost. D) zero opportunity cost.
Use the following to answer questions 20-22:
First Bakery
Cookies
Pies
0
15
10
12
20
9
30
6
40
3
50
0
Second Bakery
Cookies
Pies
0
20
20
16
40
12
60
8
80
4
100
0
20. Given the production possibility tables for First and Second Bakeries presented
above, the opportunity cost of producing cookies
A) is higher at First Bakery.
C) is the same at both bakeries.
B) is higher at Second Bakery. D) cannot be computed without further information.
21. Given the production possibility tables for First and Second Bakeries presented
above, the opportunity cost of producing pies
A) is higher at First Bakery.
C) is the same at both bakeries.
B) is higher at Second Bakery. D) cannot be computed without further information.
22. Given the production possibility tables for First and Second Bakeries presented
above,
A) First Bakery has a comparative advantage in the production of both goods.
B) Second Bakery has a comparative advantage in the production of pies.
C) First Bakery has a comparative advantage in the production of pies.
D) neither bakery has a comparative advantage.
23. Scotland and Canada produce both haggis and maple syrup using labour only. A
unit of maple syrup can be produced with 8 hours of labour in Scotland and 4 hours
of labour in Canada. A unit of haggis can be produced with 8 hours of labour in
Scotland and 12 hours of labour in Canada. Canada has
A) an absolute advantage in maple syrup production.
B) an absolute advantage in haggis production.
C) a comparative advantage in maple syrup production.
D) a comparative advantage in haggis production.
E) A and C.
Industrial Goods
Use the following to answer question 133:
9
8
7
6
5
4
3
2
1
0
F
E
A
D
C
1
B
2
3 4 5 6 7
Agricultural Goods
8
24. Refer to the graph above. If countries A and B face the production possibility curves
A and B respectively, which dotted curve represents their combined production
possibility curve?
A) C B) D C) E D) F