Practice Test #1
ECONOMICS 1BB3
Introductory Macroeconomics
Sections C01, C02
Term Test #1
DATE
10:00am
This examination paper includes 12 pages including the title page and 30 questions. You
are responsible for ensuring that your copy of the paper is complete. Please bring any
discrepancy to the attention of your invigilator. YOU HAVE 60 MINUTES TO COMPLETE
THE TEST.
Special Instructions:
Only the McMaster Standard (Casio - FX991 MS or FX991 MS Plus) Calculator
may be used. This test paper must be returned along with the scan sheet.
Write your name and student number on the test paper and the scan sheet. If
you are wearing a baseball cap, please turn it so the peak is in the back. Please
turn off all cell phones. There should be no electronic devices at your seat other
than a calculator. All books and bags must be left at the front of the room. You
will need your student ID card at your desk, along with your calculator, a pencil,
and a pen. Use an HB pencil to fill in the scan sheet. You cannot fill in the
version number of your test paper on the scan sheet.
During the test:
1. Do not look at anyone else’s test paper.
2. Do not communicate with another student during the test.
3. If you are seen communicating with another student or looking at another
student’s test, this is a violation of the academic integrity policy. You will be
charged.
4. No bulky coats or bags at your seat.
5. All electronic devices and watches (smart or not) under your seat.
Page 1 of 12
OMR EXAMINATION - STUDENT INSTRUCTIONS
NOTE: IT IS YOUR RESPONSIBILITY TO ENSURE THAT THE ANSWER SHEET IS
PROPERLY COMPLETED: YOUR EXAMINATION RESULT DEPENDS UPON PROPER
ATTENTION TO THESE INSTRUCTIONS.
The scanner, which reads the sheets, senses the shaded areas by their non-reflection of light.
A heavy mark must be made, completely filling the circular bubble, with a HB pencil. Marks
made with a pen or felt-tip marker will NOT be sensed. Erasures must be through or the
scanner may still sense a mark. Do NOT use correction fluid on the sheets. Do NOT put any
unnecessary marks or writing on the sheets.
1.
Print your name, student number, course name, section number and the date in
the space provided at the top of Side 1 (red side) of the form.
2.
Mark your student number in the space provided on the sheet on Side 1 and fill in
the corresponding bubbles underneath.
3.
Mark only ONE choice from the alternatives (1,2,3,4,5, or A,B,C,D,E) provided for
each question. If there is a True/False question, enter response of 1 (or A) as
True, and 2 (or B) as False. The question number is to the left of the bubbles.
Make sure that the number of the question on the scan sheet is the same as the
question number on the test paper.
4.
Pay particular attention to the Marking Directions on the form.
5.
Begin answering questions using the first set of bubbles, marked “1".
Page 2 of 12
INSTRUCTIONS:
Choose the one alternative that best completes the statement or answers the question.
1) The following equations represent the demand and supply for bird feeders.
QD = 30 - P
QS = -5 + 3P
At the price of $15, which of the following statements is correct?
A) there is a surplus of 40
B) there is a surplus of 25
C) there is a shortage of 25
D) there is a shortage of 40
Figure 3.3
2) Refer to Figure 3.3. An increase in the price of inputs would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
Page 3 of 12
Figure 3.6
3) Refer to Figure 3.6. If the price is $10,
A) there would be a surplus of 200 units.
B) there would be a shortage of 200 units.
C) there would be a shortage of 600 units.
D) there would be a surplus of 600 units.
4) An increase in the demand for lobster due to changes in consumer tastes, accompanied by
a decrease in the supply of lobster as a result of bad weather reducing the number of
fishermen trapping lobster, will result in
A) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
B) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or
decrease.
C) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
D) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or
decrease.
5) Economists assume that rational people do all of the following except
A) respond to economic incentives.
B) weigh the benefits and costs of all possible alternative actions.
C) undertake activities that benefit others and hurt themselves.
D) use all available information as they act to achieve their goals.
Page 4 of 12
Figure 3.14
6) Refer to Figure 3.14. The graph in this figure illustrates an initial competitive equilibrium in
the market for apples at the intersection of D2 and S2 (point E). Which of the following
changes would cause the equilibrium to change to point A?
A) a positive change in the technology used to produce apples and decrease in the price of
oranges, a substitute for apples
B) a decrease in the wages of apple workers and an increase in the price of oranges, a
substitute for apples
C) an increase in the number of apple producers and a decrease in the number of apple trees
as a result of disease
D) an increase in the wages of apple workers and a decrease in the price of oranges, a
substitute for apples
7) Following the successful launch of Red Bull in the Canadian market in 2004, companies
such as Coca Cola, Pepsi, and many others have introduced products to compete with Red
Bull. The energy drinks introduced to compete with Red Bull would be considered
A) inferior goods compared to Red Bull.
B) normal goods compared to Red Bull.
C) complements to Red Bull.
D) substitutes for Red Bull.
8) If a firm has an incentive to increase supply now and decrease supply in the future, the firm
expects that the
A) demand for the product will be lower in the future than it is today.
B) price of its product will be lower in the future than it is today.
C) price of inputs will be lower in the future than they are today.
D) price of its product will be higher in the future than it is today.
Page 5 of 12
9) If the production possibilities frontier is
more of one good is produced.
, then opportunity costs are constant as
A) bowed out
B) nonlinear
C) linear
D) bowed in
10) The more substitutes there are for a good
A) the flatter the demand curve will be.
B) the larger the income effect.
C) the less important the price of the good will be in determining demand.
D) the steeper the demand curve will be.
11) Olive oil producers want to sell more olive oil at a higher price. Which of the following
events would have this effect?
A) an increase in the price of land used to plant olives
B) an increase in the price of olive oil presses
C) a decrease in the cost of transporting olive oil to markets
D) Research finds that consumption of olive oil reduces the risk of heart disease.
12) A successful market economy requires
A) an equitable distribution of income and limits on immigration.
B) generous unemployment benefits and paid medical leave for everyone in the labour force.
C) well-defined property rights and an independent court system to adjudicate disputes based
on the law.
D) a government-controlled banking system and government price controls.
13) As incomes in Alberta fall people are drinking less craft beer and more beer produced by
international brewers. Thus, an economist would consider beer produced by international
brewers to be a(n)
A) inferior good.
B) normal good.
C) complementary good.
D) substitute good.
Page 6 of 12
Figure 3.5
14) Refer to Figure 3.5. The figure above shows the supply and demand curves for two
markets: the market for original Picasso paintings and the market for designer jeans. Which
graph most likely represents which market?
A) Graph B represents the market for original Picasso paintings and Graph A represents the
market for designer jeans.
B) Graph B represents both the market for original Picasso paintings and designer jeans.
C) Graph A represents the market for original Picasso paintings and Graph B represents the
market for designer jeans.
D) Graph A represents both the market for original Picasso paintings and designer jeans.
15) What is the difference between an "increase in demand" and an "increase in quantity
demanded"?
A) There is no difference between the two terms; they both refer to a shift of the demand
curve.
B) An "increase in demand" is represented by a rightward shift of the demand curve while an
"increase in quantity demanded" is represented by a movement along a given demand curve.
C) An "increase in demand" is represented by a movement along a given demand curve, while
an "increase in quantity demanded" is represented by a rightward shift of the demand curve.
D) There is no difference between the two terms; they both refer to a movement downward
along a given demand curve.
Page 7 of 12
Figure 2.4
Figure 2.4 shows various points on three different production possibilities frontiers for a nation.
16) Refer to Figure 2.4. A movement from X to Y
A) could be due to a change in consumers' tastes and preferences.
B) is the result of advancements in food production technology only, with no change in the
technology for plastic production.
C) could occur because of an influx of immigrant labour.
D) is the result of advancements in plastic production technology only, with no change in food
production technology.
17) Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats
per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per
year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not
trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while
Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined
output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If
the two countries do trade, each will completely specialize in producing the crop for which it has
a comparative advantage. If trade occurs, by what amount will the combined output for the two
countries increase?
A) 800 bushels of corn and 1000 bushels of oats
B) 400 bushels of corn and 500 bushels of oats
C) 350 bushels of corn and 400 bushels of oats
D) 200 bushels of corn and 200 bushels of oats
Page 8 of 12
Table 2.1
Production choices for Tomaso's Trattoria
Quantity of Quantity of
Pizzas
Calzones
Choice
Produced
Produced
A
48
0
B
36
15
C
24
30
D
12
45
E
0
60
18) Refer to Table 2.1. Assume Tomaso's Trattoria only produces pizzas and calzones. A
combination of 36 pizzas and 30 calzones would appear
A) along Tomaso's production possibilities frontier.
B) inside Tomaso's production possibilities frontier.
C) outside Tomaso's production possibilities frontier.
D) at the horizontal intercept of Tomaso's production possibilities frontier.
19) For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds
of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces.
Which of the following is true about the comparative advantage between the two countries?
A) Switzerland has the comparative advantage in chocolate.
B) Switzerland has the comparative advantage in watches.
C) Germany has the comparative advantage in watches and chocolate.
D) Germany has the comparative advantage in watches.
20) Automobile manufacturers produce a range of automobiles such as sports utility vehicles,
luxury sedans, pickup trucks and compact cars. What fundamental economic question are
they addressing by making this range of products?
A) How to produce goods that consumers want?
B) Why produce a variety of automobiles?
C) Who to produce automobiles for?
D) What to produce?
Page 9 of 12
Table 2.5
Bracelets
Necklaces
Serena
8
16
Haley
9
12
Table 2.5 shows the output per week of two jewelers, Serena and Haley. They can either
devote their time to making bracelets or making necklaces.
21) Refer to Table 2.5. What is Haley's opportunity cost of making a bracelet?
A) 2 necklaces
B) 3 bracelets
C) 3/4 of a bracelet
D) 1 1/3 necklaces
22) Refer to Table 2.5. Which of the following statements is true?
A) Haley has an absolute advantage in making both products.
B) Haley has an absolute advantage in making necklaces and Serena in making bracelets.
C) Serena has an absolute advantage in making both products.
D) Haley has an absolute advantage in making bracelets and Serena in making necklaces.
23) Refer to Table 2.5. What might the price of trade be?
A) 1.5 necklaces for 1 bracelet
B) 2 bracelets for 1 necklace
C) 3 necklaces for 1 bracelet
D) 1 bracelet for 1 necklace
24) If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4
and y = 10, the slope of this line is
A) negative 11 divided by 6.
B) seven tenths.
C) negative seven tenths.
D) 6 divided by 11.
25) Which of the following is a microeconomics question?
A) What factors determine the price of carrots?
B) What determines the average price level and inflation?
C) How much will be saved and how much will be produced in the entire economy?
D) What will the level of economic growth be in the entire economy?
Page 10 of 12
26) An example of a factor of production is
A) a worker hired by Bombardier.
B) stock issued by Bombardier.
C) a snow machine produced by Bombardier.
D) the streetcars exported by Bombardier.
Figure 2.5
27) Refer to Figure 2.5. If this economy is currently considering switching from point X to
point W, what is the opportunity cost of each newly produced ton of paper?
A) 3 tons of steel
B) 0.6 tons of steel
C) 1.67 tons of paper
D) 5 tons of paper.
28) Obesity is one of the biggest health challenges facing Canadians, with few Canadians
getting the recommended amount of daily physical activity. Economists would expect
A) there is no correlation between fines for skipping exercise and how often people will go to
the gym.
B) people will exercise more when the cost of skipping exercise increases.
C) people who agree to pay a fine for skipping exercise sessions will be less healthy than
those who do not.
D) people who value physical appearance to exercise less than others.
29) An economic
is a simplified version of some aspect of economic life used to
analyze an economic issue.
A) trade-off
B) market
C) variable
D) model
Page 11 of 12
30) The points outside the production possibilities frontier are
A) efficient.
B) inefficient.
C) attainable.
D) unattainable.
Page 12 of 12