Econ 1002 – Sample Short Answer Test Questions

1. The table below shows the production possibilities for the production of capital goods
and consumer goods in the country of Harmony.

A B C D E F
Capital goods 0 25 40 50 55 58
Consumer goods 50 40 30 20 10 0
Capital **

Assume that the country is currently producing at output C.

a) Assume capital production increases by 60% . Fill in the new production possibility for
capital.
b) If, after the change, Harmony wishes to continue to produce the same amount of
consumer goods, how many more capital goods can it now produce? __________
c) What was the opportunity cost of moving to output D before the change in the
production of capital goods?
Give up ______ to get _______
d) ) What is the opportunity cost of moving to output D after the change in the production
of capital goods?
Give up ______ to get _______

2. Suppose both Emma and Hakim have small bakeries. They both produce bread and
pastries. Below are each of their daily production numbers.

Emma’s Bakery Bakery Hakim

Bread (doz./day) Pastries (doz./day) Bread (doz./day) Pastries (doz./day)
0 30 0 45
2 24 4 36
4 18 8 27
6 12 12 18
8 6 16 9
10 0 18 4.5
20 0

a) Who has a comparative advantage in producing bread? And who has a

comparative advantage in producing pastries?
b) Suppose Emma is currently producing 2 doz. loaves of bread and 24 doz. pastries
and Hakim is currently producing 12 doz. loaves of bread and 18 doz. pastries. If
either or both have a comparative advantage in one product or the other,
demonstrate how specializing in what they have a comparative advantage of will
make both better off if they engage in trade.
3. The table below shows the demand and supply schedules for wool in Economy XYZ.
(Thousands of tonnes per year)
Price ($) 100 200 300 400 500 600 700
Quantity
demanded 130 110 90 70 50 30 10
Quantity
supplied 10 20 30 40 50 60 70
Qd (**)
Qs (**)

a) Draw a demand and supply curve for the original values and label your graph.
b) What are the values for equilibrium price $_______ and quantity traded _________?
c) If the price of wool is $600 would there be a Surplus/Shortage? ____________; How
much? _________
d) Assume that demand increases by 60 at every price. Fill in the new quantity demanded
in the space provided (Qd**)
e) What are the new values for equilibrium price $_______ and quantity traded
_________?
f) Assume that after the change above supply increases by 50% at every price. Fill in the
new quantity supplied in the space provided (Qs**)
g) What are the new values for equilibrium price $_______ and quantity traded
_________?
h) Add the new demand and supply curves for the new, adjusted values and label
appopriately.

3. In each of the markets below, indicate what effects the changes will have on Demand
(increase or decrease); Supply (increase or decrease); Price (increase, decrease,
indeterminate); Quantity traded (increase, decrease, indeterminate)

Market Demand Supply Price Quantity

traded

Orange Juice – A freeze in Florida

occurs at the same time that the price
of apple juice (a substitute) rises.

Cigarettes – Government introduces

an effective anti-smoking policy and
at the same time increases the tax on
cigarettes.

Beer – The legal age for drinking is

increased to 25 and at the same time
technological change reduces the
cost of brewing beer.

Eyeglasses – The cost of producing lens

falls at the same time that wearing
eyeglasses becomes more fashionable.