The table below shows the production possibilities for the production

Econ 1019
– 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 morecapital 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. 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) What are the values for equilibrium price $_______ and
quantity traded _________?
b) If the price of wool is $600 would there be a
Surplus/Shortage? ____________; How much? _________
c) Assume that demand increases
by 60 at every price. Fill in the new quantity demanded in the space provided
(Qd**)
d) What are the new values for equilibrium price $_______
and quantity traded _________?
e) Assume that after the change above supply increases by 50% at every price. Fill
in the new quantity supplied in the space provided (Qs**)
f) What are the new values for equilibrium price $_______
and quantity traded _________?

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.

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