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Economics 1021A/B Study Guide - Demand Curve, Photocopier, Import Quota

Course Code
ECON 1021A/B
Jeannie Gillmore

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M. Parkin Economics 1021A-002/004 December 5, 2011
Review 3
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
1) Sally has to decide whether to study for her economics test or her accounting test. If she chooses to
study for accounting, her opportunity cost of studying accounting is
A) not comparable to the value of studying economics.
B) equal to the value of studying economics.
C) studying economics.
D) the future lost wages that will occur if she fails her accounting exam.
E) less than the value of studying economics.
2) Consider the following household. In 5 hours, Bob can cook 5 meals or clean 6 rooms. In 5 hours,
Mary can cook 30 meals or clean 10 rooms. Select the best statement.
A) Bob has a comparative advantage in cooking.
B) Since Mary is better at producing both goods, she should produce both.
C) Bob has an absolute advantage in the production of both goods.
D) Mary should specialize in cooking.
E) none of the above
Use the table below to answer the following question.
Table 1
Production for one week by Sheila and Bruce
Sheila Bruce
Good XGood YGood XGood Y
8 0 20 0
6 1 15 2
4 2 10 4
3) Given the information in Table 1, can Sheila and Bruce gain by specialization?
A) No, not under the given circumstances.
B) It depends on the wages each earns .
C) Yes, if each specializes in the good in which he has a comparative advantage.
D) Only if they are married to each other.
E) Yes, but only if Bruce gets paid more than Sheila.

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4) Suppose John and Joe each have different production possibility frontiers; John specializes in cloth
and Joe specializes in corn. John's island unexpectedly has exceptionally good weather, and
suddenly he is twice as productive in the production of both corn and cloth. Select the best
A) There will be no change in what John and Joe specialize in, because John's comparative
advantage has not changed.
B) As a result, John will have an absolute advantage in both corn and cloth.
C) As a result, it is possible that John and Joe will switch what they specialize in.
D) This is an example of unemployed resources becoming employed.
E) There will be a change in what John and Joe specialize in, because John's opportunity cost of
production will have risen.
5) A technological improvement in the production of good A
A) increases the supply of A.
B) increases the demand for A.
C) decreases the quantity demanded of A.
D) decreases the equilibrium price of A and decreases the equilibrium quantity.
E) decreases the supply of A.
6) If A and B are complements and the cost of a factor of production used in the production of A
decreases, then the price of
A) both A and B will rise.
B) A will fall and the price of B will rise.
C) A will rise and the price of B will fall.
D) both A and B will fall.
E) A will fall and the price of B will remain unchanged.
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