EXAM Review Practical Question Practice 2025 PDF

**[EXAM Review Practical Question Practice]** **[Production Possibilities Curve ]** **1)** a. Which production point would **not be possible i**n this economy? **C.** **D.** **2)** a. Under **present conditions** would this economy be **able to produce 800 pounds of...

**[EXAM Review Practical Question Practice]** **[Production Possibilities Curve ]** **1)** a. Which production point would **not be possible i**n this economy? **C.** **D.** **2)** a. Under **present conditions** would this economy be **able to produce 800 pounds of potatoes and 500 pounds of fish? Explain.** **c)** What is the **Opportunity cost of** producing the 400^th^ potato at **Point D?** **d)** What is the **Opportunity Cost** of producing the 800^th^ potato **at Point B?** **e)** The **law of \_\_\_\_\_\_\_\_\_\_\_opportunity cost** tells us that as an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will \_\_\_\_\_\_\_\_\_. **Fill in the blanks and explain why this is true**. **[Analysing changes in the market using Supply and Demand Graphs ]** **3)** In the summer of 2000, weather conditions were excellent for commercial salmon fishing off the California coast. Heavy rains meant higher than normal levels of water in the rivers, which helped the salmon to breed. Slightly cooler ocean temperatures stimulated the growth of plankton---the microscopic organisms at the bottom of the ocean food chain---providing everything in the ocean with a hearty food supply. The ocean stayed calm during fishing season, so commercial fishing operations did not lose many days to bad weather. **4)** Consider the market for soft drinks that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Suppose there is a successful campaign to educate the public about the caloric values in soft drinks and their contribution to obesity. At the same time suppose that the price of corn syrup, a key ingredient in many soft drinks, rises. **5)** Consider the market for noodles that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Noodles are an inferior good. Suppose that people's incomes fall due to the financial crisis. **6)** Consider the market for gasoline that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Suppose that there is a war in the Middle East that disrupts petroleum production (petroleum is a major input to the production of gasoline) while at the same time people's incomes in the United States increases. Assume gasoline is a normal good. **[Elasticity Review ]** 7\. Suppose a rise in the price of peaches from \$5.50 to \$6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is a. 0.5. b. 1000.0. c. 2.0. d. 1.0. 8\. The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that: 9\. The price elasticity of demand will increase with the length of the period to which the demand curve pertains because: 10\. If demand for farm crops is inelastic, a good harvest will cause farm revenues to: 11\. A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is: 12\. Sony is considering a 10 percent price reduction on its color television sets. If the demand for sets in this price range is inelastic: 13\. The price elasticity of demand is a measure of demand sensitivity to: 14\. As producers are given more time to respond to price changes, the elasticity of supply 15\. If the price elasticity of demand is 2.5, then a 1 percent increase in price will lead to a: 16\. If the cross-price elasticity of demand is negative then Product A and Product B are: +-----------------------------------+-----------------------------------+ | a. | #### Compliments | +-----------------------------------+-----------------------------------+ | b. | Unrelated Goods | +-----------------------------------+-----------------------------------+ | c. | Inferior Goods | +-----------------------------------+-----------------------------------+ | d. | Substitutes | +-----------------------------------+-----------------------------------+ 17\. If the income elasticity of demand is less than zero then Product A is: +-----------------------------------+-----------------------------------+ | a. | #### A necessity good | +-----------------------------------+-----------------------------------+ | b. | A luxury good | +-----------------------------------+-----------------------------------+ | c. | An inferior good | +-----------------------------------+-----------------------------------+ | d. | A normal good | +-----------------------------------+-----------------------------------+ 18\. Which of the following products would most likely be compliments.: +-----------------------------------+-----------------------------------+ | a. | #### Oranges and apples | +-----------------------------------+-----------------------------------+ | b. | Cars and trucks | +-----------------------------------+-----------------------------------+ | c. | Gasoline and cars | +-----------------------------------+-----------------------------------+ | d. | Apples and Chocolate | +-----------------------------------+-----------------------------------+ 19\. Which of the following products would most likely be substitutes: +-----------------------------------+-----------------------------------+ | a. | #### Oranges and apples | +-----------------------------------+-----------------------------------+ | b. | Cars and tractors | +-----------------------------------+-----------------------------------+ | c. | Gasoline and cars | +-----------------------------------+-----------------------------------+ | d. | Cell phones and typewriters | +-----------------------------------+-----------------------------------+ 20\. Which of the following products would most likely have a cross price elasticity greater than 1: +-----------------------------------+-----------------------------------+ | a. | #### Oranges and apples | +-----------------------------------+-----------------------------------+ | b. | Cars and tractors | +-----------------------------------+-----------------------------------+ | c. | Gasoline and cars | +-----------------------------------+-----------------------------------+ | d. | Cell phones and typewriters | +-----------------------------------+-----------------------------------+ **[Comparative and Absolute Advantage ]** **Question 21.** Note it may be helpful to create a quick table for yourself that looks as follows -- -- -- -- -- -- a. **What is the US's opportunity cost of making cars?** Example in US it costs 12 computers to produce 4 cars so.... For every 1 car it must give up \_\_\_\_ computers b. **What is Japan's opportunity cost of making cars?** For every 1 car it must give up \_\_\_\_ computers c. **What is US's opportunity cost of making computers?** For every 1 computer it must give up \_\_\_ of a car d. **What is Japan's opportunity cost of making computers?** For every 1 computer it must give up \_\_\_ of a car e. **Who has the *absolute* advantage in cars?** f. **Who has the *absolute* advantage in computers?** g. **Who has the *comparative* advantage in cars?** h. **Who has the *comparative* advantage in computers?** i. **Which country should produce which good and why?** j. **Provide acceptable terms of trade for these two countries** **Question 22** [\[CHART\]]{.chart} -- -- -- -- -- -- a. **What is Andy's opportunity cost of cleaning offices in terms of cleaning classrooms?** For every 1 office it must give up cleaning \_\_\_\_ classrooms. b. **What is Hannah's opportunity cost of cleaning offices in terms of cleaning classrooms?** For every 1 office it must give up cleaning \_\_\_\_ classrooms. c. **What is Andy's opportunity cost of cleaning classrooms in terms of cleaning offices?** For every 1 classroom it must give up cleaning \_\_\_\_ of an office. d. **What is Hannah's opportunity cost of cleaning classrooms in terms of cleaning offices?** For every 1 classroom it must give up cleaning \_\_\_\_ of an office. e. **Who has the *absolute* advantage in cleaning offices?** f. **Who has the *absolute* advantage in cleaning classrooms?** g. **Who has the *comparative* advantage in cleaning offices?** h. **Who has the *comparative* advantage in cleaning classrooms?** i. **Who should do which chore and why?** **[Profit Maximization/Marginal Analysis]** **23.** The table below illustrates a small firm's cost schedule for its production of "Snakes and Ladders" game sets. (Assume we are in a perfectly competitive market) a. **Complete the chart below** **Quantity Produced** **Total Cost** **Marginal Cost** **Average Cost** ----------------------- ---------------- ------------------- ------------------ 0 \$55 1 \$85 2 \$108 3 \$143 4 \$188 5 \$241 6 \$300 7 \$364 8 \$431 **b)** What is the **fixed cost of production**? **c)** At **what level of output** is the firm **operating most efficiently**? **d)** If the **market price for the game sets is \$55** **what should the firm do**? **How much profit do they make?** **e)** If the **market price for game sets is \$45 what should the firm do?** **Why?** **24.** The table below illustrates a small firm's cost schedule for its production of "Snakes and Ladders" game sets. (Assume we are in a perfectly competitive market) a. **Complete the chart** **Quantity Produced** **Total Cost** **Marginal Cost** **Average Cost** ----------------------- ---------------- ------------------- ------------------ 0 \$5.00 10 \$12.00 20 \$17.00 30 \$18.90 40 \$22.00 50 \$26.00 60 \$31.20 70 \$37.10 80 \$44.00 90 \$54.00 **b)** What is the **fixed cost of production**? **c)** At **what level of output** is the firm **operating most efficiently**? **d)** Given a **market price of \$0.65** per game **what level of production** does the company **maximize its profit**? **e)** Suppose the firm is presently producing 40 units if the **market price for game sets becomes \$0.70 what should the firm do?** **Why?** **f) At what market price per game should the firm shut down?** **[Market Structure]** **25. Fill in the following table by matching one of the following to each description below:** *Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly* There are only a few large firms in the market Pizza Pizza is in this type of market General Motors is in this type of market ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Toronto Hydro is in this type of Market The grain farmer is in this type of market There are many firms selling identical products There are many firms that sell similar products There is only one firm in this type of market There are large barriers of entry into the market, but it is still possible to enter the market. No barriers of entry in the market Firms have only a limited control over price Firm is a price maker in this market. Firms may sell similar or identical products in this type of market Firms are interdependent when choosing price to sell in this market. Firms have no control over prices in this market. (they are price takers) Products produced in this type of market are usually unique with no close substitutes. Collusion is possible in this type of market. Location is key in this type of a market. **[Market Failure and types of goods.]** **26. a) List two examples of negative externalities** b. **Describe how an economy might try to internalize the social cost of your example** **27. a) List an example of a positive externality** **b) Describe how an economy might try to encourage businesses to produce more goods that provide social benefit.** **28. Use the following terms to describe the terms listed in the following table:** *rival , non-rival, excludable, non-excludable* Public Good Common Good Natural Monopoly -------------- ------------------------ ------------------ Private Good Lighthouse NetFlix Clean air Uncongested Toll Roads Law enforcement **[Macroeconomics]** **29. List all of the fiscal policy tools that can be used by the government along with the reasons why a government might implement these tools.** **30. List and describe the limitations of fiscal policy tools.** **31. List all of the monetary policy tools that can be used by the Bank of Canada along with the reasons why a government might implement these tools.** **32. List and describe the limitations of monetary policy tools.** **33. For the following graph fill in the table provided and answer accompanying questions** **AD~1~ AD~2~ FE** +-----------------------------------------------------------------------+ | c. **What is happening** to the level of **real GDP?** | +=======================================================================+ | a. **What is happening** to **employment level?** | +-----------------------------------------------------------------------+ | b. **What is happening** to **inflation (CPI)?** | +-----------------------------------------------------------------------+ d. **What may have caused the shift in AD?** e. **What type of policy might the government implement (if any) to add to or respond to this change in the economy? Justify your choice.** f. **What type of policy might the Bank of Canada implement (if any) to add to or respond to this change in the economy? Justify your choice.** **34. For the following graph fill in the table provided and answer accompanying questions** **AD~2~ AD~1~ FE** +-----------------------------------------------------------------------+ | c. **What is happening** to the level of **real GDP?** | +=======================================================================+ | a. **What is happening** to **employment level?** | +-----------------------------------------------------------------------+ | b. **What is happening** to **inflation (CPI)?** | +-----------------------------------------------------------------------+ d. **What may have caused the shift in AD?** e. **What type of policy might the government implement (if any) to add to or respond to this change in the economy? Justify your choice.** f. **What type of policy might the Bank of Canada implement (if any) to add to or respond to this change in the economy? Justify your choice.** **35. For the following graph fill in the table provided and answer accompanying questions** **AD~1~ FE AD~2~** +-----------------------------------------------------------------------+ | c. **What is happening** to the level of **real GDP?** | +=======================================================================+ | a. **What is happening** to **employment level?** | +-----------------------------------------------------------------------+ | b. **What is happening** to **inflation (CPI)?** | +-----------------------------------------------------------------------+ d. **What may have caused the shift in AD?** e. **What type of policy might the government implement (if any) to add to or respond to this change in the economy? Justify your choice.** f. **What type of policy might the Bank of Canada implement (if any) to add to or respond to this change in the economy? Justify your choice.** **36. For the following graph fill in the table provided and answer accompanying questions** **AD~2~ FE AD~1~** +-----------------------------------------------------------------------+ | c. **What is happening** to the level of **real GDP?** | +=======================================================================+ | a. **What is happening** to **employment level?** | +-----------------------------------------------------------------------+ | b. **What is happening** to **inflation (CPI)?** | +-----------------------------------------------------------------------+ d. **What may have caused the shift in AD?** e. **What type of policy might the government implement (if any) to add to or respond to this change in the economy? Justify your choice.** f. **What type of policy might the Bank of Canada implement (if any) to add to or respond to this change in the economy? Justify your choice.** **37. For the following graph fill in the table provided and answer accompanying questions** **AD FE** +-----------------------------------------------------------------------+ | c. **What is happening** to the level of **real GDP?** | +=======================================================================+ | a. **What is happening** to **employment level?** | +-----------------------------------------------------------------------+ | b. **What is happening** to **inflation (CPI)?** | +-----------------------------------------------------------------------+ d. **What may have caused the shift in AS?** e. **What type of policy might the government implement (if any) to add to or respond to this change in the economy? Justify your choice.** f. **What type of policy might the Bank of Canada implement (if any) to add to or respond to this change in the economy? Justify your choice.**