Unit 1: Basic Economic Concepts
Macro · Unit 1 · Paper 1

Basic Economic Concepts unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 42 terms and is the same for everyone, so a teacher can assign “Unit 1, Paper 1” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 34 min 31 points0/17 attempted
1

Absolute vs comparative advantage

2

Causes of outward PPC shifts

3

The marginal decision rule

4

Scarcity

5

Marginal analysis

6

Efficiency (productive)

7

Leakages and injections

8

A straight-line PPC

9

Opportunity cost

10

Physical vs human capital

11

Growth versus efficiency

12

Finding comparative advantage from an output table

Short answer 1. Define or explain: What prices do, precisely

3 pts

Short answer 2. Define or explain: Productive vs allocative efficiency

3 pts

Short answer 3. Define or explain: Finding comparative advantage from an input table

3 pts

Short answer 4. Define or explain: Efficiency (allocative)

3 pts

Free response

7 pts

Two countries, Norland and Sudland, each have the same fixed quantity of resources. With all its resources Norland can produce 40 tons of grain or 20 tractors; Sudland can produce 30 tons of grain or 30 tractors. (a) Calculate Norland's opportunity cost of one tractor and identify which country has the comparative advantage in tractors. Show your work. (b) Identify the range of terms of trade, in tons of grain per tractor, that both countries would accept. Explain why terms outside that range would be rejected. (c) Sudland has an absolute advantage in tractors. Explain why absolute advantage does not determine whether trade is mutually beneficial. (d) Norland develops a technology that doubles its grain output per resource but leaves tractor output unchanged. State whether Norland's comparative advantage changes and justify your answer with a calculation.

Calculate Norland's opportunity cost of one tractor and identify the comparative advantage in tractors.

Identify the range of mutually acceptable terms of trade and explain why terms outside it are rejected.

Explain why absolute advantage does not determine whether trade is mutually beneficial.

State whether Norland's comparative advantage changes after the grain technology improvement, with a calculation.