ECONOMICS (ECO 210/211) TEST QUESTIONS: PIED. TECH. COLLEGE
(All Answers must be explained as much as possible)
1. a. What do you understand by the term “Resources?”
b. List the different types of resources and explain each.
c. What is a Production Possibilities Curve or Frontier (PPC/PPF)?
Use table 1; below to answer questions, d and e
Consumer Goods Capital Goods
0 45
10 40
20 32
30 20
40 0
d. draw the PPC and demonstrate points of Full Employment with
letters; M,N,O,P (Note that these are points where resources combinations
are the most efficient).
e. In your opinion, which location on the PPC represent the most
efficient allocation of resources and why?
2. Explain what you understand by the term "Comparative Advantage"
Assume that in England, it takes 4 hours to produce a bag of
wheat, and 6 hours to produce a bottle of wine. In the USA, it
takes 1 hour to produce a bag of wheat, whiles it takes 2 hours
to produce a bottle of wine. Using the above information,
answer the following questions.
i. What is the opportunity cost of a bag of wheat in England?
ii. What is the opportunity cost of a bag of wheat in the USA?
iii. Which nation (England or the USA) has comparative advantage
in the production of a bag of wheat?
iv. Explain how the theory of Comparative advantage ensure
the efficient use of resources in everyday life.
3. What do you understand by the terms; Utility, Total Utility, and
Marginal Utility?
i. To decide which of two goods is the better buy, what should the
consumer consider? (your response should be in terms of the marginal
utility and price).
