Practice Set Econ

ECON-100

PRACTICE SET-1

Q1. Is economics an art, science or uncertain? Provide a brief explanation

Q2. State whether the following statements are true or false. Also the reason as well.

1. The opportunity cost of watching a movie is the price of the ticket.
2. Markets are always the best way to allocate resources and governments should never intervene.
3. There is no relation between inflation and unemployment

Q3. Explain whether each of the following government activities is motivated by a concern about equity or a concern about efficiency.

a. regulating cable-TV prices

b. providing some poor people with vouchers that can be used to buy food

c. imposing higher personal income tax rates on people with higher incomes

d. instituting laws against driving while intoxicated

Q4. Classify the following topics as relating to microeconomics or macroeconomics.

a. a family’s decision about how much income to save

b. the effect of government regulations on auto emissions

c. the impact of higher national saving on economic growth

d. a firm’s decision about how many workers to hire

e. the relationship between the inflation rate and changes in the quantity of money

Q5. Draw and explain a production possibilities frontier for Pakistan which for some reason only produces milk and cookies.

1. Why is the PPF concave and decreasing?
2. What happens to the PPF if China decides to gift Pakistan machinery that can produce more milk in the same time period?
3. What happens to the PPF if the same machinery increases the production of milk and cookies both?

(Solve part b and c separately on two different graphs)