Economics Exam Review: Microeconomics and Macroeconomics 120
Questions with Worked Solutions and Rationales 2026/2027
Case 1 Scarcity and opportunity cost
A workshop can use its weekly capacity for 100 chairs or 50 desks, with a straight-
line production possibility frontier and no other products.
1. What is the opportunity cost of one desk?
2. What is the opportunity cost of one chair?
3. If 20 desks are produced efficiently, how many chairs remain possible?
4. Is 20 desks plus 70 chairs feasible under this frontier?
5. How would idle labor affect production relative to the frontier?
6. How could better technology affect the frontier?
,Case 2 Comparative advantage
Country A can produce 12 units of wheat or 6 units of cloth per worker-day. Country
B can produce 8 wheat or 8 cloth. Assume constant opportunity costs.
7. Who has absolute advantage in wheat?
8. Who has absolute advantage in cloth?
9. Find each country opportunity cost of one cloth.
10. Who has comparative advantage in cloth?
11. Who has comparative advantage in wheat?
12. Could a trade price of 1.5 wheat per cloth benefit both?
,Case 3 Competitive equilibrium
Demand is quantity = 100 - 2 times price. Supply is quantity = 20 + 2 times price.
Prices and quantities use consistent arbitrary units.
13. Find equilibrium price.
14. Find equilibrium quantity.
15. At price 10, find shortage or surplus.
16. At price 30, find shortage or surplus.
17. If demand rises by 20 units at every price, find new equilibrium.
18. Under the original curves, is a price ceiling of 25 binding?
, Case 4 Unit tax and incidence
Inverse demand is price = 100 - quantity; inverse supply is price = 20 + quantity. A
$20 per-unit tax creates a wedge between buyer and seller prices. Ignore other
effects.
19. Find the no-tax quantity and price.
20. Find quantity after the tax.
21. Find buyer and seller prices after tax.
22. Find government tax revenue.
23. Find deadweight loss.
24. Who bears the tax in this symmetric example?
Questions with Worked Solutions and Rationales 2026/2027
Case 1 Scarcity and opportunity cost
A workshop can use its weekly capacity for 100 chairs or 50 desks, with a straight-
line production possibility frontier and no other products.
1. What is the opportunity cost of one desk?
2. What is the opportunity cost of one chair?
3. If 20 desks are produced efficiently, how many chairs remain possible?
4. Is 20 desks plus 70 chairs feasible under this frontier?
5. How would idle labor affect production relative to the frontier?
6. How could better technology affect the frontier?
,Case 2 Comparative advantage
Country A can produce 12 units of wheat or 6 units of cloth per worker-day. Country
B can produce 8 wheat or 8 cloth. Assume constant opportunity costs.
7. Who has absolute advantage in wheat?
8. Who has absolute advantage in cloth?
9. Find each country opportunity cost of one cloth.
10. Who has comparative advantage in cloth?
11. Who has comparative advantage in wheat?
12. Could a trade price of 1.5 wheat per cloth benefit both?
,Case 3 Competitive equilibrium
Demand is quantity = 100 - 2 times price. Supply is quantity = 20 + 2 times price.
Prices and quantities use consistent arbitrary units.
13. Find equilibrium price.
14. Find equilibrium quantity.
15. At price 10, find shortage or surplus.
16. At price 30, find shortage or surplus.
17. If demand rises by 20 units at every price, find new equilibrium.
18. Under the original curves, is a price ceiling of 25 binding?
, Case 4 Unit tax and incidence
Inverse demand is price = 100 - quantity; inverse supply is price = 20 + quantity. A
$20 per-unit tax creates a wedge between buyer and seller prices. Ignore other
effects.
19. Find the no-tax quantity and price.
20. Find quantity after the tax.
21. Find buyer and seller prices after tax.
22. Find government tax revenue.
23. Find deadweight loss.
24. Who bears the tax in this symmetric example?
