This diagnostic helps you find which Unit 1 topics to revisit. It has one or two short questions on each topic, 1.1 to 1.6. Answer every question before opening any answer; allow about 30 minutes.
These are original Marlbridge practice questions, not past exam questions. The set is not calibrated, so it gives no predicted score. Valdoria and Kestria are fictional countries; the currency is the valda (VD), and all data are fictional. A four-function calculator is enough. Only the stated change happens in each question.
Question 1 (multiple choice · 1.1)
Which list gives one example of land, labour and capital, in that order?
- (A) A copper deposit; the work of a mining engineer; a drilling rig
- (B) A copper deposit; a mine office building; the work of a mining engineer
- (C) A bank loan; the work of a mining engineer; a drilling rig
- (D) A forest; a founder who risks her savings to open a sawmill; a delivery van
Answer and explanation
Answer: (A). Copper in the ground is land, an engineer’s work is labour, and a drilling rig is human-made and used in production (capital).
- (B) has the wrong order: a building is capital and the engineer is labour.
- (C) A loan is money. It can buy resources but is not one of the four.
- (D) Organising a business and bearing the risk of loss is entrepreneurship, not labour.
If you missed this: read “Economic resources: the four factors of production” in the Topic 1.1 study guide.
Question 2 (multiple choice · 1.2)
The table shows points on Valdoria’s production possibilities curve (PPC).
| Point | A | B | C | D | E | F |
|---|---|---|---|---|---|---|
| Cloth (thousand metres) | 0 | 10 | 20 | 30 | 40 | 50 |
| Cocoa (thousand tonnes) | 100 | 95 | 85 | 69 | 45 | 0 |
Valdoria moves from point D to point C. What is the opportunity cost of one tonne of cocoa gained?
- (A) 0.5 metres of cloth
- (B) 0.625 metres of cloth
- (C) 1.6 tonnes of cocoa
- (D) 10 metres of cloth
Answer and explanation
Answer: (B). Cocoa rises from 69 to 85 thousand tonnes, a gain of 16 thousand tonnes. Cloth falls from 30 to 20 thousand metres, so 10 thousand metres are given up. Per tonne of cocoa: 10 ÷ 16 = 0.625 metres of cloth.
- (A) is the whole-curve average (50 ÷ 100), not the D-to-C move.
- (C) turns the ratio upside down: 16 ÷ 10 = 1.6 tonnes of cocoa is the cost of one metre of cloth.
- (D) uses the total given up (10 thousand metres) and forgets to divide by the 16 thousand tonnes gained.
If you missed this: read “Calculating opportunity cost” in the Topic 1.2 study guide.
Question 3 (multiple choice · 1.2)
A recession in Kestria ends. The unemployment rate falls from 9% to 5%, and the country’s resources and technology do not change. How is this best shown on Kestria’s PPC?
- (A) A movement from a point inside the PPC towards the curve
- (B) An outward shift of the PPC
- (C) A movement along the PPC from one efficient point to another
- (D) A change in the PPC from a bowed-out curve to a straight line
Answer and explanation
Answer: (A). Idle workers put Kestria inside its PPC. Re-employing them moves output towards the curve; capacity is unchanged.
- (B) Output grows, but a shift needs more or better resources or technology. The workers existed all along.
- (C) describes a reallocation between two goods while fully employed.
- (D) The shape depends on how opportunity costs change, not on employment.
If you missed this: read “Shifts of the PPC: growth and contraction” in the Topic 1.2 study guide.
Question 4 (multiple choice · 1.3)
The table shows the hours of labour each country needs to make one unit.
| Country | Hours per bag of cement | Hours per roll of fabric |
|---|---|---|
| Valdoria | 2 | 8 |
| Kestria | 4 | 10 |
Which statement is correct?
- (A) Kestria has a comparative advantage in fabric, even though Valdoria has an absolute advantage in fabric.
- (B) Valdoria has a comparative advantage in both goods, because it needs fewer hours for each.
- (C) Kestria has an absolute advantage in fabric, because 10 is greater than 8.
- (D) Valdoria has a comparative advantage in fabric, because a roll costs it only 0.25 bags of cement.
Answer and explanation
Answer: (A). With input data, the opportunity cost of a roll = hours per roll ÷ hours per bag. Valdoria: 8 ÷ 2 = 4 bags. Kestria: 10 ÷ 4 = 2.5 bags. Kestria gives up less (comparative advantage); Valdoria needs fewer hours (absolute advantage).
- (B) confuses absolute with comparative advantage. With two goods, nobody has a comparative advantage in both.
- (C) uses the output rule on input data. More hours per unit means less productive.
- (D) inverts the ratio. 0.25 rolls is Valdoria’s cost of a bag of cement, not of a roll.
If you missed this: read Worked example 3 in the Topic 1.3 study guide.
Question 5 (multiple choice · 1.4)
Which event would shift the demand curve for rice cookers in Valdoria to the left?
- (A) The price of rice rises sharply.
- (B) The price of rice cookers rises.
- (C) The price of microwave ovens, a substitute for rice cookers, rises.
- (D) Buyers expect rice cookers to cost more next month.
Answer and explanation
Answer: (A). Rice and rice cookers are complements. Dearer rice means buyers want fewer cookers at every price.
- (B) is the good’s own price: a movement along the curve.
- (C) A dearer substitute increases demand (right).
- (D) Expecting a higher price later increases demand now (right).
If you missed this: read “The determinants of demand” in the Topic 1.4 study guide.
Question 6 (multiple choice · 1.5)
Which pair of events would both decrease the supply of honey in Valdoria?
- (A) Beekeepers’ wages rise, and the government adds a tax of VD 1 on each jar sold.
- (B) The price of honey falls, and the price of the sugar fed to bees in winter rises.
- (C) New hive designs raise output per hive, and more beekeepers enter the market.
- (D) Consumers’ incomes fall, and beekeepers’ wages rise.
Answer and explanation
Answer: (A). Higher wages and a per-unit tax both raise costs, so both shift supply left.
- (B) Dearer sugar decreases supply, but honey’s own price is a movement along the curve.
- (C) Better technology and more sellers both increase supply.
- (D) Income is a determinant of demand, not supply.
If you missed this: read “Determinants of supply” in the Topic 1.5 study guide.
Question 7 (multiple choice · 1.6)
A new production method lowers the cost of making e-readers. Nothing else changes. Which describes what happens in the e-reader market?
- (A) At the original price there is a surplus; the price falls until a new equilibrium has a lower price and a higher quantity.
- (B) At the original price there is a shortage; the price rises until a new equilibrium has a higher price and a higher quantity.
- (C) The equilibrium price and quantity both fall.
- (D) Supply shifts right, and then demand also shifts right because the price is lower.
Answer and explanation
Answer: (A). Lower costs increase supply (shift right). At the old price Qs > Qd, so sellers cut the price; buyers move down the unchanged demand curve.
- (B) describes an increase in demand.
- (C) is the result of a decrease in demand.
- (D) A lower price moves buyers along the demand curve; it does not shift it.
If you missed this: read “Changes in equilibrium: when a curve shifts” in the Topic 1.6 study guide.
Question 8 (multiple choice · 1.6)
A cool summer decreases the demand for air conditioners in Valdoria. In the same year a new factory opens and increases their supply. What happens to the equilibrium?
- (A) Price falls; the change in quantity is indeterminate.
- (B) The change in price is indeterminate; quantity falls.
- (C) Price falls and quantity rises.
- (D) The changes in price and quantity are both indeterminate.
Answer and explanation
Answer: (A). Both shifts push the price down. Their effects on quantity conflict, so that change depends on which shift is larger.
- (B) swaps the two results.
- (C) looks only at the supply shift.
- (D) misses that the two effects on price agree.
If you missed this: read Worked example 3 in the Topic 1.6 study guide.
Question 9 (short answer · 1.3)
Using all their resources for a month, each country can produce:
| Country | Cashews (tonnes) | Water pumps |
|---|---|---|
| Valdoria | 100 | 25 |
| Kestria | 60 | 40 |
(a) Calculate each country’s opportunity cost of one water pump, and identify which country has the comparative advantage in pumps. (b) State the range of terms of trade for one pump that would benefit both countries. (c) Would these terms benefit both? (i) 1 pump for 5 tonnes of cashews; (ii) 1 tonne of cashews for 0.5 pump.
Worked answer
(a) Valdoria: 100 ÷ 25 = 4 tonnes of cashews per pump. Kestria: 60 ÷ 40 = 1.5 tonnes. Kestria has the comparative advantage in pumps (1.5 < 4).
(b) More than 1.5 but fewer than 4 tonnes of cashews per pump.
(c) (i) No. 5 is above 4, so Valdoria (the buyer) would pay more than its own cost. (ii) Yes. 1 tonne for 0.5 pump means 1 ÷ 0.5 = 2 tonnes per pump, inside the range.
If you missed this: read “Specialisation and the terms of trade” in the Topic 1.3 study guide.
Question 10 (short answer · 1.6)
The weekly market for jars of honey in a Valdorian city is described by Qd = 90 − 5P and Qs = 10P − 30, where quantities are in hundreds of jars and P is in valdas.
(a) Calculate the equilibrium price and quantity. (b) Calculate the surplus or shortage at VD 10. (c) Explain how the market moves from VD 10 to equilibrium.
Worked answer
(a) Set Qd = Qs: 90 − 5P = 10P − 30, so 120 = 15P and P = VD 8. Q = 90 − 5(8) = 50 hundred jars. (Check: 10(8) − 30 = 50.)
(b) At VD 10: Qd = 90 − 50 = 40 and Qs = 100 − 30 = 70. Qs > Qd, so there is a surplus of 30 hundred jars (3,000 jars).
(c) Sellers cut the price to clear unsold jars. Quantity demanded rises and quantity supplied falls, both along the curves, until the surplus disappears at VD 8.
If you missed this: read “How prices restore equilibrium” in the Topic 1.6 study guide.
Question 11 (short answer · 1.4)
Bicycle helmets are a normal good in Valdoria. For each event, state whether it causes a change in demand or a change in quantity demanded for helmets, and the direction.
(a) The price of helmets falls. (b) The price of bicycles falls. (c) A news report says helmet prices will rise next month. (d) Average incomes fall.
Worked answer
(a) Quantity demanded rises: a movement down the demand curve.
(b) Demand increases (shift right). Bicycles and helmets are complements, so more bicycle buyers means more helmets wanted at every price.
(c) Demand increases now (shift right): buyers buy before the price rises.
(d) Demand decreases (shift left), because helmets are a normal good.
If you missed this: read “Change in quantity demanded v. change in demand” in the Topic 1.4 study guide.
Your next step
Circle each question you got wrong or guessed.
| Topic | Question(s) | If you missed it, read |
|---|---|---|
| 1.1 Scarcity | 1 | Scarcity study guide |
| 1.2 Opportunity cost and the PPC | 2, 3 | Opportunity cost and the PPC study guide |
| 1.3 Comparative advantage and gains from trade | 4, 9 | Comparative advantage study guide |
| 1.4 Demand | 5, 11 | Demand study guide |
| 1.5 Supply | 6 | Supply study guide |
| 1.6 Market equilibrium and changes in equilibrium | 7, 8, 10 | Market equilibrium study guide |
How to use your result
- No mistakes in a topic: tick it off, but try its practice set once before the exam.
- One mistake: read the section named in the answer, then redo the question without looking.
- Two or more mistakes, or a guess: work through that topic’s study guide and practice set first.
- Several “shift v. movement” mistakes: revisit Topics 1.4, 1.5 and 1.6 together.
Then try the mixed unit review, whose questions combine several topics.