This diagnostic helps you find which Unit 1 topics to revisit. Each of its nine questions is tied to one topic, so a wrong answer points you to the study guide you need.
These are original Marlbridge practice questions, not past exam questions. The diagnostic is not calibrated against real exam results and gives no predicted score.
Allow about 30 minutes and work without notes. Write down every answer before you open any answer box. A four-function calculator is enough. All people, firms, countries and data are fictional.
Question 1 (multiple choice · 1.1)
A riverside restaurant uses several resources. Which list contains only factors of production that are scarce?
- (A) A fishing boat, the fish in the river, and a cook’s working hours
- (B) A fishing boat, a bank loan, and a cook’s working hours
- (C) A widely published recipe for fish soup, the fish in the river, and a fishing boat
- (D) The fish in the river, a cook’s working hours, and the profit the restaurant made last year
Answer and explanation
Answer: (A). The boat is capital, the fish are land and the cook’s hours are labour. Each is limited and has other uses.
- (B) A loan feels like a resource, but money only buys factors of production.
- (C) A widely known recipe is established knowledge. It is non-rival, so it may not be scarce.
- (D) Last year’s profit is income, not a factor of production.
If you missed this: read the Topic 1.1 study guide.
Question 2 (multiple choice · 1.2)
In the fictional country of Brennick, the state sets the price of new cars, and a government agency gives them to households in order of their place on a waiting list. Which question does the waiting list answer, and through which coordinating mechanism?
- (A) For whom to produce, through a central plan
- (B) For whom to produce, through prices in markets
- (C) How to produce, through a central plan
- (D) What to produce, through prices in markets
Answer and explanation
Answer: (A). The list decides who receives the cars (“for whom”), and a state agency, not buying and selling, decides it (a central plan).
- (B) In a market, cars would go to buyers willing and able to pay the market price.
- (C) “How” is about methods and inputs. The list chooses no method.
- (D) The cars already exist; the list only shares them out.
If you missed this: read the Topic 1.2 study guide.
Question 3 (multiple choice · 1.3)
Orlenne, a fictional economy, produces fish and furniture. New fishing nets double the amount of fish it can catch with its resources. Furniture technology does not change. Which statement is correct?
- (A) The PPC pivots outward on the fish axis, and the opportunity cost of one unit of furniture, measured in fish, rises.
- (B) The whole PPC shifts outward evenly, and opportunity costs do not change.
- (C) The PPC pivots outward on the fish axis, and the opportunity cost of one unit of furniture, measured in fish, falls.
- (D) Orlenne moves along its PPC towards more fish; the curve does not move.
Answer and explanation
Answer: (A). Maximum fish doubles while maximum furniture is unchanged, so the curve pivots on the fish axis. The resources used for one unit of furniture could now catch twice as many fish, so furniture costs more fish.
- (B) treats a change in one industry as if it helped both.
- (C) gets the cost backwards: it is fish that became cheaper in terms of furniture.
- (D) describes a change of choice. Here the ability to produce has changed.
If you missed this: read “Shifts of the curve versus movements along it” and Worked example 2 in the Topic 1.3 study guide.
Question 4 (short answer · 1.3)
Paskara, a fictional economy, makes cement and medicine:
| Point | A | B | C | D | E |
|---|---|---|---|---|---|
| Cement (thousand tonnes per year) | 0 | 10 | 20 | 30 | 40 |
| Medicine (thousand doses per year) | 80 | 74 | 62 | 44 | 0 |
(a) Calculate the opportunity cost of 1 thousand tonnes of cement when Paskara moves from B to C. (b) Paskara produces 20 thousand tonnes of cement and 55 thousand doses. Is this efficient, inefficient or unattainable? What is the opportunity cost of moving to C? (c) Compare the medicine given up from A to B with that from C to D. What does this show about the PPC’s shape?
Answer and explanation
(a) Medicine given up = 74 − 62 = 12 thousand doses for 10 thousand tonnes of cement, so 12 ÷ 10 = 1.2 thousand doses per thousand tonnes.
(b) At 20 thousand tonnes, Paskara could make 62 thousand doses. It makes 55, so it is inside the curve: inefficient. Moving to C adds 7 thousand doses and gives up no cement: the opportunity cost is zero.
(c) A to B costs 6 thousand doses; C to D costs 18 thousand. The same extra cement costs more and more medicine: increasing opportunity cost, so the PPC is bowed outward.
A common slip in (a) is dividing the other way (10 ÷ 12 ≈ 0.83). That is the cost of medicine in cement.
If you missed this: read “Opportunity cost from a PPC” and “Why the curve bows outward” in the Topic 1.3 study guide.
Question 5 (multiple choice · 1.4)
Two fictional print shops each have one machine. The table shows the hours each needs to print one item.
| Shop | Hours per banner | Hours per poster |
|---|---|---|
| Zell | 4 | 1 |
| Yarrow | 6 | 3 |
Which statement is correct?
- (A) Zell has the absolute advantage in both goods and the comparative advantage in posters.
- (B) Zell has the comparative advantage in both goods, because it needs fewer hours for each.
- (C) Zell has the comparative advantage in banners, and Yarrow has it in posters.
- (D) Yarrow has the absolute advantage in banners, and Zell has it in posters.
Answer and explanation
Answer: (A). Fewer hours per item means Zell has the absolute advantage in both. With input data, 1 banner costs hours per banner ÷ hours per poster: Zell 4 posters, Yarrow 2 posters, so Yarrow has the comparative advantage in banners. A poster costs Zell 1/4 banner and Yarrow 1/2 banner, so Zell has it in posters.
- (B) confuses absolute with comparative advantage. When costs differ, no one has the comparative advantage in both goods.
- (C) comes from using the output rule on input data, which flips the costs.
- (D) Zell needs fewer hours per banner (4 against 6).
If you missed this: read “Output data and input data” in the Topic 1.4 study guide.
Question 6 (short answer · 1.4)
Pelagia and Trenmoor are fictional countries with equal resources. The table shows the most each can make per month using all its resources on one good. Both PPCs are straight lines.
| Country | Olive oil (thousand litres) | Blankets (thousands) |
|---|---|---|
| Pelagia | 100 | 25 |
| Trenmoor | 30 | 20 |
(a) Which country has the comparative advantage in blankets? Show the opportunity costs. (b) State the range of terms of trade, in litres of oil per blanket, at which both countries gain. (c) They trade at 1 blanket for 3 litres of oil. Show that each country gains on every blanket.
Answer and explanation
(a) 1 blanket costs Pelagia 100 ÷ 25 = 4 litres and Trenmoor 30 ÷ 20 = 1.5 litres. Trenmoor has the comparative advantage in blankets, even though Pelagia has the absolute advantage in both goods.
(b) More than 1.5 and fewer than 4 litres of oil per blanket.
(c) Trenmoor makes a blanket for 1.5 litres and sells it for 3: a gain of 1.5 litres. Pelagia would pay 4 litres to make one itself and pays 3: a saving of 1 litre.
If you missed this: read “Comparative advantage” and “Terms of trade” in the Topic 1.4 study guide.
Question 7 (multiple choice · 1.5)
Dario leaves a job paying $30,000 a year to open a bicycle repair workshop in a garage he owns. He could have rented the garage out for $6,000 a year. In the first year the workshop earns $70,000 of revenue, and he pays $40,000 for parts, tools and a helper. What is the net benefit for the year, counting all economic costs?
- (A) $30,000
- (B) $24,000
- (C) $0
- (D) −$6,000
Answer and explanation
Answer: (D). Total economic cost = $40,000 explicit + $30,000 salary given up + $6,000 rent given up = $76,000. Net benefit = 70,000 − 76,000 = −$6,000. He would do better keeping his job and renting out the garage.
- (A) subtracts only the explicit costs.
- (B) forgets the salary he gave up.
- (C) forgets that using his own garage gives up rent.
If you missed this: read “Explicit and implicit costs” in the Topic 1.5 study guide.
Question 8 (multiple choice · 1.6)
A courier firm earns $9 for each extra delivery in an afternoon. The marginal costs of the 1st to 5th deliveries are $4, $5, $7, $10 and $12. It has already paid a non-refundable $500 for its yearly van licence. How many deliveries should it make this afternoon?
- (A) 3
- (B) 4
- (C) 1
- (D) 0, because the $500 licence is more than one afternoon’s net benefit
Answer and explanation
Answer: (A). Deliveries 1 to 3 have MC below the $9 MB. The 4th has MC $10 > $9, so it would lower net benefit by $1. Net benefit for 1 to 5 deliveries is $5, $9, $11, $10 and $7.
- (B) Total revenue ($36) still exceeds total cost ($26) at 4, but a positive total is not enough: the 4th delivery itself loses $1.
- (C) picks the largest gap between MB and MC and throws away two worthwhile deliveries.
- (D) lets a sunk cost decide. The $500 does not change the MB or MC of any delivery.
If you missed this: read “Thinking at the margin” and “Sunk costs do not change the best quantity” in the Topic 1.6 study guide.
Question 9 (short answer · 1.6)
Ines has $14 a week for swimming sessions ($3 each) and music downloads ($1 each):
| Unit | 1st | 2nd | 3rd | 4th | 5th | 6th |
|---|---|---|---|---|---|---|
| MU of swims (utils) | 36 | 27 | 15 | 9 | – | – |
| MU of downloads (utils) | 14 | 12 | 9 | 7 | 5 | 4 |
(a) Find the utility-maximizing combination and show that it meets both conditions. (b) Her brother suggests 4 swims and 2 downloads, which also costs $14. Use MU per dollar to explain why this is worse.
Answer and explanation
(a) MU per dollar: swims 12, 9, 5, 3; downloads 14, 12, 9, 7, 5, 4. Buying in order of highest MU per dollar gives 3 swims and 5 downloads. Spending: 3 × $3 + 5 × $1 = $14. Last units: 15 ÷ 3 = 5 and 5 ÷ 1 = 5 utils per dollar, so the ratios are equal. Total utility = 78 + 47 = 125 utils.
(b) The 4th swim gives only 9 ÷ 3 = 3 utils per dollar, while a 3rd download would give 9. Moving money to downloads raises utility. Total utility is 87 + 26 = 113, which is 12 utils less.
If you missed this: read “Spending a budget on two goods” in the Topic 1.6 study guide.
Your next step
Count a short-answer question as wrong if any part was wrong. Then find your misses below.
| Topic | Question(s) | If you missed it, read |
|---|---|---|
| 1.1 Scarcity | 1 | Scarcity |
| 1.2 Resource Allocation and Economic Systems | 2 | Economic systems |
| 1.3 Production Possibilities Curve | 3, 4 | The PPC |
| 1.4 Comparative Advantage and Trade | 5, 6 | Comparative advantage |
| 1.5 Cost-Benefit Analysis | 7 | Cost-benefit analysis |
| 1.6 Marginal Analysis and Consumer Choice | 8, 9 | Marginal analysis |
How to use your result
- Start with the topics you missed. Read the sections named in the answer, then do that topic’s practice questions. One question is a small sample: treat a miss as a signal to check.
- Look for patterns. Questions 3 to 6 all rely on opportunity cost: if you missed two or more, revise Topic 1.3 before Topic 1.4. Questions 7 and 8 both ask which costs count: implicit costs do, sunk costs do not.
- All correct? Go on to the mixed unit review, whose longer questions combine topics.
- Retake it after a week of revision.