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Econ 1 SAT/MCT

Econ 1 SAT/MCT. 2 SAT/MCT – one in S1, one in S2 S1: 10 November 2005 (lecture hour) Start 5 minutes past sharp, finish 10 minutes to 45 minutes Students may leave only after all papers have been collected by invigilators Each SAT/MCT accounts for 20% of coursework marks available Format:

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Econ 1 SAT/MCT

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  1. Econ 1 SAT/MCT • 2 SAT/MCT – one in S1, one in S2 • S1: 10 November 2005 (lecture hour) • Start 5 minutes past sharp, finish 10 minutes to • 45 minutes • Students may leave only after all papers have been collected by invigilators • Each SAT/MCT accounts for 20% of coursework marks available • Format: • Q1: 10 multiple choice questions (50%) • Q2 and Q3: SAT (25% each)

  2. Timing • Test: 45 minutes • Split your time according to weight attached to questions • E.g. • 5 minutes settling down time (e.g. read over paper, decide order you want to answer in) • 20 minutes MCT • 10 minutes each SAT

  3. Format of questions • Multiple choice – see Mankiw quizzes • Short answer • How to answer: today’s session • Sample questions: first Econ 101 newsletter (to be distributed in tutorials, week 5)

  4. Short answer questions • Short answers • Not an essay • Answering essay exam questions – 24th Nov • No need for introduction and conclusion • 1 side 1 page • (depending on size of writing/diagrams) • Depending on question • 1 diagram, bullet points • 2 paragraphs

  5. Answering a short answer question (Example 1) • Read the question carefully • E.g. ‘Explain the adjustment to a new equilibrium in the electricity distribution market if a tax is introduce on energy use in ALL production activities’ • Tax on supply or demand as in today’s lecture? • No! Tax on input to production (Lec 6, slide 4) • If the question said ‘a tax is introduced on every unit of electricity sold’ or ‘…on every unit of electricity purchased’, we would be looking at a tax on supply or demand of electricity

  6. Answering a short answer question (Example 1, cont…) • First you need a properly and clearly labelled supply and demand diagram • Then bullet points addressing the 5 stages of adjustment • Initial equilibrium where S1=D1 with P1 and Q1 • A determinant of supply has changed (increase in input costs due to tax on input use). The supply curve shifts back from S1 to S2 • At the initial market price, P1, there is excess demand: demand in unchanged at Q1, but at P1, suppliers are only willing to supply Q1S • (a) In response to the excess demand/supply shortage, price will start to rise and consumers move back up their demand curve, D1. (b) However, as price rises, suppliers will be willing to supply more and will move up their new supply curve, S2 • Price will rise until a new equilibrium is reached where S2=D1, with a higher price, P2, and lower output, Q2.

  7. Answering a short answer question (Example 2) • Not all questions will require a diagram • For example, defining public goods vs common resources – topic yet to be studied • Another example, would be trade and comparative advantage • ‘Karen and Grant teach a class together. In one day Karen can mark 30 exam papers or write 3 lab worksheets. Grant can mark 15 exam papers or write 3 lab sheets. Who should mark exam papers and who should write lab sheets in order to minimise the amount of time taken to mark all papers and write all the lab sheets for this class?’

  8. Answering a short answer question (Example 2, cont…) • From the information given, you could talk about • Absolute advantage • Comparative advantage • Prices • In an essay answer you may want to discuss all three • Note that here that neither Karen nor Grant has absolute advantage in one of the activities, writing lab worksheets • You would also want clear and extended definition of terms and full explanation of why comparative advantage is the basis for trade • But still focussing on the question asked (the question would be more detailed, in two parts, for an essay exam)

  9. Answering a short answer question (Example 2, cont…) • Here you are given information on Karen and Grant’s productivity and asked who should do each activity • So answer as follows • Input, time, will be minimised (output will be maximised) if each person specialises in the activity where their opportunity cost is the lowest • Here, if Karen marks one exam paper, the opportunity cost is 1/10 of a worksheet, if she writes a worksheet the opportunity cost is 10 exam papers • If Grant marks one exam paper, the opportunity cost is 1/5 of a worksheet, if he writes a worksheet the opportunity cost is 5 exam papers • (Alternatively, you may want to construct a table showing this information)

  10. Answering a short answer question (Example 2, cont…) • From this we can see that for marking exams, Karen has the lowest opportunity cost (1/10 worksheet vs 1/5 for Grant) • For writing worksheets, Grant has the lowest opportunity cost (5 exam papers vs 10 for Karen) • Therefore, Karen should mark exams and Grant should write lab worksheets • Note that we do not know what the total number of exam papers to be marked is, or the total number of worksheets to be written • We would need this information to know if Karen and/or Grant can completely specialise in the activities where their opportunity cost is lowest in order to minimise total time taken. If there is a limit on the extent that trade allows specialisation, absolute advantage (productivity) will be important.

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