Muhammad Abubakar BashirAS ECONOMICS
Sec 1. The Basic Economic Ideas
1.5 Production Possibility Curve
Section 1: MCQ’S
1. An economy produces combinations of computers and food as shown
on the diagram of a production possibility curve (PPC).
If all available resources were used, which two points on the PRC
diagram show the maximum combinations of
computers and food that the economy can produce?
A. W and X
B. X and Y
C. Y and Z
D. Z and W
2. A production possibility curve shows the combinations of outputs an
economy can produce using all available resources.
At which points on the diagram are all available resources used?
A. W and X only
B. W, X and Z only
C. W, X, Y and Z
D. Z and Y only
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3. The diagram shows an economy's production possibility curve.
It has been employing its resources in the ratio of 80% consumer goods production
and 20% capital goods production.
What will be the result if it decides to double its output of capital goods?
A. a gain of 20 capital goods
B. a gain of 40 capital goods
C. a loss of 200 consumer goods
D. a loss of 600 consumer goods
4. An economy is operating at a point inside its production possibility curve.
Why is this described as inefficient?
A. Individuals are enjoying too much leisure.
B. More of one good can be produced without decreasing production of another.
C. The combination of labour and capital is wrong.
D. There are shortages of some goods and an excess supply of others.
5. An economist knows the current point at which an economy is operating within
its production possibility curve. What can the economist judge from this knowledge
about the economy?
A. its degree of self-sufficiency
B. Bits international competitiveness
C. its level of output of two goods
D. its rate of economic growth
6. What does a production possibility curve show?
A. the maximum output that can be produced by a firm in a year
B. The maximum output that can be produced per worker per year in the
economy
C. the maximum output that could be exported from a country
D. the maximum output of two or more goods in an economy from a given
amount of inputs
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7. Which labels might be used on a production possibility curve diagram?
Y(vertical) axis X(horizontal)axis
A capital input labour input
B cost of production quantity produced
C output of rice labour input
D output of rice output of sugar
8. The diagram shows a production possibility curve (PPC). It indicates the
combinations of consumer goods and capital goods produced by an economy using
all its available resources.
What does position X indicate?
A. a lower ratio of capital to consumer goods is necessary to achieve economic
growth
B. increasing levels of unemployment
C. insufficient factors of production are available
D. too many consumer goods are causing a fall in economic growth
9. A country can produce manufactured goods and agricultural products as shown in
the diagram.
Given this information, which statement is definitely correct?
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A. If the country produces at Q it has unused or inefficiently used resources
B. The country should produce at T instead of at Q.
C. The country would be better off producing at R than S.
D. The monetary costs are the same to produce at V as they are producing at R.
10. The diagram shows a production possibility curve.
What can be deduced from the shape of this curve?
A. decreasing marginal returns to consumption
B. decreasing opportunity costs of consumption
C. increasing opportunity costs of production
D. increasing returns to scale
11. The diagram shows the production possibility curve of a desert island economy
where the inhabitants produce just two commodities, coconuts and fish.
What explains the shape of the production possibility curve?
A. Coconuts and fish are perfect complements.
B. Coconuts and fish are perfect substitutes.
C. The inhabitants consume more fish than coconuts.
D. The opportunity cost of increasing fish production is constant.
12. The diagram shows a production possibility curve for an economy that produces
capital goods and consumer goods.
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Why is the production possibility curve drawn concave to the origin?'
A. Capital goods are a more labour intensive output than consumer goods.
B. Consumers always seek to maximize their satisfaction from consumption.
C. Profit maximization for firms always ensures efficiency in production.
D. Some resources are more efficient in production of some goods than others.
13. The diagram shows the production possibility curves of two economies, X and Y.
Which statement about the two economies is correct?
A. Both economies always have the identical opportunity costs.
B. Both economies have the same future growth prospects.
C. The opportunity costs are constant in both economies.
D. The two economies can never produce the same combination of products.
14. The diagram shows the production possibility curve of a desert island economy
where the inhabitants live off
just two commodities, coconuts and fish.
What explains the shape of the production possibility curve
A. Coconuts and fish are in joint demand.
B. Coconuts and fish are perfect substitutes when consumed
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C. Fishing and coconut growing are equally efficient.
D. The opportunity cost of fish falls as more time is devoted to fishing
15. Some people are shipwrecked on a tropical island and allocate their time
between gathering coconuts and fishing. Each individual is equally productive in
collecting coconuts or catching fish.
Which diagram represents the production possibility curve of this community?
16. The diagram shows the production possibility curve of an economy.
Which statement explains the shape of this curve?
A. More efficient workers are drawn away from the production of consumer
goods.
B. Resources cannot be switched between producing capital and consumer
goods
C. The economy is more efficient at producing capital than consumer goods.
D. The opportunity cost of producing capital goods increases the more capital
goods are made
17. The diagram shows an economy's production possibility curve.
Why does the curve slope downwards?
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A. Agriculture and industry are subject to diminishing returns to scale.
B. Agriculture and industry are subject to increasing returns to scale.
C. consumers are indifferent between industrial and agricultural output.
D. Resources available are limited.
18. A farmer with a fixed area of land grows two crops, wheat and barley. Some
land used for barley is flooded and
cannot be used. The farmer then starts to plant genetically modified (GM) what that
produces wheat more
efficiently on the land that is not flooded.
Which diagram shows the most likely effect of these changes on the farmer's
production possibility curve (PPC)
as it moves from XX to YY?
19. Line XX is the production possibility curve (PPC)of a worker picking peas and
beans in a 10-hour working day.
what could cause the worker's PPC to shift to the line YY?
A. a decrease in working hours to 8 per day and a machine that increases the
worker's pea picking productivity
B. A machine that increases the worker’s pea picking productivity only
C. a new work schedule where the worker spends 6 hours per day picking peas
and only 4 hours picking beans
D. a reduction in working hours to 8 per day only
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20. In the diagram JK is the Initial production possibility curve for an economy
producing computers and cars
What could cause the curve to shift to JL?
A. a fall in output per worker in the car industry
B. a fall in the level of competition in the car industry
C. a rise the potential workforce of the economy
D. a rise in the price of cars
21. In the diagram the original production possibility curve is LM.
What could cause the curve to shift to NP?
A. a fall in the working population
B. a reallocation of resources from consumer goods to capital goods
C. an increase in output per worker
D. an increase in unemployment
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22. A production possibility curve for a country is shown
What would cause the shift from PP to P, P?
A. application of more machinery used in manufacturing
B. productivity decreases
C. scientific methods applied to farming
D. switch from production of consumer goods to capital good
23. What would be a determinant of a country’s production possibility curve
boundary?
A. the capital invested in infrastructure
B. the level of price and wage inflation
C. the level of unemployed labour
D. the volume of imports and exports
24. Economy X uses the resources in the labour intensive production of wheat and
wooden furniture as shown by the production possibility curve FW
with the help of new strains of wheat seeds, X increased yields and shifted to a new
production possibility
Which diagram depicts this change?
curve.
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25. Line XX is the production possibility curve (PPC) of a Yorker picking peas and
beans in a 10-hour working day
What would cause the worker's PPC to shift to the line YY?
A. a machine that increases the worker's pea picking productivity only
B. a new work schedule where the worker spends 8 hours per day picking peas
only 4 hours picking beans
C. a reduction in working hours to B per day and a machine that increases the
Worker's pea picking productivity
D. a reduction in working hours to 8 per day only
26. An increase in a country's consumer price index implies an increase in
What could cause the curve to shift to XZ?
A. a fall in productivity in manufacturing
B. a fall in the price of manufactured goods
C. a higher demand for manufactured goods
D. an improvement in manufacturing technology
27. The curve PP in the diagram is the production possibility curve for a country
producing goods X and Y. Th
production of Xis more labour-intensive than the production of Y.
The working hours of the labour force are reduced by law.
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Which curve could be the country's new production possibility curve?
A. TT
B. SS
C. QQ
D. RR
28. A country's production possibility curve moves from XX to YY as shown in the
diagram
What can be concluded from the diagram?
A. a rise in technological progress
B. a rise in the retirement age
C. An Increase in investment
D. An increase in net emigration
29. A production possibility curve shows labour-intensive farming output and
capital-intensive manufacturing output.
What would not cause a shift in this curve?
A. a reduction in sales tax on manufactured products
B. better training of workers in the manufacturing sector of the economy
C. improvements in the productivity of agricultural machinery
D. the reclamation of land to be used for both agriculture and manufacturing
30. The diagram illustrates the production possibility curve of an economy in Year 1
(x1 Y1) and in Year 2(X2 Y2).
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What can be concluded from the diagram?
A. The cost of production was higher in Year 2 than in Year 1.
B. The full employment level of output was higher in Year 2 than in Year 1.
C. The opportunity cost of production was higher in Year 2 than in Year 1.
D. Unemployment was higher in Year 2 than in Year 1.
31. The diagram shows a country's production possibility curve.
What could allow the economy to move from M to N?
A. an increase in consumer spending
B. an increase in demand for exports
C. an increase in government spending on pensions
D. an increase in investment
32. The diagram shows the production possibility curve (PPC) of an economy that
produces goods and services.
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What might cause the shift of the PPC from XY, to XY2?
A. a decrease in the demand for services
B. a decrease in the efficiency in the production of services
C. a decrease in the opportunity cost of producing services
D. a decrease in the resources employed in services
33. The diagram illustrates the production possibility curves for an economy in Year
1 (X1, Y1) and Year 2 (X2, Y2).
What can be deduced from the diagram?
A. a decrease in the demand for services
B. a decrease in the efficiency in the production of services
C. a decrease in the opportunity cost of producing services
D. a decrease in the resources employed in services
34. A country's production possibility curve moves from XX to YY as shown in the
diagram.
What could have caused this movement?’
A. a rise in the retirement age
B. an increase in investment
C. An increase in net emigration
D. A rise in technological progress
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35. The diagram shows shifts in an economy's production possibility curve.
Which change could have come about as a result of an improvement in technology?
A. S to Y
B. T to S
C. W to T
D. W to Y
36. The diagram shows a production possibility curve for a farmer. The original
position is X.
If the farmer switches some of his land from producing pears to producing apples,
which point represents his new position?
37. Farmers using traditional methods lack access to finance and often employ
family members on a part-time basis.
If working practices in agriculture could be improved, how would this be likely to be
shown on the production possibility curve?
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A. by a movement from R to T
B. By a movement from S to R
C. by a movement from S to T
D. by a movement from T to R
38. The diagram shows a production possibility curve for an economy.
What might cause the movement from X to Y?
A. more efficient use of resources
B. an increased emphasis on international trade
C. growth in the productive capacity of the economy
D. new innovations and technology
39. The change from WX to YZ in a country's production possibility curve is shown.
What could have caused this shift?
A. an increase in employment among the existing labour force
B. Ban increase in the rate of interest
C. the closing of an inefficient factory
D. the discovery of a new resource
40. In the diagram, GH is an economy's initial production possibility curve.
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What could cause the curve to shift to JK?
A. a decrease in net exports
B. an increase in the average price level
C. an increase in the unemployment rate
D. net outward migration
41. The diagram shows a production possibility curve for an economy.
Assuming that the production possibility curve remains unchanged, what is the most
likely reason for the movement from point X to point Y?
A. a civil war causing a widespread loss of resources
B. a permanent fall in productivity in both capital and consumer goods
C. the exhaustion of a natural resource
D. the rise in unemployment due to a recession
42. The curve JK in the diagram is an economy's production possibility curve.
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What could cause the economy to move from point M to point N?
A. a decrease in the dependency ratio
B. a decrease in the population of working age
C. an increase in the participation rate
D. an increase in the unemployment rate
43. A country was at point P on its production possibility curve. Following the threat
of invasion, it prepared for war. The war then reduced the country's infrastructure.
What are the most likely changes on the production possibility curve diagram that
are consistent with these events?
A. P to Q followed by Q to R
B. P to Q followed by Q to S
C. P to R followed by R to Q
D. P to R followed by R to S
44. A country is producing electrical goods and medicines at full capacity. An
innovation is developed that enables the country to produce a new medicine which
becomes in great demand.
How would this be represented by its production possibility curves?
A. as a movement from W to X
B. as a movement from X to Y
C. as a movement from X to Z
D. as a movement from Y to X
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45. In the diagram the original production possibility curve is LM.
What might cause the curve to shift to NP?
A. technological progress
B. unemployment of resources
C. the depletion of natural resources
D. a reallocation of resources
46. In the diagram, JK is an economy's production possibility curve.
What could cause the curve to shift to GH?
A. a decrease in innovation
B. an increase in the retirement age
C. an increase in the price of energy
D. an increase in the unemployment rate
47. In the diagram, the curve JK is a country's production possibility curve.
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What could cause the curve to shift to LM?
A. a decrease in the participation rate
B. a decrease in the unemployment rate
C. an increase in the dependency ratio
D. an increase in the population of working age
48. The diagram shows a production possibility curve for an economy.
Assuming that the production possibility curve remains unchanged, what is the most
likely reason for the movement from point X to point Y?
A. a civil war causing a widespread loss of resources
B. a permanent fall in productivity in both capital and consumer goods
C. a rise in unemployment due to a recession
D. the exhaustion of a natural resource
49. The diagram shows an economy's production possibility curve.
What will cause a movement from point X on the production possibility curve to
point Y within the curve?
A. an increase in unemployment.
B. a fall in the size of the labour force.
C. a reduction in the availability of land for industrial production.
D. an improvement in technology in consumer goods production
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50. The diagram shows a production possibility curve for an economy that is
producing at point P.
Which quantity of X is given YP to produce the quantity of Y shown?
A. 40
B. 50
C. 100
D. 110
51. The production possibility curves (PPCs) show the abilities of four economies to
produce wheat and rice. Which PPC has the lowest opportunity cost for producing
wheat?
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52. YX is an economy's production possibility curve (PPC).
The equation of the curve is qi = 1000-2qx.
What is the opportunity cost of producing one extra unit of good X?
A. 1\2 unit of good y
B. 2 units of good y
C. 500 units of good y
D. 1000 units of good y
53. A farmer picks 10 kg of strawberries in each hour. The farmer is twice as
productive at picking raspberries. Which diagram shows the farmer's daily
production possibility curve when working 8 hours a day?
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54. XY is the production possibility curve (PPC) of a firm that produces desks and
chairs.
What are the opportunity costs of the 4th and 5th desks produced by the firm?
opportunity cost
opportunity cost of 5th desk
of 4th desk
A 1 chair 3 chairs
B 2 chairs 5 chairs
C 3 chairs 0 chairs
D 4 chairs 5 chairs
55. The diagram shows a production possibility curve for an economy
which produces only two goods, X and Y.
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The economy produces 400 of good Y and produces on its production
possibility curve. Which quantity of good X is given up?
A. 600
B. 800
C. 1200
D. 1600
56. An economy can produce only two goods at any one time. These are
good X and one other good from A, B, C or D. The table shows the
outputs of goods A, B, C and D with each output of good X when the
economy's resources are fully employed.
Which good must be produced with good X to show a production
possibility curve with increasing costs?
Units
X 0 100 200 300 400
A 0 20 40 60 80
B 110 70 40 20 0
C 120 90 60 30 0
D 140 120 90 50 0
57. The production possibility curve for an economy producing capital
and consumer goods is represented by the line PQ.
What is the opportunity cost of producing OS of consumer goods?
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A. OR of capital goods
B. PR of capital goods
C. SQ of consumer goods
D. SQ of consumer goods+PR of capital goods
58. The diagram shows a production possibility curve for an economy
that is producing at point P.
Which quantity of Y is given up to produce the quantity of X shown?
A. 40
B. 50
C. 100
D. 110
59. The diagram shows different production possibilities for a bakery.
They wish to increase production of cakes from 15 units to 25 units.
What is the opportunity cost?
A. 10 units of cake
B. 15 units of cake
C. 20 units of bread
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D. 50 units of bread
60. The diagram shows two production possibility curves (EF and GH),
before and after technological progress has taken place.
A. MH
B. OH
C. OM
D. YF
61. R, S, R :S2.R.S, and R & Sa are production possibility curves (PPC)
for four different countries 1.2,3 and 4.
Which statement about the opportunity cost of good R in terms of good S
is not correct?
A. It is greater at all points on R, S, than on R3S3.
B. It is greater in country 3 than country 2.
C. It is lower in country 2 than country 1.
D. It is the same at each point on R3S3
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62. The diagram shows that the production possibility frontier of maize
and beans has changed from PPF, to PPF2.
What has happened to the opportunity cost of maize and the returns to
factors producing beans?
opportunity cost returns to factors producing
of maize beans
A fallen Fallen
B fallen Risen
C risen Fallen
D risen Risen
63. The diagrams show the change in a country's production possibility
curve between Year 1 and Year 2.
What can be concluded from the diagrams?
A. Future growth prospects have been harmed.
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B. The level of unemployment has fallen.
C. The opportunity cost of consumer goods has risen.
D. The proportionate growth in production is greater in consumer
goods.
64. The diagram shows the change in a country's production possibility
curve from PQ to PR.
What increases as a result of the change from PQ to PR?
A. the price of private goods
B. the price of public goods
C. the opportunity cost of private goods
D. the opportunity cost of public goods
65. The diagrams show an economy's production possibility curve before
and after a change has occurred.
What would this change indicate about opportunity cost and the
production possibility curve?
production possibility
opportunity cost
curve
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switched from constant to
A involved some increase
increasing
switched from decreasing to
B involved some decrease
constant
switched from decreasing to
C involved some increase
increasing
switched from increasing to
D involved some decrease
constant
66. The diagram shows the change in an economy's production possibility
curve as it grows in the long run. Which movement from point X is most
likely to show the highest potential for growth?
67. The diagram shows the production possibility curve XX of an
economy that produces both consumer goods and capital goods.
If the economy moves from point M to point N, which diagram represents
the most likely position of the production possibility curve YY in the
future?
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Key
Q Ans. Reference
1 A MJ 22/P12/Q3
2 A MAR 22/P12/Q1
3 C O/N 20/P11/Q1
4 B O/N 20/P13/Q1
5 C M/J 20/P13/Q1
6 D O/N 19/P11/Q2
7 B O/N 19/P12/Q2
8 C M/J 19/P11/Q4
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9 A M/J 18/P11/Q4
10 C O/N 20/P12/Q1
11 D MAR 20/P12/Q1
12 D MAR 18/P12/Q3
13 C MIJ 16/P11/Q3, MIJ 11/P121Q30, M/J 11/P11/Q1, MIJ 11/P13/Q29
14 C MIJ 15/P12/Q3, OIN 12/P11/Q2
15 A MIJ 15/P11/Q2, OIN 07/P1/Q1
16 D OIN 10IP12/Q3, OIN 10IP11/Q3, O/IN 10/P13/Q2
17 D . OIN 02/P1/Q1
18 C MIJ 221P14IQ2
19 A OIN 21/P12/Q1
20 A OIN 21/P13/Q1
21 A OIN 19/P13/Q4
22 B MIJ 19/P121Q1
23 A MIJ 19/P121Q3
24 C OIN 17/P121Q3
25 C M/J 17/P12/Q3
26 D OIN 16/P11/Q3
27 B MIJ 16/P13/Q3, OIN 11/P121Q2
28 D O/N 15/P13/Q1
29 A MIJ 16/P11/Q4
30 B M/J 14IP11/Q3
31 C OIN 13/P11/Q2, O/N 05/P1/Q2
32 B M/J 13/P11/Q1
33 B O/N 09/P12/Q1, M/J 05/P1/Q3
34 C M/J 08/P1/Q1
35 A O/N 03/P1/Q2
36 B MAR 19/P12/Q3
37 D O/N 17/P11/Q3
38 A O/N 16/P13/Q3
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39 D M/J 16/P12/Q3
40 D O/N 15/P11/Q3
41 D MIJ 15/P13/Q4
42 D O/N 14/P11/Q2
43 B MIJ 14/P12/Q2
44 C M/J 14/P13/Q3
45 C O/N 12/P12/Q2, M/J 06/P1/Q2, M/J 03/P1/Q2
46 C M/J 12/P11/Q2, M/J 12/P13/Q2
47 D M/J 12/P13/Q2
48 C O/N 11/P11/Q1, O/N 11/P13/Q29
49 A M/J 02/P1/Q1
50 B M/J 22/P11/Q1
51 B MAR 22/P12/Q4
52 B M/J 18/P12/Q2
53 B MIJ 18/P12/Q3
54 A M/J 18/P13/Q1
55 B OIN 16/P12/Q1, M/J 13/P13/Q2, M/J 07/P1/Q1, M/J 04/P1/Q2
56 D O/N 16/P12/Q4
57 B O/N 16/P11/Q2, O/N 12/P13/Q2, O/N 08/P1/Q2
58 A M/J 17/P13/Q3, MAR 17/12
59 C M/J 16/P13/Q1
60 A M/J 12/P13/Q2
61 A O/N 17/P13/Q3
62 D M/J 17/P11/Q3
63 C O/N 15/P12/Q3
64 D M/J 15/P13/Q3
65 D O/N 14/P13/Q2
66 C O/N 15/P12/Q2
67 B O/N 14/P12/Q3
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