Applied Economics
Final Exam
Course Introduction
Applied Economics focuses on the practical application of economic theories and quantitative methods to real-world problems across various sectors, such as business, policy, healthcare, and the environment. This course equips students with skills to analyze data, evaluate economic models, and devise strategic solutions to contemporary issues. By integrating case studies, empirical research, and policy analysis, students learn to address challenges including market behavior, resource allocation, and economic forecasting, preparing them for decision-making roles in both public and private sectors.
Recommended Textbook
Exploring Economics 6th Edition by Robert L. Sexton
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28 Chapters
4557 Verified Questions
4557 Flashcards
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Page 2
Chapter 1: The Role and Method of Economics
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198 Verified Questions
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Sample Questions
Q1) In economic terms,religious and spiritual services are treated as:
A) goods that people desire.
B) resources or inputs.
C) marginal benefits.
D) priceless commodities.
Answer: A
Q2) Economists believe that individuals act as if they are motivated by self-interest and:
A) respond selfishly.
B) respond in predictable ways to changing circumstances.
C) it leads to inconsistent and unpredictable behavior.
D) all of the above.
Answer: B
Q3) Which of the following topics would be covered in microeconomics?
A) The effects of an increase in the supply of lumber on the homebuilding industry.
B) The unemployment rate.
C) The effects of interest rates on the overall economy.
D) The inflation rate.
Answer: A
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3
Chapter 2: Economics: Eight Powerful Ideas
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Sample Questions
Q1) The opportunity cost of an item is:
A) greater during periods of inflation and lower during periods of deflation.
B) the highest valued alternative you give up to get that item.
C) the value of all available alternatives you sacrifice to get that item.
D) always equal to the dollar value of the item.
Answer: B
Q2) Government price controls
A) strip the market of its meaning for both buyers and sellers.
B) often impose harm on the same people they are trying to assist.
C) sometimes force prices above or below what they would be in a market economy.
D) all of the above
Answer: D
Q3) An economy's resources:
A) consist of land, labor, capital, and entrepreneurial skills.
B) are unlimited in a country like the United States.
C) are always efficiently utilized in wealthy nations.
D) consist of land, labor, and entrepreneurial skills but not capital.
Answer: A
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4
Chapter 3: Scarcity, Trade-Offs, and Production Possibilities
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Sample Questions
Q1) The position of a country's production possibilities curve in the future will be affected by:
A) the rate of technological progress.
B) discoveries of supplies of natural resources.
C) the growth rate of productivity in the country.
D) all of the above.
Answer: D
Q2) Which of the following would be most likely to shift a country's production possibilities curve outward?
A) An improvement in the general level of literacy and education.
B) A sudden, substantial expansion of consumer wants.
C) A reduction in the country's labor force or population.
D) Shifting resources from investment to consumption goods production.
Answer: A
Q3) An improvement in technology will tend to cause a society's production possibilities curve to shift outward.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) Increasing government taxation or regulation of an industry generally increases the supply of goods.
A)True
B)False
Q2) An increase in which of the following would shift the supply curve for gasoline to the right?
A) demand for gasoline
B) price of gasoline
C) number of producers of gasoline
D) price of oil, an input into the production of gasoline
Q3) When the price of a good is lower than the equilibrium price, A) a surplus will exist.
B) buyers desire to purchase more than is produced.
C) sellers desire to produce and sell more than buyers wish to purchase.
D) quantity supplied exceeds quantity demanded.
Q4) Other things constant,a decrease in the price of fertilizer will:
A) increase the supply of wheat.
B) decrease the supply of wheat.
C) increase the demand for wheat.
D) decrease the demand for wheat.
6
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Chapter 5: Markets in Motion and Price Controls
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Sample Questions
Q1) If both market demand and supply increase simultaneously,then equilibrium quantity will (be)____ and equilibrium price will (be)____.
A) indeterminate; decrease
B) increase; increase
C) increase; indeterminate
D) decrease; decrease
Q2) Which of the following could not cause an increase in both the equilibrium price and quantity of a good exchanged?
A) Increased input prices.
B) Decreased incomes for an inferior good.
C) An increase in the price of a substitute good.
D) Increased tastes for the good.
Q3) Beach resorts raise their prices during the summer months and yet more people book rooms at those times.Is this a violation of the law of demand?
Q4) Which of the following is an example of an unintended consequence?
A) first time tax credits that cause more home sales
B) a price ceiling on gasoline that causes a gas shortage
C) increased parking fines that lead to fewer violators
D) all of the above
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Chapter 6: Elasticities
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Sample Questions
Q1) Assume an industry initially in equilibrium has a price floor imposed at a price above the equilibrium price.Total revenue received by the producers from sales will:
A) rise as a result.
B) rise as a result only if supply is elastic.
C) rise as a result only if demand is elastic.
D) rise as a result only if demand is inelastic.
Q2) If the demand curve for a product is horizontal,then the elasticity of demand is:
A) equal to zero.
B) equal to one.
C) greater than one, but less than infinity.
D) equal to infinity.
Q3) The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:
A) 0.5, indicating relatively elastic demand.
B) 0.5, indicating relatively inelastic demand.
C) 2.0, indicating relatively elastic demand.
D) 2.0, indicating relatively inelastic demand.
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Chapter 7: Market Efficiency and Welfare
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Sample Questions
Q1) Total welfare gains from trade to the economy can be measured by the sum of consumer and producer surplus.
A)True
B)False
Q2) Graphically,consumer surplus is measured by:
A) the area below the demand curve.
B) the area below the demand curve, but above the upward-sloping supply curve.
C) the area below the demand curve, but above the market price.
D) the area below the market demand curve, but above the supply curve.
Q3) If the government provides a subsidy in one industry and raises the tax revenue by taxing another industry,would,other things equal,cause welfare costs in both industries.
A)True
B)False
Q4) If the world supply of diamonds decreases,diamonds become more valuable,and therefore,the consumer surplus derived from diamonds increases.
A)True
B)False
Q5) How does the deadweight loss occur in a deficiency payment program?
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Page 9
Chapter 8: Market Failure
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Sample Questions
Q1) If the government imposes a pollution tax on gasoline refineries:
A) the supply of gasoline will shift to the right.
B) the demand for gasoline will shift to the right.
C) the supply of gasoline will shift to the left.
D) the demand for gasoline will shift to the left.
Q2) The failure of private incentives to provide adequate maintenance of public resources leads to the tragedy of the commons.
A)True
B)False
Q3) The tendency of those who are insured to take more risks is a problem of:
A) free riding.
B) moral hazard.
C) adverse selection.
D) positive externalities.
Q4) Differentiate between a public good and common resources.
Q5) The over hunting of U.S.buffalo that nearly caused their extinction would be an example of the tragedy of the commons.
A)True
B)False
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Chapter 9: Public Finance and Public Choice
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Sample Questions
Q1) What is the ability to pay principle? Does the U.S.federal income tax follow this principle or not? Explain your answer.
Q2) Exhibit 9-1 A flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages.Assume that the flat tax rate is 12%. Refer to Exhibit 9-1.How much income tax would you have to pay if you were earning $20,000 a year?
A) $2,400
B) $1,200
C) $3,000
D) zero
Q3) A flat tax plan with a standard deduction of $25,000 in income and a tax rate of 20% would require an individual earning $100,000 to pay $15,000 in income taxes.
A)True
B)False
Q4) Vertical equity is the concept that people with similar levels of income should be treated similarly.
A)True
B)False
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Chapter 10: Consumer Choice Theory
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Sample Questions
Q1) In consumer equilibrium:
A) the average utility from each dollar spent is the same.
B) total utility cannot be increased by reallocating spending among the goods consumed.
C) total utility obtained from the consumption of each product is at a maximum.
D) the marginal utility from the last unit of each good consumed is the same.
Q2) Which of the following is true?
A) A good for which the marginal utility of the last unit of a good consumed is greater will provide more total utility from consumption of the good.
B) If marginal utility is positive but diminishing, total utility increases with consumption of a good.
C) If marginal utility is diminishing, total utility must be diminishing.
D) Total utility is equal to the change in marginal utility from consuming an added unit of a product.
Q3) An individual's level of utility is based on fulfillment of needs as opposed to wants.
A)True
B)False
Q4) How does the law of demand reflect the law of diminishing marginal utility?
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Page 12
Chapter 11: The Firm: Production and Costs
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Sample Questions
Q1) An example of an implicit cost of production is:
A) the cost of leather used in manufacturing furniture.
B) the opportunity cost of space in your home that is used for a home office.
C) the wages paid to high school students that work in a fast-food restaurant.
D) none of the above.
Q2) Total cost equals total variable cost plus marginal cost.
A)True
B)False
Q3) Diseconomies of scale are most likely at very low levels of output.
A)True
B)False
Q4) Assume the following cost information about Fred's widget company: Its fixed cost is $27,and its total variable cost is $18 for 1 unit; $33 for 2; $45 for 3; $60 for 4; and $78 for 5.Given this information:
A) the marginal cost of providing the second unit is $15.
B) the total cost of producing 4 units is $87.
C) the average total cost of producing five units is $21.
D) all of the above are true.
Q5) If the marginal cost is less than average total cost,average total cost will decrease.
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Constant cost industries:
A) use large portions of the total supply of specialized resources.
B) significantly increase the demand for inputs when expanding output, and as a result, input prices rise.
C) do not use inputs in sufficient quantities that a change in industry output would affect the prices of the inputs.
D) are those in which the cost curves of individual firms shift upwards as industry output expands.
Q2) Perfect competition is the term used to describe:
A) an industry in which a few price-taking firms produce identical products.
B) an industry in which numerous price-taking firms produce identical products.
C) an industry in which firms are price takers and compete for market share by varying the qualitative characteristics of products.
D) an industry in which numerous firms are price makers and produce identical products.
Q3) In the short run,if a perfectly competitive firm produced at the quantity of productive efficiency,would it generate the highest profit level possible? Why or why not?
Q4) What are the characteristics of a perfectly competitive industry?
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Page 14
Chapter 13: Monopoly and Antitrust
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Sample Questions
Q1) Graphically,the marginal revenue curve of a monopolist:
A) lies below the demand curve of a monopolist.
B) is the same as the demand curve of a monopolist.
C) lies above the demand curve of a monopolist.
D) is the same as the marginal cost curve of a monopolist.
Q2) Average cost regulation of a natural monopoly:
A) generates economic losses for the seller.
B) necessitates a subsidy payment to the firm.
C) creates incentives that tend to shift ATC curves in an upward direction.
D) imposes a price that is less than marginal cost.
Q3) Which landmark legislation made it illegal to engage in predatory pricing and also prohibited mergers if it led to weakened competition?
A) Sherman Act
B) Robinson-Patman Act
C) Cellar-Kefauver Act
D) Clayton Act
Q4) A monopoly firm can sell as much output as it wants at whatever price it sets.
A)True
B)False
Q5) What conditions should be met to practice price discrimination in a market?
Page 15
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Chapter 14: Monopolistic Competition and Product
Differentiation
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Sample Questions
Q1) If a profit-maximizing monopolistic competitor earns positive economic profits in the short run:
A) demand will become increasingly inelastic as new firms enter.
B) the firm should increase its output as new firms enter.
C) there must be barriers to entry into the industry.
D) new firms will be attracted to the industry.
E) both b. and d. are correct.
Q2) A monopolistically competitive firm derives its ability to influence price from: A) the perfectly elastic demand curve it faces. B) barriers to entry.
C) its product, which is differentiated in some way from competing products. D) its position as the sole supplier in the market.
Q3) As new firms enter a monopolistically competitive market,profits of existing firms ____ and product diversity in the market ____.
A) decline; decreases B) rise; decreases C) rise; increases D) decline; increases
Q4) Why does inefficiency exist in monopolistic competition?
Q5) Define monopolistic competition.
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Chapter 15: Oligopoly and Strategic Behavior
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Sample Questions
Q1) Economists believe that oligopolists like American Airlines and the Kellogg Company:
A) make price and output decisions without regard to what their competitors might do.
B) have no perceptible influence on the market price, but choose output where marginal revenue equals the marginal cost of production.
C) carefully watch and anticipate the moves of their competitors.
D) have no control over market but produce output to the point where demand equal marginal cost.
Q2) Collusion among oligopolists would generally be easiest to achieve in which of the following situations?
A) very few producers, producing differentiated products.
B) very few producers, producing homogeneous products.
C) a larger number of producers, producing differentiated products.
D) a larger number of producers, producing homogeneous products.
Q3) Economists consider the breakfast food industry to be an oligopolistic market.
A)True
B)False
Q4) How do economies of scale result in barriers to entry into oligopoly models?
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Chapter 16: The Markets for Labor, Capital, and Land
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Sample Questions
Q1) The demand curve for capital is downward sloping because of the increasing marginal cost of capital.
A)True
B)False
Q2) The demand curve for loanable funds is downward sloping because:
A) people save more at higher interest rates.
B) more investments are profitable at low interest rates than at high interest rates. C) future income is more valuable now at higher interest rates than at lower interest rates.
D) usury laws increase the quantity of funds demanded at low interest rates but do not affect the quantity of funds demanded at high interest rates.
Q3) The relationship between the wage rate and the quantity of labor that workers wish to supply in total is called:
A) the market supply curve for labor.
B) the market demand curve for labor.
C) an individual demand curve for labor.
D) an individual supply curve for labor.
Q4) Discuss the factors behind the recent decline in labor union membership.
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Chapter 17: Income, Poverty, and Health Care
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Sample Questions
Q1) Which of the following changes would tend to increase measured income inequality?
A) An increasing proportion of retired people in the population.
B) An increase in the number of divorced people.
C) An increasing proportion of high income earning women marry high income earning men.
D) All of the above
Q2) Adverse selection problems in health insurance are reduced by all of the following except:
A) requiring physical exams.
B) requiring patients to pay higher deductibles.
C) insuring entire groups.
D) by limiting the period of open enrollment in health insurance plans.
Q3) How do insurance companies try to reduce: 1)the moral hazard problem; 2)the adverse selection problem?
Q4) Assume that the average salary for male professors at a university was $110,000 and the average salary for female professors at the same university was $95,000.Based on this information,can we conclude that this university engages in gender discrimination? Why or why not?
Q5) What are the problems associated with the sale of human organs?
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Chapter 18: Introduction to Macroeconomics:
Unemployment, Inflation, and Economic Fluctuations
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Sample Questions
Q1) In the nineteenth century,U.S.farmers were ordinarily debtors.Farmers typically borrowed from banks to develop new acreage and to be able to purchase necessary inputs prior to each growing season.Why did farmers generally support public policies that were inflationary?
Q2) In the typical CPI shopping basket,which of the categories below represents the largest percentage of consumer spending?
A) housing
B) food & beverages
C) transportation
D) medical care
Q3) The total labor force equals:
A) the number of officially employed persons.
B) the number of officially unemployed persons.
C) the number of officially employed plus unemployed persons.
D) the number of persons aged sixteen and over in the population.
Q4) Job losers typically account for ____ of the unemployed.
A) 80 to 90 percent
B) 50 to 60 percent
C) 30 to 40 percent
D) 10 to 20 percent
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Chapter 19: Measuring Economic Performance
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Sample Questions
Q1) The net national product (NNP)can be obtained from the GDP by:
A) subtracting depreciation.
B) subtracting net income of foreigners and depreciation.
C) including the net income of foreigners.
D) subtracting depreciation and indirect business taxes.
Q2) Under the expenditure approach to GDP accounting,government purchases of goods and services include welfare payments.
A)True
B)False
Q3) The dollar value of stocks and bonds traded in a given year:
A) is included in the calculation of GDP.
B) have no influence on GDP.
C) is included in the calculation of private investment.
D) is not included in GDP, but the broker commissions involved are included in GDP.
Q4) What is the importance of measuring per capita GDP?
Q5) The formula for calculating real GDP = (price index/nominal GDP)´ 100.
A)True
B)False
Q6) How do pollution and crime affect GDP?
Page 21
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Chapter 20: Economic Growth in the Global Economy
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Sample Questions
Q1) Which of the following did not result in economic growth?
A) Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California
B) Cyrus McCormack inventing a threshing machine for harvesting grains
C) After World War II, the U.S. instituting the GI bill, which provided education subsidies to soldiers being released from service duty
D) Many citizens emigrating from a nation when a politically repressive regime takes office
Q2) Which of the following was not one of Malthus assumptions?
A) stable prices
B) production with only two inputs - land and labor
C) a fixed supply of land
D) human desire to increase the population
Q3) When observing economic growth and literacy rates,it is clear that:
A) economic growth causes higher literacy rates.
B) economic growth may be a consequence of improved education.
C) improved levels of education may be the result of increasing economic growth.
D) all of the above are likely to be true.
Q4) According to Malthus,how do economic growth and population relate to each other?
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Chapter 21: Financial Markets, Saving, and Investment
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Sample Questions
Q1) A stock is an obligation issued by a corporation that promises the holder to receive fixed annual interest payments and payment of the principal upon maturity.
A)True
B)False
Q2) What is the present value of $1,000 to be received in two years if the current market interest rate is 8.0%?
A) $481
B) $556
C) $857
D) $926
Q3) Public saving equals:
A) TR - G - T
B) Y - C - T + TR
C) Y + C + T + TR
D) T - G - TR
Q4) In a closed economy,the formula for public saving is: S<sub>private</sub> = T + G + TR
A)True B)False
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Chapter 22: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Short-run aggregate supply:
A) is a fixed volume of output.
B) reflects how much RGDP suppliers are willing and able to produce at different price levels.
C) shifts only when the LRAS shifts.
D) is not affected at all by the price level.
Q2) Which of the following will cause consumption,and as a result,aggregate demand,to shift to the right?
A) an optimistic business forecast of future income growth
B) increased consumer wealth
C) an increase in consumer confidence
D) all of the above
Q3) The real wealth and the real interest rate effects are both causes of the downward slope of the aggregate demand curve.
A)True
B)False
Q4) Why do wage increases along with increases of other input prices impact the short-run aggregate supply but not the long-run aggregate supply,unless they reflect permanent reductions in the supply of those inputs?
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Chapter 23: The Aggregate Expenditure Model
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Sample Questions
Q1) Assume that autonomous expenditures in an economy decreased by $10 billion.What is the change in aggregate demand at a given price level if the MPC is 0.5?
A) increase by $50 billion
B) increase by $10 billion
C) decrease by $20 billion
D) decrease by $10 billion
Q2) Which of the following changes in disposable income would lead to the greatest increase in consumption?
A) a $20,000 increase in disposable income, if MPC equals 0.5
B) a $12,000 increase in disposable income, if MPC equals 0.75
C) a $15,000 increase in disposable income, if MPC equals 0.6
D) a $30,000 increase in disposable income, if MPC equals 0.25
Q3) Consumption expenditure tends to increase when consumers have higher levels of debt.
A)True
B)False
Q4) The expenditure multiplier applies only to changes in government spending.
A)True
B)False
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Chapter 25: Monetary Institutions
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Sample Questions
Q1) Exhibit 25-2 A bank's assets consist of $1,000,000 in total reserves,$2,100,000 in loans,and a building worth $1,200,000.Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital.
Refer to Exhibit 25-2.If the required reserve ratio is 10 percent,what is the level of the bank's excess reserves? How much could it loan out as a result?
A) $700,000; $700,000
B) $700,000; $7,000,000
C) $300,000; $300,000
D) $300,000; $3,000,000
Q2) Banks create money when they increase demand deposits through the process of creating loans.
A)True
B)False
Q3) Banks are considered a safer place to deposit money now than they were prior to 1933 because:
A) gold reserves have increased.
B) reserve requirements are higher.
C) they are more closely regulated.
D) the FDIC was created.
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Page 26
Chapter 26: The Federal Reserve System and Monetary Policy
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Sample Questions
Q1) Which of the following is a definition of velocity?
A) Velocity = value of final goods and services produced/money supply
B) Velocity = real GDP/M
C) Velocity = nominal GDP/real GDP
D) Velocity = (P ´ Q)/(M ´ V)
Q2) If the amount of money in circulation is $50 million and nominal GDP is $150 million,then the velocity of money is:
A) 0.33.
B) 2.
C) 3.
D) impossible to determine from the information provided.
Q3) The Fed's purchases and sales of government securities are called:
A) margin operations.
B) open market operations.
C) small-dealer transactions.
D) intermediary transactions.
Q4) If money supply increases,P will rise as long as V and Q remain constant.
A)True
B)False
Q5) Name four of the six primary functions of the central bank.
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Chapter 27: Issues in Macroeconomic Theory and Policy
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Sample Questions
Q1) Rational expectations theory would imply that the graphical relationship between unemployment and inflation indicated by the Phillips curve is ____ in the short-run.
A) vertical
B) positively sloped
C) negatively sloped
D) horizontal
Q2) When the economy is already at relatively high levels of employment,if policy makers try to further reduce the unemployment levels through expansionary policies,what will be the likely result?
Q3) If the actual unemployment rate is less than the natural rate of unemployment,there will be a tendency toward:
A) increased inflation and a leftward shift of the short-run Phillips curve.
B) decreased inflation and a rightward shift of the short-run Phillips curve.
C) increased inflation and a rightward shift of the short-run Phillips curve.
D) decreased inflation and a leftward shift of the short-run Phillips curve.
Q4) Why is indexing not commonly adopted in spite of the fact that it eliminates most of the wealth transfers associated with unexpected inflation?
Q5) What is the short-run Phillips curve and what observations does it make?
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Chapter 28: International Trade
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182 Verified Questions
182 Flashcards
Source URL: https://quizplus.com/quiz/53317
Sample Questions
Q1) If opening up international trade resulted in the U.S.importing ballpoint pens,what would tend to happen to the U.S.price of ballpoint pens?
A) The domestic price will fall.
B) The domestic price will rise.
C) The domestic price will remain constant.
D) It is impossible to predict the impact.
Q2) The United States is the world's leading grain-producing nation.Exporting grain causes the:
A) domestic consumption of grain to rise because of the added foreign demand.
B) price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand.
C) price of grain to domestic consumers to rise because of the added foreign demand.
D) standard of living of foreigners to fall because of the lost purchasing power.
Q3) Import quotas contribute to higher prices of products imported into the U.S.,but tariffs do not.
A)True
B)False
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Chapter 29: International Finance
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138 Verified Questions
138 Flashcards
Source URL: https://quizplus.com/quiz/53318
Sample Questions
Q1) A country would tend to experience currency depreciation relative to other countries if:
A) the profitability of investments in other countries increases relative to that country. B) people in the foreign currency markets expect the value of the currency to fall in the near future.
C) the foreign demand for its exports decreases.
D) any of the above occurs.
Q2) In foreign exchange markets,the demand for dollars is determined:
A) solely by the level of U.S. merchandise exports.
B) solely by the level of U.S. merchandise imports.
C) by the level of U.S. imports and the demand for foreign assets by U.S. citizens and the U.S. government.
D) by the level of U.S. exports and the demand for U.S. assets by foreigners.
Q3) An exchange rate is the price of one currency in terms of a second currency.
A)True
B)False
Q4) The current exchange rate system is effectively a dirty float system.
A)True
B)False
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