Applied Economics
Mock Exam
Course Introduction
Applied Economics focuses on the practical application of economic theories and principles to real-world problems and policy issues. The course explores how economic tools are used to analyze and address topics such as market structures, government interventions, labor markets, public policy, health, education, and environmental economics. Students develop quantitative and analytical skills to interpret economic data, evaluate empirical research, and craft evidence-based recommendations for business, government, and non-profit organizations. Through case studies and applied projects, the course emphasizes the translation of abstract economic concepts into concrete solutions for societal and organizational challenges.
Recommended Textbook Economics and Contemporary Issues 8th Edition by Ronald Moomaw
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18 Chapters
1602 Verified Questions
1602 Flashcards
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Page 2
Chapter 1: Economic Growth: an Introduction to Scarcity and Choice
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Sample Questions
Q1) The management department's secretary has just gotten a new computer that allows him to do reports in less time. This is an example of:
A) efficiency progress.
B) efficiency change.
C) efficiency improvement.
D) efficiency growth.
Answer: C
Q2) Since 1973, the growth rate of per capita GDP in the U.S. has been lower than it was in previous periods.
A)True
B)False
Answer: True
Q3) The increase in the growth rate of capital intensity in the 1990s was due in large part to:
A) a rapid growth in the labor supply.
B) a slower growth in the labor supply.
C) a rapid growth in agricultural technology capital.
D) a rapid growth in use of information technology capital.
Answer: D
Page 3
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Chapter 2: An Introduction to Economic Systems and the Workings
of the Price System
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Sample Questions
Q1) In a market economy, prices:
A) inform.
B) motivate.
C) ration.
D) all of the above.
Answer: D
Q2) Which statement is true?
A) Lawlessness in the American Old West and in Modern Russia is based on the same set of social and economic conditions.
B) The criminal activity in Modern Russia resembles the gang activity that developed in the United States during Prohibition.
C) Gang activity, such as in Russia, is an early stage of capitalism.
D) All of the above statements are true.
Answer: B
Q3) Demand and supply framework explains prices are formed in a command economy. A)True
B)False
Answer: False
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Chapter 3: Competitive Markets and Government Policy: Agriculture
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Sample Questions
Q1) Refer to Diagram 4-3. If supply is given by S what is the total revenue?
A) $40,000.
B) $30,000.
C) $15,000.
D) $7,000.
Answer: C
Q2) A decrease in the price of tractors would likely:
A) cause the supply curve for agricultural products to shift to the right.
B) cause a movement upward along the supply curve for agricultural products.
C) cause the supply curve for agricultural products to shift to the left.
D) cause a movement downward along the supply curve for agricultural products. Answer: A
Q3) Suppose the price of Toyotas increases. This will result in:
A) a decrease in the demand for Fords.
B) an increase in the demand for Ford.
C) an increase in the quantity of Fords demanded.
D) an increase in the quantity of Toyotas demanded.
Answer: B
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Chapter 4: Efficiency in Resource Allocation:
We Have How Much Do We Want
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Sample Questions
Q1) Refer to Diagram 4-2. In the above diagram, the efficient price and quantity will be
A) Q and P
B) Q and P
C) Q and P<sub>3</sub>
D) Q and P
Q2) Which of the following is NOT an example of government failure?
A) Public goods.
B) Rent controls.
C) Agricultural price support.
D) Taxes.
Q3) Refer to Diagram 4-1. If production of compact discs is currently represented by quantity Q . The total cost of this production is given by area:
A) 0AFJ.
B) 0BFJ.
C) 0AGI.
D) 0BCI.
Q4) Minimum wage laws give rise to unemployment.
A)True
B)False
6
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Chapter 5: Market Power: Does It Help or Hurt the Economy
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Sample Questions
Q1) Suppose a monopolist is currently producing at a point where marginal revenue is $25 and marginal cost is $18. This monopolist should:
A) decrease output in order to increase profits.
B) increase output in order to increase profits.
C) advertise more to encourage consumers to buy more of the product.
D) cease production to cut its losses.
Q2) Economists argue that government should not pass policies that would impede economic rent seeking.
A)True
B)False
Q3) Cartels are defined as:
A) a single seller of a product.
B) oil producers and exporters.
C) an organized group of firms that acts like a monopoly.
D) a large group of firms that exerts little influence in the market.
Q4) A monopoly is an industry with only one seller of a good that has many close substitutes.
A)True
B)False
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Chapter 6: Air Pollution: Balancing Benefits and Costs
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Sample Questions
Q1) Suppose that at current production levels, A Major Corporation's marginal cost is $15, its marginal external cost is $5, and the marginal social benefit of production is $25. In this case, the corporation:
A) is imposing too much harm on the environment and should cut back production.
B) is producing the efficient amount.
C) is producing an amount less than the efficient amount.
D) could make society better off by decreasing production.
Q2) Suppose two firms have different marginal costs of emission control. Would a governmental policy that allotted marketable pollution permits be more cost effective than a governmental policy that required all firms to reduce emissions by the same amount?
Q3) If the market is producing where marginal social cost exceeds marginal social benefit, there will be a net loss to society.
A)True
B)False
Q4) Emissions taxes help to achieve the efficient level of production by forcing firms to bear the cost of pollution.
A)True
B)False
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Chapter 7: Health Care: How Much for Whom
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Sample Questions
Q1) Suppose Paul's employer pays a health insurance premium of $2555 per year. Paul's marginal tax rate is 30 percent. What is the policy worth to Paul?
A) $766.50.
B) $1788.50.
C) $3321.50.
D) $3650.00.
Q2) Physician-induced demand arises because:
A) consumers lack information about the effectiveness of various health care alternatives.
B) consumers often do not bear the full cost of their health care due to the existence of third party payments.
C) of the lack of ability to substitute capital for labor in the production of health care.
D) All of the above.
Q3) The greatest burden of rising health care costs falls on:
A) state government
B) federal government
C) individuals
D) insurance companies
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Chapter 8: Crime and Drugs: a Modern Dilemma
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104 Verified Questions
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Sample Questions
Q1) Suppose that the demand for cocaine falls as a result of prohibition. Which of the following factors would cause this decrease?
A) An increase in the price of cocaine.
B) An increase in the nonprice cost of buying cocaine.
C) Users experience increased excitement due to the risk of buying cocaine in an irregular market.
D) Cocaine will be sold in a less competitive market.
Q2) Refer to Crime Control. If the quantity of crime control is currently represented by A , then:
A) the marginal social benefit exceeds marginal social cost and the level of crime control should be decreased.
B) the marginal social cost exceeds marginal social benefit and the level of crime control should be decreased.
C) the marginal social benefit exceeds marginal social cost and the level of crime control should be increased.
D) the marginal social cost exceeds marginal social benefit and the level of crime control should be increased.
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Chapter
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Sample Questions
Q1) In order for an investment to be worthwhile:
A) benefits must exceed costs.
B) costs must exceed benefits.
C) the market rate of interest must exceed the rate of return on the investment.
D) the rate of return on the investment must exceed the market rate of interest.
Q2) James estimates his rate of return on an investment to be 6 percent. The market rate of interest is 7.5%. We know that:
A) James should undertake the investment.
B) James should not undertake the investment.
C) James should be indifferent to the investment.
D) James must first calculate costs and benefits before deciding whether or not to invest.
Q3) The present value of a sum of money is greater than the future value of that sum. A)True B)False
Q4) The government guarantee on student loans helps to overcome credit market failure.
A)True B)False
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Chapter 10: Educational Reform: the Role of Incentives and Choice
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Sample Questions
Q1) The hope that equal opportunity combined with voluntary exchange will move people toward equality is called:
A) commutative justice.
B) the principle of economic organization.
C) distributive justice.
D) the automatic market response to inequality.
Q2) Education special interest groups include the teachers' union, environmental organizations, and other organizations promoting ideological and religious ends.
A)True
B)False
Q3) What are some benefits of introducing competition into the public school system?
A) Schools would not have to respond to the demand of parents.
B) Schools would have to evaluate teachers based on their success with students.
C) Schools would not have to be concerned about over-spending.
D) All of the above.
Q4) Aggregate student rewards from additional effort are subject to decreasing marginal benefits.
A)True
B)False
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Chapter 11: Poverty: Old and New Approaches to a
Persistent Problem
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Many economists are not satisfied with the official measure of poverty because:
A) the official measure of poverty does not adjust for price changes.
B) the official measure of poverty does not adjust for family size.
C) the official measure of poverty adjusts for the effect of taxes on income.
D) the official measure of poverty excludes relevant and important sources of income.
Q2) The public assistance program that likely has the most adverse effect on work effort is:
A) TANF.
B) food stamps.
C) housing assistance.
D) Supplementary Security Income.
Q3) Some feel that raising the minimum wage in order to help the working poor is undesirable because:
A) it is target inefficient.
B) it is target efficient.
C) it will increase employment among the working poor.
D) employment in high-wage industries will be adversely affected.
Q4) Suppose the benefit is $400, the basic benefit is $600, and the benefit reduction rate is 20 percent. What is net income?
Page 13
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Chapter 12: Tracking and Explaining the Macroeconomy
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Sample Questions
Q1) As the price level increases, consumers increase their borrowing in order to maintain purchasing power. As a result of this increased borrowing, the interest rate rises and investment falls. This is an example of:
A) the interest rate effect.
B) the real balance effect.
C) the valuation effect of prices.
D) the substitution effect.
Q2) The aggregate demand curve is negatively sloped because as the price level falls, consumers will buy more of the goods and services that are relatively cheaper.
A)True
B)False
Q3) A good that is purchased for resale or for use in producing other goods is:
A) an intermediate good.
B) a final good.
C) an inventory good.
D) an ultimate good.
Q4) The value of a meal John cooks for his family is excluded from GDP.
A)True
B)False
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Chapter 13: Unemployment: the Legacy of Recession, Technological
Change, and Free Choice
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Sample Questions
Q1) Which of the following best describes frictional unemployment?
A) It is a long-term period of unemployment.
B) It is a temporary period of unemployment.
C) It is caused by a lack of jobs.
D) Workers suffering from this type of unemployment may need retraining.
Q2) Higher wages due to the minimum wage and the bargaining power of labor unions have contributed to the unemployment problem in most European countries.
A)True
B)False
Q3) Which of the following is likely to lead to a increase in aggregate demand?
A) contractionary fiscal policy.
B) expansionary monetary policy.
C) contractionary monetary policy
D) the interest rate effect.
Q4) Which of the following groups is likely to have the highest unemployment rate?
A) teenagers.
B) males.
C) females.
D) Hispanics.
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Q5) Refer to Labor Force. Calculate the unemployment rate to the nearest hundredth.
Chapter 14: Inflation: a Monetary Phenomenon
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103 Verified Questions
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Sample Questions
Q1) Refer to Diagram 14-2. In the above diagram, if the economy experiences inflation and unemployment caused by reduction in production of oil, the best policy to deal with both of these problems should target to:
A) shift aggregate demand from AD to AD .
B) shift aggregate demand from AD to AD .
C) shift aggregate supply from AS to AS .
D) shift aggregate supply from AS to AS .
Q2) The most appropriate policy to deal with inflation is:
A) contractionary fiscal policy.
B) contractionary monetary policy.
C) supply-side policy.
D) All of the above.
Q3) The M1 money supply consists of:
A) currency, travelers' checks, demand deposits, and other checkable deposits.
B) currency, demand deposits, and small denomination savings accounts.
C) currency, demand deposits, other checkable deposits, and U.S. savings bonds.
D) currency and demand deposits.
Q4) Supply-side policies are a powerful anti-inflationary tool.
A)True
B)False
Page 16
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Chapter 15: Sustained Budget Deficits:
Is This Any Way to
Run a Government
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Sample Questions
Q1) Economists are more concerned about the public debt than about the gross federal debt because:
A) sale of Treasury securities to the public acquires resources that otherwise might be invested in the private sector.
B) buying Treasury securities from the public acquires resources that otherwise might be invested in the private sector.
C) adding federal securities to and subtracting them from the government's trust fund effects private investments positively.
D) adding federal securities to and subtracting them from the government's trust fund effects private investments negatively.
Q2) Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:
A) cause demand to shift from D to D .
B) cause demand to shift from D to D .
C) cause the equilibrium rate of interest to change from i to i .
D) cause the equilibrium quantity of funds supplied to fall.
Q3) Explain how the federal government saves the Social Security surplus.
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Page 17
Chapter 16: Social Security: Leading Issues and Approaches to Reform
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Sample Questions
Q1) Evaluate the following statement: "Because the Social Security earnings penalty lowers the financial reward for each hour worked when earnings exceed the penalty-free amount, it reduces the number of hours worked by the elderly."
Q2) Which of the following may account for the decrease in the labor force participation rate of men 65 and older?
A) Social Security benefits.
B) Growth in private pensions.
C) Rising income.
D) All of the above.
Q3) Penny's wage rate decreases because of the imposition of a payroll tax, Penny decides to work fewer hours. This is an example of the:
A) induced savings effect.
B) income effect of a wage decrease.
C) substitution effect of a wage decrease.
D) reverse-endowment effect of a wage decrease.
Q4) "Social Security benefits have significantly lowered savings in the United States." Is this statement true or False? Defend your answer.
Q5) Who bears the burden of the Social Security payroll tax?
Page 18
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Chapter 17: International Trade: Beneficial, but
Controversial
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Sample Questions
Q1) Which of the following is used as a case for protectionism?
A) Protection from free trade will allow firms to expand output and thereby lower cost.
B) Protection from free trade will allow firms to develop monopoly power and thereby earn higher profits.
C) Protection from free trade will increase domestic competition.
D) Protection from free trade will save American jobs.
Q2) Which of the following is an example of trade negotiation on a global level?
A) The European Union
B) World Trade Organization
C) North American Free Trade Agreement
D) all of the above
Q3) For the United States, exports typically exceed imports.
A)True
B)False
Q4) The main trading partner of the United States is:
A) Japan
B) Canada
C) Mexico
D) Russia
Page 19
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Chapter 18: Financing Trade and the Trade Deficit
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Sample Questions
Q1) If 1 dollar can be traded for 5 francs, how many dollars will 1 franc buy?
Q2) Suppose the exchange rate is $0.01 per ¥ 1. An IBM computer selling for $1500 in New York would be sell for ____ in Tokyo.
A) ¥100,000.
B) ¥150,000.
C) ¥150.
D) ¥1,500.
Q3) The balance of payments refers to:
A) the value of country's exports less the value of its imports during a given time period.
B) a summary of all economic transactions between one country and all other countries during a given time period.
C) the capital inflows into a country less the capital outflows during a given time period.
D) a country's gross domestic product less the value of its imports during a given time period.
Q4) The current account contains imports, exports, and net unilateral transfers.
A)True B)False
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