Applied Economics
Study Guide Questions
Course Introduction
Applied Economics explores the practical application of economic theories, models, and empirical methods to real-world issues and decision-making processes in business, policy, and society. This course examines how economic principles can be used to analyze and address contemporary challenges such as market efficiency, public policy, resource allocation, pricing strategies, and economic forecasting. Students will engage with case studies and data-driven analysis, developing the skills necessary to evaluate economic outcomes and implement effective solutions across various sectors.
Recommended Textbook Economics for Today 4th Asia Pacific Edition by Allan Layton
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19 Chapters
2245 Verified Questions
2245 Flashcards
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Chapter 1: Thinking like an economist
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89 Flashcards
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Sample Questions
Q1) An entrepreneur is a motivated person who seeks profit by:
A)economising.
B)undertaking risky activities.
C)winning in the lottery.
D)selling shares.
Answer: B
Q2) Macroeconomics is concerned with:
A)the study of the whole economy.
B)the study of the economic behaviour of government decision makers.
C)the study of the issues of how individual prices are determined in markets.
D)the study of how firms determine output levels.
Answer: A
Q3) Which of the following words indicate the positive statement?
A)good, bad.
B)should, need.
C)if, then.
D)ought to.
Answer: C
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3
Chapter 2: Production possibilities and opportunity cost
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Sample Questions
Q1) The production possibility curve is bowed outward from the origin because of:
A)the law of decreasing opportunity costs.
B)the finite nature of the resource base.
C)inefficiency.
D)the changes in the opportunity cost due to different efficiencies of the same resource in different use.
E)unemployment.
Answer: D
Q2) Law of increasing opportunity cost states:
A)that opportunity cost decreases as production of one output expands.
B)that the economy is operating at full employment.
C)that the stock of technology is increasing.
D)the production possibilities frontier bows inwards.
Answer: B
Q3) Inefficient production occurs:
A)at any point inside the production possibilities curve.
B)at any point along the production possibilities curve.
C)at any point outside the production possibilities curve.
D)at a point that cannot be determined.
Answer: A
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Chapter 3: Market demand and supply
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Sample Questions
Q1) In Exhibit 3-3,a shift in the supply curve from S to S can be because of:
A)subsidies to consumers.
B)higher taxes imposed on producers.
C)changes in consumer preferences.
D)technological innovation.
Answer: D
Q2) Assuming that day old bread is an inferior good,an increase in consumer income,other things being equal,will cause a/an:
A)rightward shift in the demand curve for day old bread.
B)downward movement along the demand curve for day old bread.
C)leftward shift in the demand curve for day old bread.
D)upward movement along the demand curve for day old bread.
Answer: C
Q3) A complementary good is:
A)a good that is not related to any other good.
B)a good that is given to you for free.
C)a good that is jointly consumed with another good.
D)a good that is consumed instead of another good.
Answer: C
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Page 5
Chapter 4: Markets in action
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Sample Questions
Q1) Economists argue that the minimum wage results in:
A)more bargaining power for unskilled workers.
B)zero impact if the minimum wage is above the market-clearing price.
C)a shortage of workers.
D)a more equal income distribution and is worth the loss of some jobs.
Q2) Assume a price floor is set above the equilibrium price.The result is a surplus.
A)True
B)False
Q3) Which of the following is not a characteristic of a public good?
A)It is scarce.
B)It is not diminished in amount as additional people consume the product.
C)Its benefits cannot be withheld from anyone.
D)It is free.
E)It yields widespread benefits.
Q4) Higher petrol prices would likely raise the price of large,gas-guzzling automobiles
A)True
B)False
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6
Chapter 5: Elasticity of demand and supply
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Sample Questions
Q1) Suppose that the quantity of cars sold decreases by 5 per cent after the price of motorbikes decreases by 20 per cent.What is the coefficient of the cross elasticity of demand?
A)3.
B)1.5.
C)0.25.
D)2.
E)0.3.
Q2) Along a straight-line demand curve,the elasticity of demand:
A)is approximated by the slope of the curve.
B)is constant at every point on the curve.
C)is less elastic than along a non-linear demand curve.
D)is equal to one.
E)becomes more inelastic as price falls.
Q3) If demand for a good is price elastic,it must also be income elastic.
A)True
B)False
Q4) The tax incidence indicates that tax is always paid by sellers.
A)True
B)False
7
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Chapter 6: Production costs
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Sample Questions
Q1) In Exhibit 6-10,short-run average total cost,short-run marginal cost and long-run average cost are all equal at which level of output per week?
A)500 units.
B)1000 units.
C)1500 units.
D)2000 units.
Q2) In Exhibit 6-1,the marginal product of labour is equal to zero at point:
A) A.
B) B.
C) C.
D) D.
Q3) The long run is a period of time:
A)that is too short to change the size of a firm's plant.
B)that is long enough to permit changes in all the firm's inputs, both fixed and variable.
C)in which production occurs beyond one year.
D)in which production occurs beyond five years.
Q4) The marginal curve determines the L-shape of the AVC curve.
A)True
B)False
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Chapter 7: Perfect competition
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Sample Questions
Q1) According to Exhibit 7-5,if the price of the good is $17,then the result for the perfectly competitive firm will be:
A)making a long-run profit.
B)making a long-run loss and so it will shut down.
C)making a short-run loss but it will continue to produce.
D)making a normal profit.
E)indeterminate.
Q2) All three types of long-run supply curves can be observed in real life: increasing-cost supply curve,upward-sloping supply curve and constant supply curve.
A)True
B)False
Q3) If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit,its marginal revenue is:
A)more than $10.
B)less than $10.
C)$10.
D)$5300.
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9
Chapter 19: Applying graphs to economics
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Sample Questions
Q1) A graph can be used to illustrate the relationship between the price of compact discs and the quantity of compact discs demanded.If there is evidence that buyers' income also influences the demand for compact discs,then a movement along the curve can be caused by a change in the price of compact discs.
A)True
B)False
Q2) A direct relationship is a relationship between two variables in which they move in different directions (if one increases,the other decreases).
A)True
B)False
Q3) Straight line CD in Exhibit 1A-4 shows which of the following?
A)Increasing values for X increases the value of Y.
B)Decreasing values for X decreases the value of Y.
C)There is no association between X and Y.
D)Variables X and Y are negatively related.
Q4) An inverse relationship is a negative causation between two variables.
A)True
B)False
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