Business Administration Economics Exam Practice Tests
Course Introduction
Business Administration Economics is a foundational course designed to introduce students to key economic principles and their application within the realm of business management. The course covers topics such as supply and demand, market structures, pricing strategies, and the role of government in the economy, as well as macroeconomic factors like inflation, unemployment, and economic growth. By integrating economic theory with practical business decision-making, students gain a comprehensive understanding of how economic forces affect organizational operations, resource allocation, and strategic planning. This knowledge equips students to analyze business environments, assess risks, and make informed managerial decisions in a dynamic global marketplace.
Recommended Textbook
Economics for Managers 3rd Edition by
Paul G. Farnham
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16 Chapters
1464 Verified Questions
1464 Flashcards
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Page 2
Chapter 1: Managers and Economics
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) In deciding which model of a car to buy, microeconomic theory maintains that consumers are concerned about the absolute price of a particular car, rather than its relative price.
A)True
B)False
Answer: False
Q2) Which of the following market structures is most similar to perfect competition?
A)Monopsony.
B)Monopolistic competition.
C)Oligopoly.
D)Monopoly.
Answer: B
Q3) Which of the following would be an illustration of a microeconomic issue affecting U.S.auto manufacturers?
A)An introduction of new, more fuel efficient models by Japanese competitors.
B)A recession in Europe that causes U.S. auto exports to Europe to decline.
C)A decline in the demand for new cars in the U.S. due to an economic downturn.
D)An appreciation of the U.S. dollar relative to the Japanese yen.
Answer: A
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Page 3
Chapter 2: Demand, Supply, and Equilibrium Prices
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94 Flashcards
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Sample Questions
Q1) Federal subsidies to farmers can have the effect of creating a surplus in the market for certain crops.
A)True
B)False
Answer: True
Q2) Assume the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilization of personal computers.Which of the following will happen to equilibrium price and equilibrium quantity?
A)Price will increase; quantity cannot be determined.
B)Price will decrease; quantity cannot be determined.
C)Quantity will increase; price cannot be determined.
D)Quantity will decrease; price cannot be determined.
Answer: C
Q3) All else constant, an increase in the incomes of consumers in the market for diamonds would cause the supply of diamonds to increase.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Demand Elasticities
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112 Flashcards
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Sample Questions
Q1) Assume that, for a particular demand curve, when price rises from $50 to $60, total revenue falls from $8,750 to $7800.
a.Based on this information, what is the quantity demanded at each price.
b.Without calculating the coefficient of elasticity, is demand over this range elastic or inelastic? How do you know?
Answer: a.When price is $50, quantity demanded is $8750/$50 = 175.When price is $60, quantity demanded is $7800/$60 = 130.
b.Demand is elastic.When price increases from $50 to $60, total revenue decreases.Thus, the decrease in quantity dominates the increase in price, indicating that the percentage in quantity demanded is greater than the percentage change in price and the absolute value of the elasticity coefficient is greater than 1.
Q2) Hot dogs and hot dog buns would be expected to have:
A)positive income elasticities of demand with respect to each other.
B)negative income elasticities of demand with respect to each other.
C)a positive cross-price elasticity of demand.
D)a negative cross-price elasticity of demand.
Answer: D
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Chapter 4: Techniques for Understanding Consumer Demand and Behavior
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67 Flashcards
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Sample Questions
Q1) Refer to Scenario 2.By examining the t-statistics associated with the regression coefficients, at the 5 percent significance level, which of the two independent variables are statistically different from zero?
Q2) In a multiple regression problem involving two independent variables, if b is computed to be +2.0, it means that:
A)the relationship between X and Y is significant.
B)the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X , holding X constant.
C)the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X , without regard to X .
D)the estimated average value of Y is 2 when X equals zero.
Q3) Refer to Scenario 2.What is the estimated regression equation for determining the market value of houses?
Q4) Refer to Scenario 2.What are the units of measurement for the standard error of the estimate?
Q5) Refer to Scenario 2.What percentage of the variation in the dependent variable, Market Value, is explained by the regression model?
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Chapter 5: Production and Cost Analysis in the Short Run
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Which of the following inputs is most likely to be "fixed" in the short run?
A)Labor.
B)Capital.
C)Energy.
D)Raw Material.
Q2) Assume there is an improvement in technology that increases the marginal product of each unit of labor.This would have the effect of:
A)reducing the average total cost, average variable cost, and marginal cost of production.
B)increasing the average total cost, average variable cost, and marginal cost of production.
C)reducing the average variable cost and marginal cost of production, but average total cost would be unchanged.
D)reducing the average total cost and average variable cost of production, but marginal cost would be unchanged.
Q3) In the general textbook treatment, the firm's short run average variable and average total cost curves are U-shaped, while the average fixed cost curve is downward sloping over the entire range of output.Explain why.
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Chapter 6: Production and Cost Analysis in the Long Run
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Sample Questions
Q1) Assume that as a firm expands its scale of operation, the minimum point of its short-run average total cost curve is unchanged.In this case, we would say that the firm is experiencing diseconomies of scale.
A)True
B)False
Q2) Isoquants are convex to the origin due to:
A)the law of diminishing marginal utility.
B)the assumption of the diminishing marginal productivity of each input.
C)the fact that as less capital is used, its marginal productivity falls.
D)the fact that as more labor is used, its marginal productivity rises.
Q3) The fact that supermarkets, a land-intensive form of organization, have become the dominant form of grocery store in the United States suggests that there is little or no potential for input substitution in the grocery store business.
A)True
B)False
Q4) The fact that a firm is using a capital-intensive method of production means that input substitution is not possible.
A)True
B)False
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Chapter 7: Market Structure: Perfect Competition
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Summarize the characteristics of a perfectly competitive market.
Q2) Assume a perfectly competitive firm is producing a level of output at which MR < MC.What should the firm do to maximize its profits?
A)The firm should do nothing - it wants to maximize the difference between MR and MC in order to maximize its profits.
B)The firm should decrease output.
C)The firm should increase price.
D)The firm should increase output.
Q3) When a firm decides to shut down in the short run, its losses are limited to its fixed costs.
A)True
B)False
Q4) The estimated price-cost margin of 11.9 percent in the market for broiler chickens in 1992 suggested that there was a high degree of competition in that industry.
A)True B)False
Q5) What assumptions in the perfect competition model ensure that economic profit is zero in the long run? Explain.
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Chapter 8: Market Structure: Monopoly and Monopolistic Competition
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107 Verified Questions
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Sample Questions
Q1) Even if production of a good is characterized by economies of scale, consumers of the good would be best served by having a large number of small firms produce the good because of the effects of increased competition.
A)True
B)False
Q2) Barriers to entry reduce the likelihood that price-setter firms will see their positive economic profits competed away over time.
A)True
B)False
Q3) Which of the following values of the Lerner Index indicates the greatest amount of market power?
A)0)313.
B)0)375.
C)0)6.
D)0)625.
Q4) Patents and copyrights create incentives for individuals to create information that might not be produced otherwise.
A)True
B)False
Page 10
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Chapter 9: Market Structure: Oligopoly
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96 Flashcards
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Sample Questions
Q1) Which of the following best describes the basic characteristics of noncooperative oligopoly models?
A)Managers make decisions based on the strategy they think their rivals will pursue.
B)Managers attempt to deliberately mislead their rivals regarding the strategy they will pursue.
C)When making decisions, managers basically ignore the mutual interdependence that exists among rivals.
D)Managers refuse to negotiate with their rivals when it comes to such decisions as what price to charge.
Q2) In the prisoner's dilemma game, each player's dominant strategy is also the Nash equilibrium.
A)True
B)False
Q3) A firm acting as a price leader would never reduce market price because this would clearly make all of the firms in the market worse off and defeat the purpose of having a firm act as the price leader.
A)True
B)False
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Chapter 10: Pricing Strategies for the Firm
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Sample Questions
Q1) The practice of charging different prices to various groups of customers that are not based on differences in the costs of production is referred to as:
A)predatory pricing.
B)markup pricing.
C)discretionary pricing.
D)price discrimination.
Q2) Assume the price elasticity of demand for a product is -4.In this case, the firm's optimal markup is (approximately):
A)400 percent.
B)100 percent.
C)33 percent.
D)25 percent.
Q3) When demand is elastic, the marginal revenue resulting from a decrease in price is:
A)positive.
B)zero.
C)negative.
D)cannot be determined without more information.
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Chapter 11: Measuring Macroeconomic Activity
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102 Flashcards
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Sample Questions
Q1) If one is interested in comparing the economic well-being of citizens across countries which of the following measures would be the most useful: nominal GDP, real GDP, or real GDP per capita? Explain.
Q2) The largest expenditure component in the U.S.is investment expenditures.
A)True
B)False
Q3) In a closed economy firms sell goods and services to:
A)households and foreigners.
B)households and the government.
C)just the government.
D)none of the above.
Q4) A French citizen lives in Detroit, but works in Windsor, Canada; his income is counted in U.S.GDP.
A)True
B)False
Q5) The purchase of a Boeing airplane by the U.S.government is considered part of government consumption expenditures and gross investment.
A)True
B)False
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Chapter 12: Spending by
Individuals, Firms, and
Governments on Real Goods and Services
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Sample
Questions
Q1) U.S.import spending is not affected by U.S.real income but is influenced by the economic activity of its major trading partners and the exchange rate, hence import spending is taken as autonomous.
A)True
B)False
Q2) When measuring the actual output produced in an economy, one should focus on GDP measured in nominal terms.
A)True
B)False
Q3) The Federal Reserve looks at the threshold of capital utilization rates as an indicator of inflationary pressures.
A)True
B)False
Q4) Stabilization of business cycle fluctuations focuses on the long run.
A)True
B)False
Q5) What factors will shift the aggregate expenditure function for a given level of real domestic income?
Q6) Briefly explain how capacity utilization rates are used by forecasters.
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Chapter 13: The Role of Money in the Macro Economy
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) The quantity of money demanded is positively related to the interest rate.
A)True
B)False
Q2) Open market purchase of government securities results in:
A)an increase in bank reserves.
B)a decrease in bank reserves.
C)an increase in interest rates.
D)none of the above.
Q3) The simple deposit multiplier is larger than the money multiplier.
A)True
B)False
Q4) The legislation that made all depository institutions regardless of Federal Reserve membership subject to the reserve requirements established by the Fed is called the:
A)Glass-Steagall Act.
B)McFadden Act.
C)Monetary Control Act of 1980.
D)none of the above
Q5) The monetary base is $1,000 billion and the money multiplier is 5.5.What is the size of the money supply?
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Chapter 14: The Aggregate Model of the Macro Economy
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Sample Questions
Q1) In the short-run along the horizontal portion of the aggregate supply curve, an increase in the budget deficit and an expansionary monetary policy would:
A)increase the price level only.
B)increase both the price level and real income.
C)increase real income only.
D)none of the above.
Q2) An increase in taxes would shift the:
A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.
Q3) The level of potential GDP does not change because the factors determining potential output are fixed in the short run.
A)True
B)False
Q4) What are the reasons for a decrease in the NAIRU.
Q5) A decrease in personal taxes would shift the aggregate demand curve rightward. A)True
B)False
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Chapter 15: International and Balance of Payments Issues in the Macro Economy
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Sample Questions
Q1) The difference between interest income or receipts earned on investments in the rest of the world by the residents of a given country and the payments to foreigners on investments they have made in a given country is called:
A)unilateral transfers.
B)net investment income.
C)capital expenditures.
D)none of the above.
Q2) A decreased demand for U.S.dollars on the foreign exchange market, all else equal, will result in a depreciation of the U.S.dollar.
A)True
B)False
Q3) The Bretton Woods conference in 1944 established the gold standard, which was abandoned in 1971.
A)True
B)False
Q4) Stating the dollar has strengthened against the yen means the dollar has depreciated.
A)True
B)False
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Chapter 16: Combining Micro and Macro Analysis for Managerial Decision Making
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Sample Questions
Q1) In terms of location decisions, firms evaluate the extent to which the labor force is unionized.
A)True
B)False
Q2) Managers in firms with market power can:
A)not influence price.
B)develop strategies that involve both the demand and supply sides of the market.
C)only focus on the demand side of the market.
D)none of the above.
Q3) McDonald's can offset the decline in demand by influencing the different variables that affected the demand function for their products.
A)True
B)False
Q4) The quoted in the textbook study of consumer behavior at Starbucks company stores demonstrated that including calorie count on menus had no impact on consumer behavior.
A)True
B)False
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