Business Economics
Exam Review
Course Introduction
Business Economics explores the application of economic theory and quantitative methods to analyze business enterprises and the factors contributing to their diversity as organizations and structures. The course delves into how economic principles influence decision-making within firms, including pricing strategies, production processes, and resource allocation. Students will examine market structures, cost analysis, demand forecasting, and the role of government regulations, fostering an understanding of how economic forces shape business operations and strategies in competitive and global markets.
Recommended Textbook
Microeconomics 1st Canadian Edition by R. Glenn Hubbard
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17 Chapters
2441 Verified Questions
2441 Flashcards
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Chapter 1: Economics: Foundations and Models
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Explain the economic idea that "people respond to incentives."
Answer: Human beings act from a variety of motives, including religious belief, envy, and compassion."People respond to incentives" means that people will act if they feel it is in their best economic interest to do so.
Q2) If the marginal cost of producing an extra million kilograms of french fries is $1 million, then McCain Foods Ltd.should produce the extra french fries
A)only if the marginal benefit is greater than $1 million plus an acceptable profit margin.
B)as long as the marginal benefit the firm receives is just equal to or greater than $1 million.
C)as long as the marginal cost does not rise.
D)until the marginal benefit the firm receives reaches zero.
Answer: B
Q3) Which of the following is a result of a market economy?
A)environmental protection
B)an equal income distribution
C)agreement on equity
D)voluntary exchange
Answer: D
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) A production possibilities frontier with a bowed outward shape indicates A)the possibility of inefficient production.
B)constant opportunity costs as more and more of one good is produced.
C)increasing opportunity costs as more and more of one good is produced.
D)decreasing opportunity costs as more and more of one good is produced.
Answer: C
Q2) In a report made to the Canadian Parliament in 2002, The Standing Senate Committee on Social Affairs, Science and Technology cautioned that increased health spending could lead to reduced debt reduction.This statement suggests that A)the government of Canada is doing future generations a great disservice by neglecting debt repayment and focusing exclusively on health care spending.
B)there is a tradeoff between healthcare spending and debt reduction.
C)society should value debt reduction more highly than healthcare spending.
D)society should value healthcare spending more highly than debt reduction because of the long term economic benefits generated by a healthier population.
Answer: B
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is
A)a neutral good.
B)a normal good.
C)a necessity.
D)a complement.
Answer: B
Q2) If the price of a product is above equilibrium, what forces it down?
Answer: When the price is above equilibrium, a surplus occurs.Some producers who are unable to sell the product will have an incentive to offer to sell the product at a lower price.A lower price will simultaneously decrease the quantity supplied and increase the quantity demanded.This downward pressure on price continues until the surplus is eliminated and equilibrium is achieved.
Q3) The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.
A)True
B)False
Answer: True
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) Which of the following statements best describes the concept of consumer surplus?
A)"Sobey's was having a sale on Chapman's ice cream so I bought 6 litres."
B)"I was all ready to pay $300 for a new leather jacket that I had seen in Hudson's Bay, but I ended up paying only $180 for the same jacket."
C)"I paid $130 for a printer last week. This week the same store is selling the same printer for $110."
D)"I sold my Blu-ray copy of Ben-Hur for $18 at a garage sale even though I was willing to sell it for $10."
Q2) In a province with rent-controlled apartments, all of the following are true except A)apartments usually rent for rates lower than the market rate.
B)apartments are often in shorter supply than they would be without rent control.
C)it usually takes more time to find an apartment than it would without rent control.
D)landlords have an incentive to rent more apartments than they would without rent control.
Q3) What is "tax incidence"? What determines tax incidence in a competitive market?
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set
A)equal to the marginal external cost at the economically efficient level of pollution.
B)equal to the marginal private cost of production at the economically efficient level of pollution.
C)equal to the amount of the deadweight loss created in the absence of a pollution tax.
D)at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.
Q2) The 2005 European Union Emission Trading Scheme is an agreement among 24 European Union nations to
A)eliminate air pollution and greenhouse gases by the year 2020.
B)reduce carbon dioxide emissions.
C)provide fast growing developing countries such as India and China with the technology to reduce their carbon emissions.
D)impose a carbon tax by the year 2020 on all industries that emit carbon dioxide.
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is .What happens to sales revenue if the restaurant increases its price by 5 percent?
A)Sales revenue falls by less than 5 percent.
B)Sales revenue remains unchanged.
C)Sales revenue falls by 100 percent.
D)It cannot be determined without information on prices.
Q2) List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
Q3) Income elasticity measures
A)how a good's quantity demanded responds to change in the goods price.
B)how a good's quantity demanded responds to change in the price of another good.
C)how a good's quantity demanded responds to change in buyers' incomes.
D)how a good's quantity demanded responds to producers' incomes.
Q4) What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
Q5) Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?
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Chapter 7: Comparative Advantage and the Gains From International Trade
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Refer to Figure 7.2.As a result of the tariff, domestic producers increase their quantity supplied by
A)31 thousand kilograms of rice.
B)22 thousand kilograms of rice.
C)15 thousand kilograms of rice.
D)6 thousand kilograms of rice.
Q2) Refer to Figure 7.2.If the tariff was replaced by a quota which limited rice imports to 16 thousand kilograms, the amount of revenue received by rice importers would equal
A)$6.4 thousand.
B)$9.6 thousand.
C)$16 thousand.
D)$19.8 thousand.
Q3) Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.
A)higher; less efficient
B)higher; more efficient
C)lower; less efficient
D)lower; more efficient
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Chapter 8: Consumer Choice and Behavioral Economics
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) Refer to Figure 8.1.Which of the following statements is true?
A)Quantities Q and Q are the utility-maximizing quantities of hoagies at two different prices of hoagies.
B)Quantities Q and Q may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods.
C)Quantity Q could be a utility-maximizing choice if the price is $5.75, but quantity Q may not be because we have no information on the marginal utility per dollar when price changes.
D)Quantities Q and Q are derived independently of the utility-maximizing model.
Q2) If preferences are transitive, indifference curves
A)intersect at the equilibrium consumption bundle.
B)intersect at the optimum consumption bundle.
C)intersect where the marginal rate of substitution for each indifference curve is equal. D)do not intersect.
Q3) What is a Giffen good?
Q4) What is marginal utility and what is the law of diminishing marginal utility?
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Chapter 9: Technology, Production, and Costs
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169 Verified Questions
169 Flashcards
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Sample Questions
Q1) Economies of scale exist as a firm increases its size in the long run because of all of the following except
A)the firm can afford more sophisticated technology in production.
B)labour and management can specialize even further in their tasks.
C)as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
D)as a firm expands its production, its profit margin per-unit of output increases.
Q2) Refer to Figure 9.1.Diminishing marginal productivity sets in after
A)the 2nd worker is hired.
B)the 3rd worker is hired.
C)the 4th worker is hired.
D)the 5th worker is hired.
Q3) Describe the relationship between marginal cost and average total cost.
Q4) Which of the following is an implicit cost of production?
A)interest paid on a loan to a bank
B)wages paid to labour plus the cost of carrying benefits for workers
C)the utility bill paid to water, electricity, and natural gas companies
D)rent that could have been earned on a building owned and used by the firm
Q5) State the law of diminishing marginal returns.
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Chapter 10: Firms in Perfectly Competitive Markets
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) What is productive efficiency?
A)a situation in which resources are allocated to their highest profit use
B)a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
C)a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it
D)a situation in which firms produce as much as possible
Q2) When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell
A)the output where marginal revenue equals marginal cost.
B)any positive output the entrepreneur decides upon because all of it can be sold.
C)nothing at all; the firm shuts down.
D)the output where average total cost equals price.
Q3) What is meant by the term "long-run competitive equilibrium?
Q4) Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.
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Page 12
Chapter 11: Monopolistic Competition
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) Refer to Table 11.2.What is the output (Q)that maximizes profit and what is the price (P)charged?
A)P=$55; Q=5 cases
B)P=$50; Q=6 cases
C)P=$45; Q=7 cases
D)P=$40; Q=8 cases
Q2) When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.
A)True
B)False
Q3) A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.
A)True
B)False
Q4) How might a monopolistically competitive firm continually earn economic profit greater than zero?
Q5) What is the difference between zero accounting profit and zero economic profit?
Q6) What is the difference between the terms "marketing" and "advertising"?
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Chapter 12: Oligopoly: Firms in Less Competitive Markets
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) For years economists believed that market structure explained the ability of some firms to earn economic profits.Today, economists and business strategists put greater emphasis on
A)the number of years a firm has been in business and the average price of the products sold by the firm.
B)the number of countries in which a firm conducts business and the number of employees the firm has in each country.
C)the characteristics of individual firms and the strategies their managements use to continue to earn economic profits.
D)the size of a firm relative to the industry average and the number of firms in the domestic industry.
Q2) Refer to Figure 12.5 Use the decision tree to determine whether Microsoft should deter Toshiba from entering the market for electronic book readers (e-readers).Assume that each firm must earn a 20% return on investment to break even.Explain Microsoft's decision process.
Q3) Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.
Q4) Explain why OPEC is caught in a prisoner's dilemma?
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Page 14
Chapter 13: Monopoly and Antitrust Policy
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Refer to Figure 13.9.Why won't regulators require that Erickson Power produce the economically efficient output level?
A)because there is insufficient demand at that output level
B)because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit
C)because Erickson Power will earn zero profit
D)because Erickson Power will sustain persistent losses and will not continue in business in the long run
Q2) What happens to a monopoly's revenue when it sells more units of its product?
Q3) To enter a local cable television market, a firm needs a license from the CRTC.This is an example of
A)a government-imposed barrier.
B)monopoly due to control of a resource.
C)a natural monopoly.
D)the government maintaining consistent standards in the broadcast industry.
Q4) Market power in Canada causes a huge loss of economic efficiency.
A)True
B)False
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Page 15
Chapter 14: The Markets for Labour and Other Factors of Production
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) The primary purpose of labour unions is to
A)ensure that workers receive adequate safety training.
B)ensure that all members earn identical incomes.
C)negotiate with employers about wages and working conditions.
D)endorse candidates and donate money to them.
Q2) When workers are paid on a piece-rate basis, an employer must be able to easily measure each worker's output.
A)True
B)False
Q3) Wage differences among workers of different races and gender could be due to all of the following except
A)differences in preferences for jobs.
B)differences in work experience.
C)differences in education.
D)labour unions.
Q4) Refer to Table 14.2.The marginal profit from hiring the second unit of labour is
A)$4,200.
B)$1,960.
C)$1,800.
D)$1,450.
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Chapter 15: Public Choice, Taxes, and the Distribution of Income
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Refer to Figure 15.1.Of the tax revenue collected by the government, the portion borne by producers is represented by the area
A)B + C.
B)F + G.
C)E + H.
D)B + C + F + G.
Q2) In Canada
A)the income tax system has little or no impact on the distribution of income. B)the after-tax income distribution of income is more equal than the before-tax distribution.
C)once a person is in poverty, it is very difficult for a person to get out of poverty. D)the degree of income mobility is relatively low.
Q3) Refer to Figure 15.5.Which country has the more unequal distribution of income?
A)Islandia
B)Syldavia
C)They may have the same absolute income distribution although their relative income distribution is different.
D)There is insufficient information to answer the question.
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) Refer to Figure 16.4.Suppose the firm represented in the diagram decides to practice perfect price discrimination.What is the total revenue collected by the firm?
A)$6,720
B)$7,680
C)$10,240
D)$13,440
Q2) Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1,200.Assume that Iris and Daphne do not know each other.If the price is $800 per copy,
A)both Iris and Daphne will purchase Joss's services and Joss will undertake the job.
B)only Daphne will purchase Joss's services and Joss will undertake the job for her. C)only Daphne will want to purchase Joss's services but Joss will not be willing to do the work.
D)neither Iris nor Daphne will commission the work.
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Chapter 17: Firms, the Stock Market, and Corporate Governance
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137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/27606
Sample Questions
Q1) A corporation is owned by its A)board of directors.
B)stockholders.
C)employees.
D)CEO.
Q2) Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?
A)As a sole proprietor, Jeremy would be taxed twice.
B)As a sole proprietor, Jeremy would not have control of the business.
C)As a sole proprietor, Jeremy would face unlimited liability.
D)As a sole proprietor, Jeremy would be subject to significant rules and regulations.
Q3) What is a primary market?
A)a market where primary inputs like steel are sold
B)a market where you can sell any bonds you own as a private investor
C)a market where a newly issued claims are sold to initial buyers by the borrowing firm
D)a market where you can sell any stocks you own as a private investor
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