Course Introduction
Business Economics
Final Exam Questions
Business Economics explores the application of economic theory and quantitative methods to business decision-making. The course covers fundamental concepts such as demand and supply analysis, production and cost structures, market competition, and pricing strategies. Students learn to analyze the economic environment in which businesses operate, assess the impact of government policies, and utilize economic tools to solve real-world business problems. Emphasis is placed on the practical relevance of microeconomic and macroeconomic principles in formulating effective strategies, optimizing resource allocation, and achieving organizational objectives.
Recommended Textbook
Microeconomics Brief Edition 2nd Edition by Campbell R. McConnell
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13 Chapters
1963 Verified Questions
1963 Flashcards
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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143 Flashcards
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Sample Questions
Q1) How is the economic perspective reflected in lines for fast food?
A) Customers select the shortest line because they have perfect information.
B) Customers select the shortest line because they believe it will reduce their time cost of obtaining food.
C) Lines will typically be of unequal length because of the inefficiencies in counter service.
D) The set of food choices is often too complex for customers and thus creates long lines.
Answer: B
Q2) Which situation would most likely shift the production possibilities curve for a nation in an outward direction?
A) A decrease in the quality of products
B) An increase in the supply of resources
C) A decrease in the state of technology
D) An increase in the amount of discrimination
Answer: B
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3
Chapter 2: The Market System and the Circular Flow
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Sample Questions
Q1) Which is a major feature of the market system?
A) Government-established prices in all markets
B) Reallocation of all resources from private to public uses
C) The right to own private property and control resource uses
D) Central planning by government to provide goods and services
Answer: C
Q2) In a market economy,entrepreneurs are most concerned with:
A) maximizing utility or satisfaction from limited incomes.
B) increasing the wages and salaries of workers.
C) maximizing profits or minimizing losses.
D) the selfish pursuit of money.
Answer: C
Q3) Which fundamental question about a competitive market system primarily focuses on technological progress and capital accumulation?
A) What goods and services will be produced?
B) How will the goods and services be produced?
C) How will the system promote progress?
D) Who will get the goods and services?
Answer: C
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Chapter 3: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) In a competitive market,every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.
A)True
B)False
Answer: True
Q2) DVD players and DVDs are:
A) complementary goods.
B) substitute goods.
C) independent goods.
D) inferior goods.
Answer: A
Q3) The rationing function of prices refers to the:
A) tendency of supply and demand to shift in opposite directions.
B) fact that ration coupons are needed to alleviate wartime shortages of goods.
C) capacity of a competitive market to equate the quantity demanded and the quantity supplied.
D) ability of the market system to generate an equitable distribution of income.
Answer: C
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Chapter 4: Elasticity of Demand and Supply
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Sample Questions
Q1) The supply of tickets to a major sporting event such as the Super Bowl or a World Series game is perfectly inelastic.
A)True
B)False
Q2) If average consumer incomes increase proportionately faster than the demand for a product,then the income elasticity of demand for the product is:
A) zero.
B) greater than zero but less than 1.
C) greater than 1.
D) equal to 1.
Q3) In which instances will total revenues decline?
A) Price rises and E<sub>d</sub> equals 0.41.
B) Price rises and demand is of unit elasticity.
C) Price falls and demand is elastic.
D) Price rises and E<sub>d</sub> equals 2.47.
Q4) The price of gold is volatile because the supply is highly inelastic,so changes in demand have a large effect on price.
A)True
B)False
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Chapter 5: Market Failures: Public Goods and Externalities
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Sample Questions
Q1) Government should subsidize a product whose consumption results in spillover costs in order to achieve the optimal level of output.
A)True
B)False
Q2) According to a study by economists Ian Ayres and Steven Levitt,the division of the total benefit of the Lojack to its owners and all other car owners is:
A) 100 percent to the car owner with a Lojack,0 percent to other car owners.
B) 75 percent to the car owner with a Lojack,25 percent to other car owners.
C) 50 percent to the car owner with a Lojack,50 percent to other car owners.
D) 10 percent to the car owner with a Lojack,90 percent to other car owners.
Q3) Which is not one of the conditions for the Coase theorem to hold?
A) The ownership of property is clearly defined.
B) The number of people involved is small.
C) The amount of money disputed is minor.
D) The costs of bargaining are negligible.
Q4) Productive efficiency means that goods and services are being produced by society in the least costly way.
A)True B)False
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Chapter 6: Businesses and Their Costs
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Sample Questions
Q1) Diseconomies of scale:
A) pertain to the long run.
B) pertain to the short run.
C) are synonymous with diminishing returns.
D) are synonymous with increasing returns.
Q2) Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:
A) $5,000.
B) $500.
C) $.50.
D) $50.
The firm's total costs are $200 * 100 = $20,000.Its total variable costs are $150 * 100 = $15,000.Thus,its fixed costs are $20,000 - 15,000 = $5,000.
Q3) Minimum efficient scale occurs at the smallest level of output at which a firm can minimize long-run average costs.
A)True
B)False
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Chapter 7: Pure Competition
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Sample Questions
Q1) A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 1000 units is $2.50.The minimum possible average variable cost is $2.00.The market price of the product is $2.50.To maximize profit or minimize losses,the firm should:
A) continue producing 1000 units.
B) produce less than 1000 units.
C) produce more than 1000 units.
D) shut down.
Q2) Average revenue is:
A) total revenue minus total cost.
B) marginal revenue minus marginal cost.
C) marginal revenue divided by the quantity of output.
D) total revenue divided by the quantity of output.
Q3) In the long run,pure competition forces firms to produce at the minimum of average total cost and charge a price consistent with that cost.
A)True B)False
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9
Chapter 8: Pure Monopoly
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Sample Questions
Q1) In the short run,a monopolist's profits:
A) may be positive,negative,or zero.
B) are positive because of the monopolist's market power.
C) are positive if the monopolist's elasticity of demand is less than 1.
D) are positive if the monopolist's selling price is above average variable cost.
Q2) Some firms in the technology sector have achieved economies of scale because costs have been reduced by:
A) price discrimination.
B) socially optimal pricing.
C) fair return pricing.
D) simultaneous consumption.
Q3) The nondiscriminating pure monopolist's demand curve:
A) is the industry demand curve.
B) shows a direct or positive relationship between price and quantity demanded.
C) tends to be inelastic at high prices and elastic at low prices.
D) is identical to its marginal revenue curve.
Q4) A monopolist seeks maximum profit per unit.
A)True
B)False
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Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Which cannot be a characteristic of an oligopolistic industry?
A) Differentiated products
B) A large number of consumers
C) Significant barriers to entry
D) A perfectly elastic firm demand curve
Q2) Suppose a few powerful firms control all production in an industry and face identical demand and cost schedules.If they successfully collude and maximize joint profits,then price,output,and profit levels in the industry will be the same as those in:
A) pure monopoly.
B) regulated monopoly.
C) monopolistic competition.
D) an oligopoly with a kinked-demand curve.
Q3) Monopolistically competitive firms are productively inefficient because production occurs where:
A) marginal cost is greater than marginal revenue.
B) marginal cost is less than marginal revenue.
C) average total cost is greater than the minimum average total cost.
D) average total cost is less than the difference between average total cost and average variable cost.
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Page 11
Chapter 10: Wage Determination
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Sample Questions
Q1) Other things being equal,the wages of clerical workers would tend to decrease if there was an increase in:
A) the marginal revenue product of clerical workers.
B) the minimum entry requirements for clerical work.
C) the period of training required for clerical work.
D) nonmonetary benefits available to clerical workers.
Q2) A union composed of all workers in a given plant or industry is called a(n):
A) closed shop.
B) craft union.
C) monopsony union.
D) industrial union.
Q3) If there is a decrease in the demand for union electrical workers and at the same time there is a drastic cutback in the numbers of electricians trained by the union,then the:
A) wages of electricians are likely to increase and the quantity employed will decrease.
B) wages of electricians are likely to increase and the quantity employed will increase.
C) quantity employed will increase,but the effect on wages is indeterminate.
D) quantity employed will decrease,but the effect on wages is indeterminate.
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Chapter 11: Income Inequality and Poverty
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Sample Questions
Q1) A government payment in the form of goods and services rather than money is a(n):
A) earned income tax credit.
B) benefit reduction.
C) noncash transfer.
D) work incentive.
Q2) The equality-efficiency trade-off suggests that:
A) welfare programs stimulate incentives to work.
B) inefficiencies result when income is transferred from rich to poor.
C) noncash transfers are superior to cash transfers.
D) economic growth is the best means of reducing poverty.
Q3) The poverty rate increased dramatically during the 1960s but has been reduced significantly since then.
A)True
B)False
Q4) The distribution of income in the United States after taxes and transfers are taken into account is less equal than it is before taxes and transfers are taken into account.
A)True
B)False
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Chapter 12: Public Finance: Expenditures and Taxes
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Sample Questions
Q1) The efficiency loss of a tax is the idea that:
A) in addition to taking income from the citizenry,taxes also increase the rate of inflation.
B) taxes cause a decline in output for which marginal benefit exceeds marginal cost.
C) taxes diminish incentives to work.
D) government spends dollars less efficiently than do households and businesses.
Q2) The greater the elasticity of demand and supply,the greater is the efficiency loss of a tax.
A)True
B)False
Q3) Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1).If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20,we can conclude that the:
A) supply of X is highly inelastic.
B) supply of X is highly elastic.
C) demand for X is highly inelastic.
D) demand for X is highly elastic.
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Page 14
Chapter 13: International Trade and Exchange Rates
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Sample Questions
Q1) The chemical industry is highly capital-intensive.
A)True
B)False
Q2) According to the principle of comparative advantage,worldwide output and consumption levels will be highest when goods are produced in nations where:
A) domestic opportunity costs are lowest.
B) inflation rates are low.
C) the balance of trade is in a surplus position.
D) the exchange rate is falling.
Q3) The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:
A) International Monetary Fund (IMF).
B) World Trade Organization (WTO).
C) Common Market Organization (CMO).
D) International Trade Commission (ITC).
Q4) The bulk of U.S.exports and imports are with developing nations.
A)True
B)False
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