Business Economics
Question Bank
Course Introduction
Business Economics explores the fundamental principles of economics as they apply to the decision-making processes within businesses and organizations. The course covers topics such as supply and demand analysis, market structures, pricing strategies, cost analysis, and the impact of government policies on business operations. By integrating economic theory with real-world business scenarios, students learn to assess market opportunities, forecast trends, and make strategic decisions aimed at maximizing organizational performance. The course also emphasizes the role of economic reasoning in day-to-day management and long-term planning.
Recommended Textbook
ECON Micro 2 2nd Edition by William A. McEachern
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21 Chapters
3947 Verified Questions
3947 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) A rational decision maker will take only those actions for which the expected marginal benefit
A) is positive
B) is at its maximum level
C) is greater than or equal to the expected marginal cost
D) is less than the expected marginal cost
E) exactly equals the expected marginal cost
Answer: C
Q2) The statement 'If I'm going to Miami for the Spring Break,all of my classmates are also going to Miami for the Spring Break' is an example of:
A) The fallacy that association is causation
B) The fallacy of composition
C) The mistake of ignoring secondary effects
D) A normative statement
E) A false statement
Answer: B
Q3) As a scientist,an economist's main professional objective is to become wealthy.
A)True
B)False
Answer: False
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Chapter 2: Economic Tools and Economics Systems
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185 Flashcards
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Sample Questions
Q1) The fictional country of Gameland has the following characteristics: its citizens are privately owning all resources;the resources are guided to their most productive use through market prices;goods and services are channeled to consumers who value them the most;and there is no central authority to protect property rights or enforces contracts.The economic system in Gameland is most likely:
A) Pure command system
B) Pure capitalist system
C) Mixed system
D) Transitional economy
E) Economy based on religion
Answer: B
Q2) Which of the following is most appropriately measured along one axis of the production possibilities frontier diagram?
A) the quantity of a produced good
B) the price of a produced good
C) the quantity of natural resources
D) the state of technology
E) society's welfare and satisfaction
Answer: A
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Chapter 3: Economic Decision Makers
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196 Flashcards
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Sample Questions
Q1) Brian is the sole proprietor owner of Long Voyage Software,which generates maps for wilderness trips.He started the business with an initial investment of $80,000.A faulty map caused one customer to get hopelessly lost.After her rescue and recuperation,she sued Long Voyage for $5,000,000.Which of the following is true?
A) The customer can be awarded only $80,000--what the firm has available to pay.
B) The customer can be awarded $5,000,000 but can get only $80,000.
C) The customer can be awarded $5,000,000,but Brian personally won't have to pay more than $80,000.
D) If $5,000,000 is awarded,Brian will have to pay none of it.
E) If $5,000,000 is awarded,Brian is personally responsible for paying all of it.
Answer: E
Q2) Household production is more likely to occur when
A) it requires few specialized resources
B) technology makes it more costly than market production
C) tax avoidance is undesirable
D) less control over the final product is desirable
E) the opportunity cost of household production is high
Answer: A
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) If demand decreases and supply increases,price will
A) always increase
B) always decrease
C) increase only if supply increases more than demand decreases
D) increase only if supply increases less than demand decreases
E) decrease only if supply increases more than demand decreases
Q2) If the price of the good described in Exhibit 4-1 is $1.60,then there is a
A) shortage of 30 units
B) surplus of 30 units
C) shortage of 20 units
D) surplus of 20 units
E) surplus of 10 units
Q3) Assume that corn and soybeans are alternatives that could be grown by most farmers.An increase in the price of corn will
A) increase the supply of corn
B) increase the supply of soybeans
C) decrease the supply of soybeans
D) decrease the supply of corn
E) have no effect on the supplies of corn and soybeans
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Page 6
Chapter 5: Elasticity of Demand and Supply
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238 Flashcards
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Sample Questions
Q1) Price elasticity of demand is calculated as
A) the percentage change in quantity demanded divided by the percentage change in price
B) the percentage change in price divided by the percentage change in quantity demanded
C) the absolute change in quantity demanded divided by the absolute change in price
D) the absolute change in price divided by the absolute change in quantity demanded
E) none of the above
Q2) The demand curve for a good that has many perfect substitutes in consumption is likely to be
A) upward sloping
B) steep
C) highly inelastic
D) horizontal
E) vertical
Q3) If demand is elastic,a decrease in price leads to a decrease in total revenue.
A)True
B)False
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7
Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) The fact that the washroom usually has paper towels left (free to the consumer) suggests that the marginal utility of paper towels quickly diminishes to 0 for each consumer.
A)True
B)False
Q2) Suppose a glass of orange juice has a price of $2 and a glass of soft drink has a price of $1.If the consumer is maximizing utility,
A) juice must have higher MU than soda drink
B) the soft drink must have higher MU than juice
C) both must have equal MU
D) consumers would buy more soda drink than orange juice
E) the consumer would buy twice as much orange juice as soft drink
Q3) In Exhibit 6-3,the total utility of consuming five scones is
A) 82
B) 30
C) 34
D) 27
E) 2
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Chapter 7: Production and Cost in the Firm
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Maryann and Don want to open their own deli.To do so,Maryann must give up her job,at which she earns $20,000 per year,and Don must give up his part-time job,at which he earns $10,000 per year.They must liquidate their money market fund,which earns $1,000 interest annually.The rent on the building is $10,000 per year,and expenses for such necessities as utilities,corned beef,and pickles are $35,000 annually.What is the explicit cost per year of operating the deli?
A) $10,000
B) $35,000
C) $45,000
D) $31,000
E) $76,000
Q2) The short run is a period of time
A) equal to or less than six months
B) during which all resources may be varied
C) during which all resources are fixed
D) during which at least one resource is fixed
E) during which at least one resource may be varied
Q3) When marginal cost is decreasing,total cost is rising.
A)True
B)False
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Chapter 8: Perfect Competition
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Sample Questions
Q1) The motivating force behind an increase in supply in a long-run adjustment to equilibrium is
A) lower prices
B) economic profits that are present in the short run
C) higher profit expectations among owners of firms in the industry,triggered by increased prices
D) normal profits witnessed by individuals outside the industry that trigger entry
E) the decreases in average cost that can be obtained through economies of scale
Q2) Exhibit 8-20 shows the cost schedule for 'No#2 widget factory'.We know that the market for widgets is perfectly competitive,and the widgets are selling for $10 each.How many widgets should the factory produce to maximize its profit?
A) 1
B) 2
C) 3
D) 4
E) 5
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Chapter 9: Amonopoly
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257 Flashcards
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Sample Questions
Q1) What is the relationship between price elasticity of demand and the monopolist's revenue?
A) marginal revenue is maximized where demand is unit elastic.
B) average revenue is maximized where demand is unit elastic.
C) marginal revenue is negative where demand is inelastic.
D) average revenue is negative where demand is inelastic.
E) marginal revenue is lowest where demand is unit elastic.
Q2) The firm in Exhibit 9-5
A) is operating in the short run
B) is operating in the long run
C) will exit the industry in the long run
D) shut down in the short run
E) could be operating in either the short run or the long run
Q3) Consider Exhibit 9-8.What is the profit-maximizing price?
A) $70
B) $80
C) $23.33
D) $20
E) it is impossible to determine price because only information on total revenue is given
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Page 11
Chapter 10: Monopolistic Competition and Oligopoly
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219 Flashcards
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Sample Questions
Q1) Bank-with-us and First-Bank are the only two banks in GreenVillage,and they are trying to increase their profits by attracting more customers.Consumers are indifferent between banks;they are interested only in the interest rate they can earn on their savings.Assume that each bank can choose to offer a 2% or a 5% interest rate on savings.If both banks are offering 2% interest rate,they split the market and each earns $1.6 billion in profits.If both banks are offering 5% interest rate,they split the market and each earns $1.2 billion in profits.If one offers 2% and the other one offers 5%,the bank offering the higher interest rate earns $2 billion in profits,and the other bank earns only $1 billion.Which of the following statements is correct?
A) If Bank-with-us is offering 2% interest rate,then First-Bank is also offering 2% interest rate
B) If Bank-with-us is offering 2% interest rate,then First-Bank is offering 5% interest rate
C) First-Bank will offer 2% interest rate no matter what the other bank does
D) Bank-with-us will offer 2% interest rate only if First-Bank will offer 2%
E) Bank-with-us will offer 5% interest rate no matter what the other bank does
Q2) A player's strategy is a game plan when decisions are interdependent
A)True
B)False
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Chapter 11: Resource Markets
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) The market supply curve of a resource is
A) downward sloping
B) upward sloping
C) horizontal at the market price
D) vertical
E) determined by firms
Q2) Other things equal,similar resources in alternative uses will be paid
A) different amounts based on their different uses
B) different amounts based on the alternative uses
C) different amounts if resources are mobile
D) similar amounts if resources are not mobile
E) similar amounts if resources are mobile
Q3) Which of the following is an example of resources that are substitutes?
A) steel and glass used in auto manufacturing
B) glue and wood used in furniture manufacturing
C) buttons and cotton used in shirt manufacturing
D) leather and rubber used in basketball manufacturing
E) eggs and flour used in baking
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13
Chapter 12: Labor Markets and Labor Unions
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211 Flashcards
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Sample Questions
Q1) If union demands result in a surplus of labor in some industries,the resulting
A) increased demand for labor in the nonunion sector drives nonunion wages up
B) decreased demand for labor in the nonunion sector drives nonunion wages down
C) increased supply of labor in the nonunion sector drives nonunion wages down
D) increased supply of labor in the nonunion sector drives nonunion wages up
E) decreased supply of labor in the nonunion sector drives nonunion wages up
Q2) Most collective bargaining agreements in the United States are reached
A) only after binding arbitration
B) only after a strike
C) without a strike
D) only after a strike lasting at least three weeks
E) only after government intervention to avoid a strike
Q3) Through collective bargaining,
A) representatives of an employer negotiate with the rank and file of the union membership
B) union and nonunion members combine forces in negotiation
C) craft and industrial unions combine forces in negotiation
D) contracts are worked out between representatives of the union and employer representatives
E) union workers must accept contracts negotiated by their representatives
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Chapter 13: Capital, interest, and Corporate Finance
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) The present value of a promise to pay $5,000 every year forever when the prevailing interest rate is 10 percent equals
A) $5,000
B) $50,000
C) $100,000
D) $250,000
E) $500,000
Q2) If people have a positive rate of time preference,they
A) must be rewarded for saving
B) are willing to pay more for a good that saves them money if they hold on to it a long time
C) prefer to consume in the future when things are cheaper
D) prefer time deposits to savings accounts
E) prefer leisure over labor
Q3) Interest is a payment for deferred
A) taxation
B) saving
C) consumption
D) investment
E) none of the above
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Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) According to Coase,firms emerge when
A) transaction costs in the market are less than the cost of hierarchical control
B) transaction costs in the market are more than the cost of hierarchical control
C) prices in the market are less than the cost of hierarchical control
D) prices in the market are more than the cost of hierarchical control
E) implicit contracts in the market can be made explicit in a firm
Q2) In Exhibit 14-2,the point I<sub>1</sub> indicates
A) the optimal amount of information gathered
B) common knowledge
C) the opportunity cost of the consumer's time
D) adverse selection
E) that all information is costly
Q3) Adverse selection is more likely when
A) a job requires specific training
B) a job requires intangible or unmeasurable abilities
C) the wage offered is above the average of all wages in the market
D) the wage is based on true marginal revenue products
E) performance can be monitored closely
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Chapter 15: Economic Regulation and Antitrust Policy
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) A monopoly or group of firms acting together as a monopoly
A) cannot perform the economic task of resource allocation
B) allocates resources in the most efficient way possible
C) misallocates resources by producing more output than a competitive industry would
D) misallocates resources by producing where the marginal benefit of the final unit produced exceeds its marginal cost
E) misallocates resources by producing where the marginal benefit of the final unit produced is less than its marginal cost
Q2) Because of the rise of global competition and free trade,
A) antitrust policy serves no purpose
B) antitrust policy may be less necessary than previously thought
C) U.S.industrial concentration poses more of a threat to consumers
D) U.S.markets are becoming less contestable
E) U.S.manufacturers are seeking fewer trade barriers
Q3) In order to ensure allocative efficiency on the part of a natural monopoly,regulators would set price equal to marginal cost.
A)True
B)False
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Chapter 16: Public Goods and Public Choice
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119 Flashcards
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Sample Questions
Q1) Refer to Exhibit 16-4.Suppose the government announced it would give monopoly power to one firm in the industry through an exclusive license.According to the theory of rent seeking,what is the maximum amount that might be spent on rent seeking to get that license?
A) $500,000
B) $8
C) $250,000
D) $150,000
E) $75,000
Q2) To the extent that special-interest groups engage in rent seeking,they A) are guilty of tax evasion
B) tend to make the economy more efficient
C) support legislation transferring wealth to themselves only if the measure increases the economy's overall efficiency
D) shift resources from endeavors that create income to activities that simply transfer income
E) tend to increase the economy's total output of goods and services while redistributing income
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Chapter 17: Externalities and the Environment
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Sample Questions
Q1) The 'Nuts & Bolts' factory is located next to the movie set for 'The silent man'.The noise coming from the factory makes the movie production close to impossible.The factory can be sound-proofed for $2 million or it can be moved for $4 million.The movie set can be moved for $1.5 million.Assume that the factory has the property right.What would be the optimal solution to this problem?
A) The factory should pay for its own sound-proofing
B) The movie producers should pay for the sound-proofing of the factory
C) The movie producers should pay to move the movie set
D) The factory should pay to move the movie set
E) The factory should pay to move the factory
Q2) The common pool problem
A) occurs whenever goods are not rivals in consumption
B) is an example of adverse selection
C) arises whenever property rights are well defined
D) is usually caused by government intervention into private markets
E) is one in which resources to which access is unrestricted will tend to be overused
Q3) Oil is an example of a renewable resource.
A)True
B)False
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Page 19
Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) Which of the following is incorrect regarding the income assistance programs?
A) They can be cash transfer or in-kind transfer programs
B) They are means tested
C) The largest income assistance program is Medicaid
D) They require recipients to have a work history
E) The fastest growing income assistance program is Supplemental Security Income
Q2) The most recent data indicates households in the top fifth of the income distribution earn nearly ten times as much income as those in the bottom fifth.
A)True
B)False
Q3) The official poverty definition in the U.S.is having an income that
A) provides minimum biological needs
B) is less than three times the cost of a nutritionally adequate yet frugal diet
C) places the household in the bottom 20 percent of the income distribution
D) is less than the average U.S.welfare allowance
E) is approximately equal to the average household income of Canada
Q4) In every age group,average income in the United States increases with education.
A)True
B)False
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Chapter 19: International Trade
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Sample Questions
Q1) To be effective,an import quota must
A) reduce the price and increase the quantity of imports
B) set the price of the imported good higher than the domestic equilibrium price
C) restrict imports to less than would be imported under free trade
D) restrict imports to less than exports in trade with that particular country
E) be directed at the product of a specific country
Q2) Which of the following is not correct regarding dumping?
A) In the country where products are dumped,consumer surplus grows as a result of the dumping.
B) Dumping involves the selling of a product by foreign producers at a price lower than that in their own countries.
C) Critics of dumping recommend applying a tariff as the correct antidumping measure.
D) A major difficulty with dumping by firms in other countries is that it drives up prices to the domestic consumer.
E) Predatory dumping is often aimed at driving domestic producers out of business.
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Chapter 20: International Finance
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224 Flashcards
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Sample Questions
Q1) A rightward shift of the Mexican demand curve for foreign exchange will
A) decrease the price of foreign exchange in Mexico
B) increase the value of the peso
C) make foreign goods less expensive in terms of pesos
D) make foreign goods more expensive in terms of pesos
E) make Mexican goods more expensive in terms of foreign exchange
Q2) Which of the following is not considered a unilateral transfer?
A) foreign aid from one government to another
B) income earned from foreign investments
C) personal gifts to friends in foreign countries
D) donations to foreign countries from non-government domestic charities
E) government transfers to foreign residents
Q3) Which of the following is not classified as a service in the current account?
A) transportation
B) insurance
C) tourist expenditures
D) income earned from foreign investments
E) unilateral transfers
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Chapter 21: Developing and Transitional Economies
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Sample Questions
Q1) In a system of impersonal exchange,
A) bureaucratic ties on the production side are critical
B) the economy benefits from specialization and modern technology
C) inside connections on the consumption side are necessary
D) successful institutional evolution makes no difference
E) there is very little division of labor
Q2) GDP (gross domestic product) measures the market value of all goods and services produced by resources supplied by the countries' residents and firms,regardless of the location of the resource.
A)True
B)False
Q3) The group of countries more likely to have a high number of telephone lines per 1,000 people is
A) high-income countries
B) zero-income countries
C) infinite-income countries
D) low-income countries
E) middle-income countries
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