Business Economics
Test Bank
Course Introduction
Business Economics explores the application of economic theories and principles to real-world business decision-making. The course covers key topics such as demand and supply analysis, market structures, pricing strategies, production and costs, and the impact of government policies on business operations. Students will learn how businesses interpret economic trends, assess market opportunities, and allocate resources efficiently to maximize profits. Emphasizing both microeconomic and macroeconomic perspectives, the course equips students with analytical tools and frameworks essential for strategic planning and informed managerial decision-making in todays dynamic business environment.
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 Verified Questions
143 Flashcards
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Sample Questions
Q1) The production possibility curve:
A) is convex to the origin.
B) is based on the law of diminishing returns.
C) is the boundary between attainable and unattainable outputs.
D) reflects the mixed economy found with most economic systems.
Answer: C
Q2) The statement that "the unemployment rate will increase as the economy moves into a recession" is an example of:
A) a normative statement.
B) a microeconomic statement.
C) marginal analysis.
D) a generalization.
Answer: D
Q3) Which is not considered to be an economic resource?
A) Land (or other natural resources)
B) Money
C) Labor
D) Tools and machinery
Answer: B
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Page 3
Chapter 2: The Market System and the Circular Flow
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) From society's point of view,the economic function of profits is to:
A) equalize incomes.
B) ensure that the rich get richer.
C) provide revenues to pay high wages.
D) direct resources in response to changes in the economy.
Answer: D
Q2) Which is not one of the Four Fundamental Questions?
A) How will goods and services be produced?
B) How should the system promote progress?
C) Who is to receive the output of the system?
D) What goods and services should be produced by government?
Answer: D
Q3) Which of the following does not explain why specialization increases output?
A) Specialization capitalizes on differences in ability.
B) Specialization promotes self-sufficiency and independence.
C) Specialization fosters learning by doing.
D) Specialization saves time by eliminating shifting between tasks.
Answer: B
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4
Chapter 3: Demand, Supply, and Market Equilibrium
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179 Flashcards
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Sample Questions
Q1) Ticket scalping:
A) imposes economic losses on both buyers and sellers.
B) creates economic gains for both buyers and sellers.
C) imposes losses on buyers but creates gains for sellers.
D) imposes losses on sellers but creates gains for buyers.
Answer: B
Q2) An increase in demand accompanied by an increase in supply will increase the equilibrium quantity,but the effect on equilibrium price will be indeterminate.
A)True
B)False
Answer: True
Q3) A leftward shift of a product supply curve might be caused by:
A) an improvement in the relevant technique of production.
B) a decline in the prices of needed inputs.
C) an increase in consumer incomes.
D) some firms leaving an industry.
Answer: D
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Page 5
Chapter 4: Elasticity of Demand and Supply
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Sample Questions
Q1) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1.To increase total revenues,you should:
A) increase the price of the software.
B) decrease the price of the software.
C) hold the price of the software constant.
D) increase the supply of the software.
Q2) When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available,they are assuming that students who pay full tuition:
A) have elastic demand and students who use financial aid have inelastic demand.
B) have inelastic demand and students who use financial aid have elastic demand.
C) view a college education as an inferior good and students who use financial aid view it as a normal good.
D) view a college education as a normal good and students who use financial aid view it as an inferior good.
Q3) The demand for cocaine is believed to be relatively elastic among addicts.
A)True
B)False
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Page 6
Chapter 5: Market Failures: Public Goods and Externalities
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Whenever there are negative or positive externalities,the Coase theorem suggests that it is economically efficient for the government to intervene to resolve the externality problem.
A)True
B)False
Q2) When external or spillover benefits occur in the production of a particular product,the private market tends to provide:
A) none of the product.
B) too much of the product.
C) too little of the product.
D) the socially optimal amount of the product.
Q3) The government receives all of the benefits associated with the production of a public good.
A)True
B)False
Q4) The market demand curve for a pure public good shows the total value that all individuals place on each unit of the good.
A)True
B)False
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Chapter 6: Businesses and Their Costs
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) The minimum efficient scale of a firm:
A) is realized somewhere in the range of diseconomies of scale.
B) occurs where marginal product becomes zero.
C) is in the middle of the range of constant returns to scale.
D) is the smallest level of output at which long-run average total cost is minimized.
Q2) A business organization that owns and operates one or more plants is:
A) a firm.
B) an industry.
C) a partnership.
D) an S corporation.
Q3) For most producing firms:
A) marginal cost rises as output is carried to a certain level,and then begins to decline.
B) total costs rise as output is carried to a certain level,and then begin to decline.
C) average total costs decline as output is carried to a certain level,and then begin to rise.
D) average total costs rise as output is carried to a certain level,and then begin to decline.
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Chapter 7: Pure Competition
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155 Verified Questions
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Sample Questions
Q1) If there is allocative efficiency in a purely competitive market for a product,the minimum price producers are willing to accept is:
A) less than marginal benefit.
B) greater than marginal cost.
C) equal to the amount of efficiency or deadweight losses.
D) equal to the maximum price consumers are willing to pay.
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 short-run equilibrium,a competitive firm cannot earn economic profits.
A)True
B)False
Q4) In long-run equilibrium a purely competitive firm will operate where price is:
A) greater than MR but equal to MC and minimum ATC.
B) greater than MR and MC but equal to minimum ATC.
C) greater than MC and minimum ATC but equal to MR.
D) equal to MR,MC,and minimum ATC.
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Chapter 8: Pure Monopoly
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Sample Questions
Q1) Suppose a monopolist produces output where total revenue is maximized.At that output,the price elasticity of demand for the monopolist's output is:
A) greater than or equal to one.
B) less than one.
C) equal to one.
D) impossible to determine without data.
Q2) Which statement is correct?
A) Monopolist firms tend to be more internally efficient than competitive firms because they have a single goal of profit maximization.
B) Monopolist firms are sheltered from competitive forces and such an environment makes them subject to X-inefficiency.
C) Monopolist firms are in industries with low barriers to entry that tend to lower the cost of producing products.
D) Competitive firms tend to be more efficient than monopolist firms because they maximize per-unit profits,not total profits.
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10
Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The kinked-demand curve model of oligopoly:
A) suggests a firm's rivals will ignore a price cut but match a price increase.
B) suggests small changes in unit costs will have no effect on equilibrium price and output.
C) assumes a firm's rivals will match any price change it may initiate.
D) assumes a firm's rivals will ignore any price change it may initiate.
Q2) What is a positive effect of advertising?
A) It reduces economic efficiency in the economy.
B) It promotes economic concentration in industry.
C) It is designed to persuade rather than inform consumers.
D) It provides information that reduces search costs.
Q3) A potential negative effect of advertising for society is that it can:
A) be the major cause of price wars among firms in the industry.
B) reduce mutual interdependence and increase competition.
C) be self-canceling and contribute to economic inefficiency.
D) lower barriers to entry and undermine profits in the industry.
Q4) The demand curve of the monopolistic competitor is likely to be more elastic than the demand curve of the pure monopolist.
A)True
B)False
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Chapter 10: Wage Determination
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164 Flashcards
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Sample Questions
Q1) Which is characteristic of monopsony?
A) The type of labor employed is relatively mobile.
B) The supply curve for labor lies above the marginal resource cost curve.
C) The wage rate it must pay workers varies directly with the number of workers it employs.
D) The firm's employment is a small portion of the total employment of that type of labor.
Q2) The labor market for teachers in a small,isolated community that has one school district would be best described as a(n):
A) natural monopoly.
B) bilateral monopoly.
C) monopsony.
D) oligopsony.
Q3) A firm in a purely competitive product market finds it must increase wages to attract extra workers.The firm will hire labor up to the point where the marginal:
A) product of labor equals the wage rate.
B) revenue product of labor equals the wage rate.
C) revenue product of labor starts to decline.
D) revenue product is less than the cost of hiring an extra worker.
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Page 12
Chapter 11: Income Inequality and Poverty
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) The basic argument for income inequality is that it is necessary if consumer satisfaction (utility)is to be maximized.
A)True
B)False
Q2) Complete income equality using the Gini ratio would be reflected by a value of:
A) 3.
B) 2.
C) 1.
D) 0.
Q3) A Lorenz curve shows:
A) the tax and transfer trade-off.
B) how many households are living in poverty.
C) perfect income equality.
D) the distribution of income.
Q4) One of the major causes of income inequality is the difference in:
A) unemployment benefits.
B) transportation.
C) education.
D) housing.
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Chapter 12: Public Finance: Expenditures and Taxes
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) (Applying the Analysis)Which of the following claims is not made by defenders of lotteries?
A) Lotteries are a relatively painless way to fund important government services.
B) Lotteries help reduce organized crime by providing an alternative to illegal gambling.
C) Lotteries are preferable to taxes because they are voluntary.
D) Lotteries are progressive in nature,with higher income families playing more frequently.
Q2) Given supply,the more inelastic the demand for a product,the larger the portion of an excise tax that is shifted to consumers.
A)True
B)False
Q3) Which of the following is an exhaustive governmental outlay?
A) A federal $5,000 subsidy check to an Illinois farmer
B) A Temporary Assistance to Needy Families payment made by the State of New York
C) A NASA payment to Boeing Corporation for space hardware
D) A federal old age insurance payment to a retired coal miner
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Chapter 13: International Trade and Exchange Rates
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If there is no comparative advantage between two countries:
A) one country must be more productive in producing all goods than the other.
B) the benefits resulting from trade are increased.
C) there are no gains from specialization and trade.
D) each country should specialize in the production of a particular commodity.
Q2) Which country is the United States' most important trading partner?
A) Germany
B) Japan
C) China
D) Canada
Q3) There is a fall in the relative prices of Japanese goods to American goods when the: A) yen appreciates.
B) dollar appreciates.
C) inflation rate in the United States is higher than the inflation rate in Japan,and there are flexible exchange rates.
D) inflation rate in Japan is higher than the inflation rate in the United States and there are fixed exchange rates.
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