Business Economics
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Course Introduction
Business Economics explores the application of economic theories and principles to real-world business decision-making. This course examines key concepts such as supply and demand, market structures, pricing strategies, production and cost analysis, and the impact of government policies on business operations. Students will analyze how economic forces influence business strategies, resource allocation, and competitive behavior within various markets. The course also addresses contemporary economic issues affecting businesses, equipping students with analytical tools to make informed managerial decisions in a dynamic economic environment.
Recommended Textbook
Foundations of Economics 6th Edition by Robin Bade
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20 Chapters
5153 Verified Questions
5153 Flashcards
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Page 2
Chapter 1: Getting Started
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337 Verified Questions
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Sample Questions
Q1) In the diagram above,which figure(s)show(s)an inverse relationship between the variables?
A) both B and C
B) only B
C) both A and C
D) only D
E) only C
Answer: B
Q2) The figure above shows the relationship between the time a student spends studying and the student's GPA that semester.This figure shows ________ relationship between the time spent studying and the GPA.
A) a positive but not linear
B) a negative
C) no
D) a positive, linear
E) cross-sectionally trended
Answer: A
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Page 3
Chapter 2: The Usand Global Economies
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201 Flashcards
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Sample Questions
Q1) The concept of human capital describes
A) human skills, that is, the quality of labor.
B) human population, that is, the quantity of labor.
C) the number of machines per employed worker.
D) the number of workers per operating machine.
E) the number of machines (capital) that have been produced by people (humans).
Answer: A
Q2) ________ are the largest components of state and local government revenue.
A) Transfers from federal government and corporate income taxes
B) Transfers from federal government and sales taxes
C) Individual income taxes and corporate income taxes
D) Individual income taxes and sales taxes
E) Corporate income taxes and lottery income
Answer: B
Q3) What are the payments each factor of production receives?
Answer: Rent is paid for the use of land.Wages are paid for the services of labor.Interest is paid for the use of productive capital.Entrepreneurs earn a profit.
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Page 4
Chapter 3: The Economic Problem
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Sample Questions
Q1) When drawing a production possibilities frontier,which of the following is held constant?
A) the amount of money in the economy
B) the available factors of production and the state of technology
C) the prices of goods and services
D) the quantity of the goods and services that are produced
E) None of the above because nothing is held constant when drawing the production possibilities frontier.
Answer: B
Q2) Which point in the figure above is an attainable combination that would have unemployed resources?
A) point A
B) point B
C) point C
D) point D
E) point A and point B
Answer: C
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Chapter 4: Demand and Supply
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Sample Questions
Q1) In the above figure,the movement from point a to point b reflects
A) an increase in the price of pizza.
B) an increase in the supply of pizza.
C) an increase in the number of producers of pizza.
D) a decrease in the cost of the tomato sauce used to produce pizza.
E) a decrease in income if pizza is a normal good.
Q2) When there is a shortage of parking spaces at your college,the
A) demand for parking spaces is greater than the supply.
B) supply of parking spaces is greater than the demand.
C) quantity of parking spaces supplied is greater than the quantity of parking spaces demanded.
D) quantity of parking spaces demanded is greater than the quantity of parking spaces supplied.
E) Both answers A and D are correct.
Q3) Which of the following increases the demand for a good or service?
A) a fall in the price of the good or service
B) a smaller number of consumers wanting to buy the good or service
C) a rise in the price of the good or service
D) a rise in the price of a substitute good or service
E) a rise in the price of a complement
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Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) The income elasticity of demand for movies in the United States is 3.41.If people's incomes decrease by 1 percent,what is the decrease in the quantity of movies demanded?
Q2) Does the fact that the price elasticity of demand for a good is inelastic violate the law of demand?
Q3) Suppose Starbucks currently charges $3.25 per cup for its latte.If Starbucks lowers the price to $3.00 per cup,based on the demand curve in the figure above,its total revenue will ________ because the demand for Starbucks latte is ________ over this price range.
A) increase; elastic B) decrease; elastic C) increase; inelastic D) increase; unit elastic E) not change; unit elastic
Q4) The table above gives the demand schedule for a good.Using the midpoint method,find the price elasticity of demand between points A and B,between B and C,between C and D,and between D and E.
Q5) If the price elasticity of supply of corn is 3.12,then is the supply of corn elastic or inelastic?
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) The figure above shows the demand curve for pizza and the market price of pizza. In the figure above,how much do the consumers pay in total for the quantity of pizza they buy per day?
A) $100,000
B) $150,000
C) $125,000
D) $50,000
E) None of the above answers is correct.
Q2) In a figure,the consumer surplus is equal to the area ________ the ________ curve and ________ the price.
A) above; demand; above B) below; supply; below C) below; demand; below D) below; demand; above E) above; supply; below
Q3) At the current production point on a nation's production possibilities frontier,the marginal benefit of a slice of pizza is 500 tacos while the marginal cost of producing a slice of pizza is 750 tacos.For the nation to produce at the point of allocative efficiency,what should be done?
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Page 8
Chapter 7: Government Actions in Markets
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Sample Questions
Q1) A black market for housing exists because of a rent ceiling.The rent for housing in the black market is
A) the same as the equilibrium rent.
B) lower than the ceiling rent.
C) somewhere between the ceiling rent and the maximum rent a tenant is willing to pay.
D) somewhere between zero and the equilibrium rent.
E) not defined because the market is not legal.
Q2) Suppose the equilibrium rent in Denver is $1,050.A rent ceiling of $755 per month leads to
A) a surplus of apartments in Denver.
B) a shortage of apartments in Denver.
C) no change in the Denver apartment market.
D) fair prices in the Denver market.
E) compared to the situation at the equilibrium rent, a decrease in the quantity of apartments demanded and an increase in the quantity of apartments supplied.
Q3) Will an increase in the minimum wage create more unemployment if the supply and demand for labor are highly elastic or highly inelastic?
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Chapter 8: Taxes
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Sample Questions
Q1) Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles,then the price of an automobile buyers pay
A) increases by $1,000.
B) increases by less than $1,000.
C) increases by more than $1,000.
D) decreases by $1,000.
E) does not change.
Q2) If the demand curve for a good is horizontal,a tax is levied on this product is
A) split between the buyers and the sellers but not evenly so that either the buyer or the seller pays more.
B) split evenly between the buyers and the sellers.
C) paid entirely by buyers.
D) paid entirely by sellers.
E) not paid by either the buyers or the sellers.
Q3) The table above gives the taxable income and the amount of tax paid.
a.Is this income tax progressive,regressive,or proportional?
b.If the taxable income is $25,000,what is the average tax rate?
c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?
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Page 10
Chapter 9: Global Markets in Action
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Sample Questions
Q1) When protection is encouraged to protect a growing domestic industry; which of the following is being used?
A) Save domestic jobs argument
B) National security argument
C) Anti-dumping argument
D) Infant-industry argument
E) Diversity and stability argument
Q2) Assume that the state of Missouri decided to place a tariff on every product produced outside the state in an effort to increase the state's revenue and increase employment in the state.If Missouri did so,
A) the state's total output would definitely increase.
B) workers with jobs in new firms replacing out-of-state imports would earn high income.
C) the standard of living within Missouri would decrease.
D) other states would begin to dump in Missouri.
E) the prices of goods imported into Missouri would fall.
Q3) How do imports affect buyers' consumer surplus?
Q4) What is the national security argument for restricting international trade? What is its flaw?
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Chapter 10: Externalities
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Sample Questions
Q1) Which of the following is an example of an activity that creates an external cost?
i.a smoker emitting second-hand smoke
ii.sulfur emitting from a smoke stack
iii.throwing garbage on the roadside
A) i only
B) i and ii
C) iii only
D) ii and iii
E) i, ii, and iii
Q2) The Coase theorem deals with the problem of pollution by
A) giving the government regulatory power over polluters.
B) making all polluters stop polluting.
C) establishing and enforcing private property rights.
D) having the government take over ownership of all polluting processes.
E) allowing the government to set the proper emission charge.
Q3) What do we mean by "property rights" and why are they important?
Q4) "Education in elementary and high schools has external benefits because families who have a lot of children do not pay any more than families without children." Is this statement correct or incorrect? Explain your answer.
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) The tendency of political parties to propose identical policies which appeal to the maximum number of voters is referred to as the principle of
A) maximum differentiation.
B) minimum differentiation.
C) minimum marginal utility.
D) maximum returns.
E) agreement.
Q2) The figure above shows the marginal cost and marginal benefit of police protection in the city of Hugo,Oklahoma.Police protection is a public good.If the city of Hugo hires 25 officers,then
A) marginal cost will exceed marginal benefit, which means that the efficient number of officers is more than 25.
B) marginal cost will exceed marginal benefit, which means that the efficient number of officers is less than 25.
C) marginal benefit will exceed marginal cost, which means that Hugo should reduce the number of officers they hire.
D) marginal benefit equals marginal cost.
E) None of the above answers is correct.
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13
Chapter 12: Markets With Private Information
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Sample Questions
Q1) Suppose that there are only two types of used cars,peaches and lemons.Peaches are worth $10,000,and lemons are worth $6,000.Three fourths of all used cars are peaches,and one fourth are lemons.In a market with no signals,for instance,a market without warranties,the average value of cars actually sold will be
A) $6,000.
B) $7,000.
C) $7,500.
D) $9,000.
E) $10,000.
Q2) In the market for health care services,Health Maintenance Organizations
A) exist to insure people with pre-existing medical conditions.
B) overprovide medical care and thereby result in increased costs.
C) help overcome adverse selection by enrolling only healthy clients.
D) help overcome moral hazard by monitoring the quality of the service.
E) None of the above answers are correct.
Q3) What role does moral hazard play in the market for health care?
Q4) What is the missing insurance market in health care? Why don't private markets provide this insurance?
Q5) Explain the concept of moral hazard.Give an example.
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Chapter 13: Consumer Choice and Demand
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287 Flashcards
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Sample Questions
Q1) An indifference curve shows
A) utility maximizing levels of consumption.
B) preferred combinations of goods.
C) a diminishing marginal rate of substitution as more of both goods are consumed.
D) combinations of goods among which a person is indifferent.
E) an increasing marginal rate of substitution for a good as more of it is consumed.
Q2) The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah will be at what point on her budget line if she spends $300 per week on rose bushes?
A) Point a
B) Point b
C) Point c
D) Point f
E) Point e
Q3) What is the marginal rate of substitution and how does it relate to an indifference curve?
Q4) If your budget increases,what is the effect on your budget line?
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Page 15
Chapter 14: Production and Cost
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Sample Questions
Q1) The average total cost curve is U-shaped.At the quantity of output where average total cost is at its minimum,is the marginal cost curve above the average total cost curve,below the average total cost curve,or intersecting the average total cost curve?
Q2) In the long run,
A) some resources are fixed.
B) all resources are variable.
C) output cannot be varied.
D) all resources are fixed.
E) Both answers B and C are correct.
Q3) When the long-run average cost curve is downward sloping,
A) economies of scale are present.
B) diseconomies of scale are present.
C) the firm experiences constant returns to scale.
D) the average fixed cost curve must be upward sloping.
E) The premise of the question is wrong because long-run average cost curves never slope downward.
Q4) What do economists mean when they say that a firm's plant is fixed?
Q5) When plotted against the total output,what does the total fixed cost curve look like?
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Chapter 15: Perfect Competition
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Sample Questions
Q1) Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14,to maximize its profit the firm should
A) do nothing because it is already maximizing its profit.
B) decrease its production.
C) increase its production.
D) shut down.
E) increase the price it charges for its product.
Q2) A perfectly competitive firm will maximize profit when the quantity produced is such that the
A) firm's total revenue is equal to total cost.
B) firm's marginal revenue is equal to the price.
C) firm's marginal revenue is equal to its marginal cost.
D) price exceeds the firm's marginal cost by as much as possible.
E) firm's marginal revenue exceeds its marginal cost by the maximum amount possible.
Q3) Is the number of sellers in the market the only thing that is different in each of the four market types economists study?
Q4) What is a perfectly competitive firm's short-run supply curve?
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Page 17
Chapter 16: Monopoly
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Sample Questions
Q1) If the market in the figure above is perfectly competitive,consumer surplus is the area ________.
A) ABH
B) BFGH
C) ACG
D) BCD
E) ACE
Q2) With perfect price discrimination,the level of output
A) exceeds the efficient quantity.
B) is the same as the amount produced by any monopoly that price discriminates.
C) is the same as the amount produced in a perfectly competitive market.
D) equals the amount produced by a single-price monopoly.
E) is unknown.
Q3) For a monopoly,marginal revenue is equal to
A) the amount people buy at a given price.
B) the amount people buy between two prices.
C) the change in total revenue brought about by a one-unit increase in quantity sold.
D) the price multiplied by the quantity sold.
E) the price of the product.
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Page 18
Chapter 17: Monopolistic Competition
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Sample Questions
Q1) How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?
Q2) Which of the following four-firm concentration ratios is consistent with monopolistic competition?
A) 100 percent
B) 75 percent
C) 25 percent
D) 0 percent
E) 91 percent
Q3) Suppose there are 7 firms in the candy industry with the market shares shown above.What is the HHI for the industry?
A) 1850
B) 2000
C) 6400
D) 100
E) 20
Q4) "One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?
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Chapter 18: Oligopoly
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Sample Questions
Q1) Resale price maintenance can be illegal
A) under the Clayton Act.
B) under the Sherman Act.
C) only if the distributors engage in predatory pricing.
D) if distributors tell the manufacturer the maximum price at which they will sell the product.
E) only when it is combined with territorial confinement.
Q2) To determine if a market is an oligopoly,we need to determine if
A) the market's HHI is less than 900.
B) there are many firms in the market.
C) the firms are so few that they recognize their mutual interdependencies.
D) the firms make identical or differentiated products.
E) cartels are legal in their market.
Q3) What is the conclusion in the prisoners' dilemma?
A) Firms should not enter a legal duopoly.
B) Two prisoners acting in their own best interest harm their joint interest.
C) There is no Nash equilibrium available to the prisoners.
D) Prisoners do not act interdependently.
E) Duopolies almost always reach their best outcome.
Q4) What is a cartel?
Page 20
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Chapter 19: Markets for Factors of Production
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Sample Questions
Q1) Because leisure time has value to many workers,as wages increase the labor supply curve
A) has a positive slope.
B) bends backwards and has a negative slope.
C) becomes a horizontal line.
D) becomes a vertical line.
E) bends forward and has a positive slope.
Q2) The rule for employing a profit-maximizing amount of labor is to continue to hire additional workers until the additional worker's value of marginal product is
A) less than the wage rate.
B) equal to the wage rate.
C) greater than 1.
D) less than the price of the product.
E) equal to the price of the product.
Q3) What factors other than the wage rate influence the demand for labor? How is demand affected by changes in these factors?
Q4) Why is the demand for labor a "derived demand"?
Q5) Why does an increase in the minimum wage increase the demand for union labor?
Q6) What tools can unions use to increase the demand for union labor?
Page 21
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Chapter 20: Economic Inequality
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Sample Questions
Q1) Poverty for a household is defined as the state of
A) having a total income that is below the median total income.
B) having an income that can be spent on food, shelter, and clothing that is below the median for food, shelter, and clothing.
C) income below what is thought fair.
D) income below what is thought necessary for food, shelter, and clothing.
E) having an income that is below average.
Q2) The ________ distance between the supply curve of low-skilled labor and the supply curve of high-skilled labor is the ________.
A) horizontal; value of marginal product of skill
B) horizontal; compensation for cost of acquiring skill
C) vertical; value of marginal product of skill
D) vertical; compensation for cost of acquiring skill
E) vertical; difference in the price of the product produced b y high-skilled labor minus the price of the product produced by low-skilled labor
Q3) What is a Lorenz curve?
Q4) What is "human capital"? How is it important in the determination of a worker's wage rate?
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Page 22