Business Economics
Test Questions
Course Introduction
Business Economics explores the application of economic theory and quantitative methods to business decision-making. The course covers concepts such as demand and supply analysis, cost and production functions, market structures, pricing strategies, and the economic environment of business. Students will learn how to assess market conditions, optimize resource allocation, and evaluate the impact of government policies on business operations. By integrating real-world case studies and practical examples, the course aims to develop analytical skills necessary for strategic planning and informed decision-making in a dynamic economic landscape.
Recommended Textbook
Microeconomics 10th Edition by William Boyes
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Page 2
Chapter 1: The Wealth of Nations: Ownership and Economic Freedom
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Sample Questions
Q1) Which economic concept is the closest to the saying, "There's no such thing as a free lunch"?
A)Specialization
B)Unlimited wants
C)Underutilization of resources
D)Opportunity costs
E)Overutilization of resources
Answer: D
Q2) Economics is the study of:
A)the allocation of scarce resources and the ways in which human decision makers utilize those resources.
B)the methods that human decision makers use to transform a scarce good into a non-economic good.
C)how to operate a business successfully.
D)a utopian society.
E)how to make money in the stock market.
Answer: A
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Page 3
Chapter 2: Scarcity and Opportunity Costs
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Sample Questions
Q1) A point inside a nation's production possibilities curve can represent:
A)a recession.
B)an increase in population size.
C)an economic growth.
D)a technological advancement.
E)an improvement in living standards.
Answer: A
Q2) Which of the following is an example of opportunity cost?
A)The Chinese food that you give up when you choose to eat Italian food.
B)The tuition that you pay to attend college.
C)For a professor of economics, the pleasure that he or she derives from teaching economics.
D)Sweets given up by a person who would never eat them even if he or she could.
E)The price paid for a ticket when you go for a movie.
Answer: A
Q3) Gains from trade can be realized if each country specializes in the production of a good in which it has a comparative advantage.
A)True
B)False
Answer: True
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Chapter 3: Markets and the Price System
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Sample Questions
Q1) Every Friday night Elizabeth either goes bowling or goes to the movies. Because the price of bowling went up, Elizabeth now sees more movies. Elizabeth's behavior would be best described as a change in which determinant of demand?
A)Price of complementary goods
B)Expectations
C)Income
D)Number of buyers
E)Price of substitute goods
Answer: E
Q2) Most markets involve the use of money for transactions because:
A)goods and services can be exchanged more easily with money than without it.
B)goods and services cannot be exchanged without money.
C)using money requires a double coincidence of wants.
D)the transaction costs of using money are very high.
E)the value of money remains same across countries over time.
Answer: A
Q3) Without money, no transaction can occur.
A)True
B)False
Answer: False
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Chapter 4: The Aggregate Economy
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Sample Questions
Q1) Which of the following is true of fiscal spending at the federal, state, and local levels of the U.S. government?
A)In 2009, total government spending equalled around $1 billion.
B)Investment expenditure in the U.S. exceeds the total spending at all levels of government.
C)Government spending at federal, state, and local levels declined steadily from the 1960s until about 1980.
D)Through the 1950s and 1960s, the U.S. government maintained a balanced budget.
E)Federal government spending exceeds state and local government spending in the U.S.
Q2) Which of the following statements about transfer payments is true?
A)Transfer payments are not included in total government expenditures.
B)Transfer payments involve the international remittance of funds.
C)Transfer payments refer to the transfer of money by the commercial banks to the people.
D)Transfer payments are made by the government to taxpayers.
E)Transfer payments are made when governments purchase goods and services.
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Chapter 5: Using Economics to Understand the World
Around You
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Sample Questions
Q1) To say that "there is a scarcity of gold" means that:
A)gold prices will plummet.
B)there is not enough gold to satisfy people's demand.
C)there are a very few substitutes for gold.
D)gold is relatively less expensive than other metals.
E)the demand for gold is changing.
Q2) Refer to figure 5.3. If people refuse to offer labor unless they receive a wage higher than the equilibrium wage, then:
A)there will be a shift in the equilibrium point.
B)the quantity of labor demanded will increase from Q to Q<sub>II</sub>.
C)the quantity of labor demanded will fall from Q to Q<sub>I</sub>.
D)the wage rate will move up, from $6 to $8.
E)the wage rate will fall from $6 to $4.
Q3) In the United States, there is a federal minimum wage that is followed by each state.
A)True
B)False
Q4) The demand for health care is perfectly elastic.
A)True
B)False
Page 7
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Chapter 6: Elasticity: Demand and Supply
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Sample Questions
Q1) The price elasticity of demand is the ratio of the change in quantity demanded to the change in price.
A)True
B)False
Q2) When economists speak of the short run, they are referring to _____.
A)a specific period of time, usually less than one year
B)a specific period of time, more than one year, but less than two years
C)a specific period of time just long enough that the quantities of all resources can be varied
D)a period of time short enough that the quantities of at least one of the resources cannot be varied
E)a period of time short enough that none of the quantities of the resources can be varied
Q3) If the demand for a good is perfectly inelastic, then:
A)the value of price elasticity of demand of the good is equal to 1.
B)the value of price elasticity of demand of the good is equal to -1.
C)the demand curve of the good is nonexistent.
D)consumers are very responsive to a change in the price of the good.
E)quantity demanded does not change when price of the good changes.
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Page 8
Chapter 7: Demand: Consumer Choice
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Sample Questions
Q1) If total utility increases by smaller and smaller amounts as more units of a product are consumed, then marginal utility is:
A)decreasing and is a negative amount.
B)decreasing and is a positive amount.
C)zero.
D)increasing and is a negative amount.
E)increasing and is a positive amount.
Q2) As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.
A)True
B)False
Q3) The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.
A)marginal utility
B)total utility
C)disutility
D)profit
E)the law of diminishing marginal utility
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9
Chapter 8: Supply: the Costs of Doing Business
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105 Flashcards
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Sample Questions
Q1) The average total cost incurred by a firm is calculated by dividing:
A)the change in total cost by the change in the quantity of output.
B)total output by the number of people employed.
C)the change in total output by the change in the number of people employed.
D)total cost by total output.
E)total output by total cost.
Q2) Economies and diseconomies of scale are the reasons why short-run average total cost decreases and then increases.
A)True
B)False
Q3) In the long run,
A)some resources are variable and some resources are fixed.
B)all the resources can be varied.
C)all resources are fixed.
D)at least one resource is fixed.
E)there are no explicit costs.
Q4) The difference between average total cost and average variable cost decreases with an increase in output.
A)True
B)False
10
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Chapter 9: Profit Maximization
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Sample Questions
Q1) In Figure 9.3, if the marginal revenue of the firm is constant at $55, calculate the profit earned by the firm at the profit-maximizing level of output?
A)$35
B)$40
C)$600
D)$4,800
E)$0
Q2) A perfectly competitive firm charges a price which is greater than its marginal cost.
A)True
B)False
Q3) Firms under perfect competition produce:
A)homogeneous products.
B)unique products.
C)either standardized or differentiated products.
D)differentiated products.
E)antique products.
Q4) The opportunity cost of going to movies is the price of entry into the movies.
A)True
B)False
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Chapter 10: Perfect Competition
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Sample Questions
Q1) For which of the following types of firm does the average revenue curve coincide with the marginal revenue curve?
A)A monopolist
B)An oligopoly firm
C)A monopolistically competitive firm
D)A perfectly competitive firm
E)A monopsonist
Q2) If at the profit-maximizing level of output, a typical perfectly competitive firm's price is greater than its average total cost, the firm should increase output.
A)True
B)False
Q3) In the short run, if the marginal cost exceeds the marginal revenue, a perfectly competitive firm should:
A)raise the level of output to maximize profit.
B)keep the level of output constant.
C)raise the level of output to minimize loss.
D)reduce the level of output to minimize loss.
E)shut down.
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Chapter 11: Monopoly
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Sample Questions
Q1) In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are 0. What would be the amount of consumer surplus if the market was perfectly competitive?
A)$1,000,000
B)$500,000
C)$300,000
D)$250,000
E)$350,000
Q2) If a monopolist is producing the output level at which price equals average total cost in the short run, then the firm is earning a normal profit.
A)True
B)False
Q3) Refer to Table 11.4. Assuming that the monopolist is maximizing profits, the price the monopolist will charge is _____.
A)$13
B)$14
C)$12
D)$16
E)$15
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Page 13
Chapter 12: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) A monopolistically competitive market is characterized by:
A)one firm selling a unique product.
B)many firms selling identical products.
C)many firms selling similar but differentiated products.
D)few firms selling identical products.
E)few firms selling similar but differentiated products.
Q2) Oligopoly can arise from:
A)diseconomies of scale in production.
B)limited demand for a product in the market.
C)government regulations.
D)easy availability of the crucial inputs.
E)reduction of trade barriers.
Q3) Strategic behavior occurs when a firm takes a particular strategy without considering the policies of its rivals.
A)True
B)False
Q4) A deadweight loss arises in a perfectly competitive market as each firm is a price taker.
A)True
B)False
Page 14
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Chapter 13: Markets and Government
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Sample Questions
Q1) When the benefits of an activity are received by those who are not directly involved in it, _____.
A)a negative externality exists
B)the government is producing a free good
C)resources are being used in their highest-valued activity
D)the government has to compensate for the loss in social welfare
E)a positive externality exists
Q2) When the government imposes a tax on the production of a commodity:
A)production will invariably increase.
B)the cost of production increases, so the supply curve shifts to the left.
C)the benefits of consumption increases, so the demand curve shifts to the right.
D)there is no change in demand or supply of the commodity.
E)both the demand and supply curves shift to the right.
Q3) When the government makes the people creating an externality, pay for it, the externality is said to be internalized.
A)True
B)False
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Page 15
Chapter 14: Antitrust and Regulation
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Sample Questions
Q1) The U.S. Justice Department, on the basis of the Herfindahl index, classifies the industries with the value:
A)below 500 as highly competitive; 500-1000 as moderately competitive; and above 1000 as highly concentrated.
B)below 1000 as highly competitive; 1000-1500 as moderately competitive; and above 1500 as highly concentrated.
C)below 500 as highly competitive; 500-1500 as moderately competitive; and above 1500 as highly concentrated.
D)below 1000 as highly competitive; 1000-1800 as moderately competitive; and above 1800 as highly concentrated.
E)below 1500 as highly competitive; 1500-2000 as moderately competitive; and above 2000 as highly concentrated.
Q2) According to the per se rule, activities that were potentially monopolizing tactics were illegal.
A)True
B)False
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16
Chapter 15: Resource Markets
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Sample Questions
Q1) The structure of the product market as described by Table 14.1 is:
A)monopolistic.
B)oligopolistic.
C)perfectly competitive.
D)monopsonistic.
E)monopolistically competitive.
Q2) Which of the following statements is not true?
A)Assuming a perfectly competitive labor market, a firm selling in a monopolistic product market will have a lower marginal revenue product curve than a firm in a perfectly competitive product market.
B)The intersection of market-labor supply with market-labor demand establishes equilibrium in a perfectly competitive labor market.
C)In monopsonistic labor markets, an individual firm faces a positively sloped labor-supply curve.
D)In a perfectly competitive labor market, an individual firm can hire as many workers as it needs at the equilibrium wage rate
E)In a monopsonistic labor market, marginal revenue product is equal to the value of marginal product.
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Chapter 16: The Labor Market
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Sample Questions
Q1) The Civil Rights Act of 1964 in the United States led to _____.
A)the introduction of the concept of discrimination.
B)complete elimination of discrimination from the labor force.
C)the creation of equal opportunities for men and women.
D)the creation of equal opportunities for the members of different races.
E)the establishment of a much clearer definition of discrimination.
Q2) Statistical discrimination is legal under the disparate impact standard but illegal under the treatment standard.
A)True
B)False
Q3) Reliance on indicators of productivity such as education, experience, and test scores may keep some very good people from getting a job and may result in hiring unproductive people. This is called:
A)worker prejudice.
B)statistical discrimination.
C)crowding out.
D)disparate treatment.
E)comparable worth.
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18
Chapter 17: The Capital Market
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Sample Questions
Q1) A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:
A)pooled stock venue.
B)stock clump.
C)stock agreement.
D)mutual fund.
E)maximal diversified investment (MDI).
Q2) Why are bonds less risky than stocks?
A)The dividend given on shares is usually less than the coupon-rate on bonds.
B)Bonds can be issued only by the government whereas shares are issued by private firms.
C)Bondholders have a claim on the assets of the firm whereas the shareholders do not.
D)Shareholders are entitled to a share of the company's earnings.
E)The higher the profit of the firm, the greater the share of the bondholders.
Q3) Bonds and stocks act as complementary goods such that a rise in the price of one raises the demand for the other.
A)True
B)False
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Chapter 18: The Land Market and Natural Resources
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Sample Questions
Q1) Unlike nonrenewable resources, the timing of extraction of renewable resources are independent of the market rate of interest.
A)True
B)False
Q2) Like profit-seeking, rent seeking is also a productive activity and contributes to the growth of the economy.
A)True
B)False
Q3) With the passage of time as the availability of an exhaustible resource declines, the cost of extraction of the resource increases.
A)True
B)False
Q4) Common ownership may fail to ensure that harvesting of renewable resources does not exceed the maximum sustainable yield.
A)True
B)False
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Chapter 19: Current Issues: Income, Income Distribution, Poverty,
and Government Policy
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Sample Questions
Q1) When a low-income individual receives a transfer payment, that individual has less of an incentive to forgo leisure time for work time.
A)True
B)False
Q2) Unemployment insurance provided by the U.S. government is usually funded by:
A)the excise duties imposed on the import of foreign goods.
B)the national tax on payrolls levied on firms.
C)external borrowing by the U.S. government.
D)printing new money.
E)selling off government bonds.
Q3) According to Table 19.1, what percentage of income is received by the top 40% of the population?
A)41.6%
B)51.9%
C)60.8%
D)56.2%
E)68.6%
Q4) Economic stagnation and recession result in unemployment and poverty.
A)True
B)False
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Chapter 20: World Trade Equilibrium
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Sample Questions
Q1) According to Table 20.1, the opportunity cost of producing one unit of wheat in the U.S. equals:
A)half a unit of cloth.
B)one-third of a unit of cloth.
C)one-fourth of a unit of cloth.
D)4 units of cloth.
E)8 units of cloth.
Q2) Refer to Table 20.3. What is the least amount Japan is willing to accept for 1 calculator?
A)1 pound of rice
B)5 pounds of rice
C)2 pounds of rice
D)2.5 pounds of rice
E)Half a pound of rice
Q3) Refer to Scenario 20.1. Which of the following statements is true?
A)Brazil has a comparative advantage in producing coffee.
B)Brazil has a comparative advantage in producing both coffee and sugar.
C)Chile has a comparative advantage in producing both coffee and sugar.
D)Neither Chile nor Brazil has a comparative advantage in producing coffee.
E)Brazil has a comparative advantage in producing sugar.
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Chapter 21: International Trade Restrictions
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Sample Questions
Q1) In a free trade area, member nations have no trade barriers among themselves, but are free to set their own trade policies toward nonmembers.
A)True
B)False
Q2) Which of the following statements about an increasing-returns-to-scale industry is not true?
A)It will tend to concentrate production in the hands of a very few large firms.
B)Firms in the industry face higher costs per unit of production as their level of output increases.
C)Opportunity costs may rise with the level of output in such industries.
D)Tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale.
E)The costs of producing a unit of output fall as more output is produced in such industries.
Q3) The world output is higher if the countries follow restrictive trade policies rather than free trade.
A)True
B)False
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23
Chapter 22: Exchange Rates and Financial Links Between Countries
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Sample Questions
Q1) One of the advantages of floating exchange rates is that:
A)consumers always know how much imported goods cost.
B)businesses always know, in advance, what future exchange rates will be.
C)countries are free to pursue their own macroeconomic policies without maintaining exchange rates.
D)countries cannot act independently and must thus coordinate their macroeconomic policies.
E)the global interest rate tends to decline to the lowest possible level.
Q2) Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.
A)currency board
B)crawling peg
C)reserve currency
D)conventional fixed peg
E)independent float
Q3) Because of their greediness, speculators are considered bad for exchange-rate markets.
A)True
B)False
24
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