Business Economics
Test Questions
Course Introduction
Business Economics explores the application of economic theories and methodologies to real-world business scenarios. The course covers fundamental concepts such as demand and supply analysis, market structures, pricing strategies, cost and production theories, and the role of government in business. Emphasizing decision-making at both the firm and industry levels, the course equips students with analytical tools to interpret economic data, evaluate market dynamics, and make informed managerial decisions. By connecting economic principles to practical business challenges, students gain a solid foundation for strategic planning and resource allocation in diverse organizational settings.
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) An economist would classify 100 shares of Apple Computer stock as capital.
A)True
B)False
Answer: False
Q2) Economists generally believe that
A) buyers and sellers have all the information they can use
B) additional information is costly to acquire
C) decision makers have complete knowledge of all the alternatives available
D) economic decisions result from random behavior
E) decision makers never make mistakes
Answer: B
Q3) In economics,"capital" refers to
A) money
B) stocks,bonds,and other financial assets
C) the seat of government
D) machines,buildings,tools,and knowledge
E) net worth (assets minus liabilities)
Answer: D
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3
Chapter 2: Economic Tools and Economics Systems
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) The law of increasing opportunity cost reflects the fact that
A) the production possibilities frontier is bowed inward
B) resources are not perfectly substitutable
C) resources cannot always be used efficiently
D) an economy will operate at a point inside the production possibilities frontier
E) an economy will operate at a point along the production possibilities frontier
Answer: B
Q2) Of the various types of economic systems,pure market capitalism involves the greatest government interference and control over the economy.
A)True
B)False
Answer: False
Q3) A point inside the production possibilities curve illustrates a situation in which resources are not fully employed
A)True
B)False
Answer: True
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Page 4
Chapter 3: Economic Decision Makers
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196 Verified Questions
196 Flashcards
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Sample Questions
Q1) If one dollar is initially equal in value to one euro and demand for euros increases,then each dollar will be worth
A) more than one euro,and European imports will be cheaper in the United States
B) less than one euro,and European imports will be more expensive in the United States
C) more than one euro,and European imports will be more expensive in the United States
D) less than one euro,and European imports will be cheaper in the United States
E) the same as the euro,and there will be no change in the values of imports or exports
Answer: B
Q2) The value of a country's imports cannot exceed the value of its exports.
A)True
B)False
Answer: False
Q3) Most economists assume that the goal of elected officials is to promote the public interest.
A)True
B)False
Answer: False
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Chapter 4: Demand, supply, and Markets
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222 Verified Questions
222 Flashcards
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Sample Questions
Q1) Which of the following is true of the relationship between price and quantity supplied?
A) There is always an inverse relationship.
B) More is supplied at lower prices.
C) Producers work harder and sell more when the price decreases.
D) There is a direct relationship between price and quantity supplied.
E) It is always true that a higher price leads to a decrease in quantity supplied.
Q2) Suppliers recognize there is a shortage in the market for their product when they notice that
A) the quantity supplied exceeds the quantity demanded
B) the quantity demanded is falling
C) inventories are falling
D) production exceeds new orders for the product
E) government economists announce a shortage exists
Q3) A price floor set below the equilibrium price will result in a surplus.
A)True
B)False
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Chapter 5: Elasticity of Demand and Supply
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238 Flashcards
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Sample Questions
Q1) If the income elasticity of demand for a service is 0.6,then a 5 percent increase in income will generate a _____ in quantity demanded
A) 3 percent decrease
B) 3 percent increase
C) 8.33 percent decrease
D) 8.33 percent increase
E) 0.12 percent decrease
Q2) As producers have more time to adjust to a price change,price elasticity of supply
A) increases
B) decreases
C) remains the same
D) rises and then falls
E) falls and then rises
Q3) If people have more time to adjust to a price change,
A) demand becomes more elastic,and supply becomes less elastic
B) demand becomes less elastic,and supply becomes more elastic
C) both supply and demand become less elastic
D) both supply and demand become more elastic
E) elasticity of both demand and supply tends toward unity
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Page 7
Chapter 6: Consumer Choice and Demand
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) The law of demand states that
A) quantity demanded is inversely related to price
B) quantity demanded is directly related to income
C) marginal utility is inversely related to quantity consumed
D) total revenue is directly related to price
E) demand curves are linear
Q2) Suppose that Hannah spends $3 to buy five biscuits.The marginal utility of the fifth biscuit is valued at $0.60;total utility of the five biscuits is valued at $4.20.Given this information,what do we know about consumer surplus?
A) It is impossible to determine consumer surplus without knowing the marginal utility of the first four biscuits.
B) It is impossible to determine consumer surplus without knowing the price per biscuit.
C) It is impossible to determine consumer surplus without knowing the price Hannah was willing to pay for the first five biscuits.
D) Consumer surplus is equal to $2.40.
E) Consumer surplus is equal to $1.20.
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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) A young chef is considering opening his own sushi bar.To do so,he would have to quit his current job,which pays $20,000 a year,and take over a store building that he owns and currently rents to his brother for $6,000 a year.His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity.What are his implicit costs?
A) $26,000
B) $66,000
C) $78,000
D) $52,000
E) $72,000
Q2) Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1,Sally's normal profit is
A) $80,000
B) $41,000
C) $65,000
D) $35,000
E) $24,000
Q3) Implicit cost involves a direct cash payment for the use of a resource.
A)True
B)False
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Page 9
Chapter 8: Perfect Competition
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250 Verified Questions
250 Flashcards
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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) Which of the following is not true of a perfectly competitive market?
A) Firms experience constant returns to scale.
B) Firms face significant barriers to entry.
C) Economic profit is zero.
D) Each firm chooses the quantity it wants to sell.
E) Each firm knows the prices of outputs and inputs.
Q3) Marginal revenue is the change in total revenue from using one more unit of an input in the short run.
A)True
B)False
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10
Chapter 9: Amonopoly
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) What is true at the profit-maximizing quantity for a nondiscriminating monopolist but not true of a perfectly competitive firm?
A) Price equals marginal cost.
B) Price is greater than marginal cost.
C) Marginal revenue equals marginal cost.
D) Marginal revenue is less than marginal cost.
E) Marginal revenue is greater than average revenue.
Q2) For a monopolist that does not price discriminate,economic profit is maximized in the short run at a price of $140.Marginal revenue at that output level is
A) equal to $140
B) greater than $140
C) less than $140
D) less than marginal cost
E) greater than average revenue
Q3) Monopolists can earn positive economic profits in the long run because they are more productively efficient than perfectly competitive firms.
A)True
B)False
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Chapter 10: Monopolistic Competition and Oligopoly
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219 Verified Questions
219 Flashcards
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Sample Questions
Q1) The tit-for-tat strategy implies that the firms
A) in non-competitive industries match price increases but ignore price decreases
B) will follow the lead of the dominant firm in making pricing decisions
C) prices will change whenever fixed cost changes
D) cooperate on the first round,and then follow your competitors reactions on the second round
E) price will only change if demand changes
Q2) As a real estate agent,Krista Otavi prides herself on her good training,availability to clients,and hard work to make a sale.Which one of the basic ways of product differentiation does Krista emphasize?
A) services
B) product image
C) location
D) commission rate
E) physical differences
Q3) In the long run in monopolistic competition,all economies of scale are exhausted. A)True
B)False
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12
Chapter 11: Resource Markets
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) In Exhibit 11-1,economic rent at equilibrium equals
A) $40
B) $80
C) $160
D) $16
E) $8
Q2) Permanent differentials in resource prices will cause
A) all of the following
B) the allocation of fewer resources to lower-paid uses
C) the equalization of payments for the same resource in different uses
D) no change in the allocation of resources
E) the allocation of more resources to higher-paid uses
Q3) Suppose that with two fro-yo machines,12 workers produce eight quarts of fro-yo.If the marginal product of the thirteenth worker is two quarts,then
A) thirteen workers produce ten quarts
B) thirteen workers produce two quarts
C) the thirteenth worker alone produces ten quarts
D) the law of diminishing returns cannot be operating in this example
E) diminishing returns must begin with the thirteenth worker
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Page 13
Chapter 12: Labor Markets and Labor Unions
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Rick's labor supply schedule is given in Exhibit 12-9.If the wage rate increases from $10 to $15,then:
A) The substitution effect equals the income effect
B) No labor is supplied
C) The substitution effect dominates the income effect
D) The income effect dominates the substitution effect
E) The supply curve is vertical
Q2) If a teachers' union negotiates the wage for all college professors,the market supply curve of college professors
A) is perfectly elastic everywhere
B) is perfectly inelastic everywhere
C) is horizontal and then it slopes upward
D) is vertical and it slopes upward
E) slopes upward and then becomes horizontal
Q3) A worker's labor supply depends on,among other things,his ability,his preference for the task,and the opportunity cost of his time.
A)True
B)False
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14
Chapter 13: Capital, interest, and Corporate Finance
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) The difference between income and consumption is
A) rent
B) profit
C) saving
D) opportunity cost
E) roundabout consumption
Q2) You expect to rent out a vacation home on Sanibel Island for $800 a month as an investment.Upkeep is estimated at $3,000 a year.If the current market interest rate is 5 percent,you are willing to pay __________ for the house.
A) $132,000
B) $100,000
C) $160,000
D) $192,000
E) $800,000
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) The firm becomes the dominant organization type whenever A) markets exist
B) markets don't exist
C) the net value of centralized,organized production exceeds the net value of market-arranged production
D) the net value of market-arranged production exceeds the net value of centralized,organized production
E) private enterprise eliminates shirking
Q2) The academic dean at Esoteric University hires a philosopher to teach one of the 12 sections of a course called "Why Nerf Balls Ingest Hair." Which of the following is true?
A) The academic dean is the agent;the philosopher is the principal.
B) The academic dean is the agent;the students are the principals.
C) The academic dean is the principal;the students are the agents.
D) The philosopher is the principal to both the academic dean and the students.
E) The philosopher is an agent to both the academic dean and the students.
Q3) Asymmetric information exists when both sides of a market approach perfect information.
A)True
B)False
Page 16
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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) Which of the following practices is not prohibited by the Clayton Act?
A) merger through the acquisition of assets,which substantially lessens competition
B) price discrimination that substantially lessens competition
C) tying contracts that substantially lessen competition
D) exclusive dealing that substantially lessens competition
E) interlocking directorates that substantially lessen competition
Q2) 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
Q3) Technological change is decreasing competition in the market for media.
A)True
B)False
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17
Chapter 16: Public Goods and Public Choice
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Competing-interest legislation is characterized by
A) concentrated costs and concentrated benefits
B) concentrated benefits and widespread costs
C) widespread benefits and widespread costs
D) widespread benefits and concentrated costs
E) zero costs
Q2) Rent seeking reduces our economy's overall efficiency by
A) getting government to adopt legislation that actually reduces production
B) disseminating market information
C) lowering taxes
D) getting voters more interested in politics
E) reducing equity
Q3) A good that is nonrival but exclusive is called
A) a private good
B) a public good
C) a quasi-private good
D) an external good
E) a normal good
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Chapter 17: Externalities and the Environment
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187 Verified Questions
187 Flashcards
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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 $200,000 or it can be moved for $4 million.The movie set can be moved for $1.5 million.Assume that the movie set 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) When competitive market equilibrium determines a level of output for which the marginal social cost exceeds the marginal social benefit,the private equilibrium results in
A) a positive externality
B) a Coase equilibrium
C) underproduction of the product
D) a market failure
E) external benefits
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Chapter 18: Income Distribution and Poverty
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) All of the following are problems with assessing the income distribution,except:
A) There is no objective standard to evaluate them
B) Effects of taxes and in-kind transfers are neglected
C) Doesn't take into account the fact that household sizes differ across quintiles
D) A better measure of income inequality is the distribution of spending
E) Effects of the underground economy are taken into account
Q2) Data on the U.S.income distribution suggest that
A) black-white income differentials have decreased
B) black-white income differentials have increased
C) the distribution of income among blacks is more uneven than the overall distribution of income
D) the distribution of income among blacks is less uneven than the overall distribution of income
E) the distribution of income among blacks follows approximately the same pattern as the overall distribution of income
Q3) Poor welfare recipients face higher marginal tax rates than do the richest families.
A)True
B)False
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Chapter 19: International Trade
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161 Verified Questions
161 Flashcards
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Sample
Questions
Q1) Exhibit 19-8 shows the demand and supply of shirts for the country of Eragos.If the world price is $4 per shirt,and the government of Eragos imposes a tariff of $1,the Eragoans are:
A) Producing 11 and importing 4 shirts
B) Producing 8 and importing 15 shirts
C) Producing 11 and importing 13 shirts
D) Producing 8 and importing 4 shirts
E) Producing 11 and importing 20 shirts
Q2) A country will import a good only if
A) there is excess domestic quantity supplied at the world price
B) domestic quantity supplied is greater than world quantity supplied
C) domestic quantity demanded is less than world quantity demanded
D) domestic quantity demanded is zero at the world price
E) excess quantity demanded is positive at the world price
Q3) Quotas and tariffs discourage foreign governments from retaliating with quotas and tariffs of their own.
A)True
B)False
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Chapter 20: International Finance
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) The actions taken by arbitrageurs in the foreign exchange markets
A) destabilize foreign exchange markets
B) are highly risky
C) have no effect on exchange rates
D) help assure that exchange rates are equalized across all markets
E) are the same as those undertaken by speculators
Q2) Under the gold standard,gold discoveries in Alaska and South America led to
A) both c and d
B) a decrease in the domestic money supply
C) inflation
D) an increase in the domestic money supply
E) deflation
Q3) If the exchange rate changes from 75 cents per euro to $1 per euro,the euro
A) appreciated,since its value has increased
B) appreciated,since the price of U.S.dollars has increased
C) appreciated,making U.S.goods more expensive in Euros
D) depreciated,since its value has declined
E) depreciated,since its value has increased
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Chapter 21: Developing and Transitional Economies
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105 Flashcards
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Sample Questions
Q1) One thing that did not happen in the former Soviet Union was
A) widespread corruption
B) a lack of faith in formal institutions
C) workers bribing officials to get good jobs
D) consumers paying fair market prices to get desired products
E) prices not being allowed to allocate resources efficiently
Q2) Social capital is
A) the shared values and trust that promote cooperation in the economy
B) the buildings and equipment used to produce goods and services
C) a government regulation aimed at improving health and safety
D) the accumulated knowledge,skill,and experience of the labor force
E) the owner's own or borrowed money invested in a business
Q3) If the country of Heehee makes the transition from central planning to a market economy in a matter of months,it is an example of the big-bang approach.
A)True
B)False
Q4) Export promotion has been more successful than import substitution.
A)True
B)False
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