Contemporary Economic Issues
Exam Practice Tests
Course Introduction
This course explores major economic challenges facing modern societies, examining issues such as globalization, income inequality, financial crises, unemployment, inflation, environmental sustainability, and the impact of technological change. Students will analyze how policymakers and markets respond to these issues, using economic reasoning and current data. Case studies and real-world examples help illuminate the complexities of economic decision-making in a globalized world, equipping students with the analytical tools to understand and critically assess pressing economic debates and policy proposals.
Recommended Textbook
Economics 20th Edition Volume I and Volume II by Campbell R. McConnell
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21 Chapters
2785 Verified Questions
2785 Flashcards
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) The economizing problem is one of deciding how to make the best use of:
A) virtually unlimited resources to satisfy virtually unlimited wants.
B) limited resources to satisfy virtually unlimited wants.
C) unlimited resources to satisfy limited wants.
D) limited resources to satisfy limited wants.
Answer: B
Q2) Although sleeping in on a work day or school day has an opportunity cost,sleeping late on the weekend does not.
A)True
B)False
Answer: False
Q3) Which of the following statements pertains to macroeconomics?
A) Because the minimum wage was raised,Mrs.Olsen decided to enter the labor force.
B) A decline in the price of soybeans caused farmer Wanek to plant more land in wheat.
C) National income grew by 2.7 percent last year.
D) The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.
Answer: C
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3
Chapter 2: The Market System and the Circular Flow
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109 Flashcards
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Sample Questions
Q1) The wants of consumers are expressed in the product market with "dollar votes."
A)True
B)False
Answer: True
Q2) Specialization in production is economically beneficial primarily because it:
A) allows everyone to have a job that he or she likes.
B) permits the production of a larger output with fixed amounts of resources.
C) facilitates trade by bartering.
D) guarantees full employment.
Answer: B
Q3) Market economies use capital goods because they improve productive efficiency.
A)True
B)False
Answer: True
Q4) Which of the following is not one of the five fundamental questions?
A) What prices will be charged for goods and services?
B) Who will get the goods and services?
C) What goods and services will be produced?
D) How will the system promote progress?
Answer: A
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Chapter 3: Demand, Supply, and Market Equilibrium
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) The term "quantity demanded":
A) refers to the entire series of prices and quantities that comprise the demand schedule.
B) refers to a situation in which the income and substitution effects do not apply.
C) refers to the amount of a product that will be purchased at some specific price.
D) means the same thing as demand.
Answer: C
Q2) If demand increases and supply simultaneously decreases,equilibrium price will rise.
A)True
B)False
Answer: True
Q3) If two goods are complements:
A) they are consumed independently.
B) an increase in the price of one will increase the demand for the other.
C) a decrease in the price of one will increase the demand for the other.
D) they are necessarily inferior goods.
Answer: C
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Chapter 4: Market Failures: Public Goods and Externalities
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Sample Questions
Q1) (Consider This)Brinley is the hottest new pop singer,but his agent discovers that Internet sales of Brinley's music have been poor due to Internet piracy,but concerts are regularly sold out and merchandise (such as T-shirts)sells well.If Brinley wants to enhance profits,economists would most likely recommend that he:
A) charge more for downloads,concerts,and merchandise.
B) cut prices for downloads,concerts,and merchandise.
C) only give concerts.
D) keep prices of downloads low and raise prices for concerts and merchandise.
Q2) (Consider This)According to the Coase theorem:
A) government should levy excise taxes on firms that generate spillover or external costs. B) taxes should be levied such that they change private behavior as little as possible. C) private individuals can often negotiate their own resolution of externality problems,without the need for government intervention.
D) private firms should not provide public goods.
Q3) Along a demand curve,product price and consumer surplus are inversely related. A)True B)False
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Chapter 5: Governments Role and Government Failure
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126 Flashcards
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Sample Questions
Q1) "Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:
A) the paradox of voting.
B) logrolling.
C) the benefits-received principle.
D) adverse selection.
Q2) Public choice economists contend public bureaucracies are inefficient primarily because:
A) the value of public goods is more easily measured than is the value of private goods.
B) of the absence of competitive market pressures.
C) public sector workers are more security-conscious than are private sector workers.
D) relatively low pay in government attracts workers of lesser quality.
Q3) Government loan guarantees tend to socialize gains and privatize losses.
A)True
B)False
Q4) Logrolling can either increase or diminish economic efficiency.
A)True
B)False
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Chapter 6: Elasticity
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Sample Questions
Q1) Income elasticity measures the effect of a change in income on the purchases of some good or service.
A)True
B)False
Q2) Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000.Along this portion of the demand curve,price elasticity of demand is:
A) 0.8.
B) 1.2.
C) 1.6.
D) 8.0.
Q3) Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired.GSU is assuming that the demand for education at GSU is: A) decreasing.
B) relatively elastic.
C) perfectly elastic.
D) relatively inelastic.
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Chapter 7: Utility Maximization
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Sample Questions
Q1) The diamond-water paradox occurs because:
A) the price of a product is related to its total utility,not its marginal utility.
B) the price of a product is related to its marginal utility,not its total utility.
C) water is,in fact,very scarce in certain regions of the world.
D) diamonds are more useful than water.
Q2) Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.
A)True
B)False
Q3) (Consider This)A topographical map shows successively higher equal-elevation lines,whereas an indifference map shows successively higher levels of total:
A) utility.
B) revenue.
C) profit.
D) cost.
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9
Chapter 8: Behavioral Economics
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153 Flashcards
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Sample Questions
Q1) Selfishness is:
A) exhibited more strongly in the ultimatum game than in the dictator game.
B) exhibited more strongly in the dictator game than in the ultimatum game.
C) exhibited equally strongly in both the ultimatum and dictator games.
D) rarely exhibited in either the ultimatum or dictator games.
Q2) Hardwired heuristics make it easy to change behavior by simply presenting people with better information.
A)True
B)False
Q3) Fatal automobile accidents occur much more frequently than do fatal airplane crashes,yet airplane crashes receive a disproportionate amount of media coverage.As a result,some people are overly fearful of flying in planes yet have no problem riding in cars.Which of the following cognitive biases best explains this disconnect between these people's fears and the statistical realities?
A) Overconfidence effect.
B) Availability heuristic.
C) Self-serving bias.
D) Confirmation bias.
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Chapter 9: Businesses and the Cost of Production
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159 Flashcards
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Sample Questions
Q1) Fixed costs are associated with:
A) highly adjustable inputs such as labor.
B) both the short run and the long run.
C) the short run only.
D) the long run only.
Q2) (Consider This)Susie purchased a nonrefundable ticket to a soccer match for $20.It will cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car.On the day of the match,Susie's boss offers her $100 to come to work instead.In considering what to do,which of the above would be considered a sunk cost?
A) The $20 ticket to the match.
B) The $10 cost to drive to the match.
C) The $5 cost to park at the stadium.
D) The $100 offered by Susie's boss.
Q3) Which of the following is correct as it relates to cost curves?
A) Average variable cost intersects marginal cost at the latter's minimum point.
B) Marginal cost intersects average total cost at the latter's minimum point.
C) Average fixed cost intersects marginal cost at the latter's minimum point.
D) Marginal cost intersects average fixed cost at the latter's minimum point.
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11
Chapter 10: Pure Competition in the Short Run
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115 Flashcards
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Sample Questions
Q1) If a purely competitive firm is producing at the P = MC output and realizing an economic profit,at that output:
A) marginal revenue is less than price.
B) marginal revenue exceeds ATC.
C) ATC is being minimized.
D) total revenue equals total cost.
Q2) A purely competitive seller should produce (rather than shut down)in the short run:
A) only if total revenue exceeds total cost.
B) only if total cost exceeds total revenue.
C) if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.
D) if total cost exceeds total revenue by some amount greater than total fixed cost.
Q3) A purely competitive seller is:
A) both a "price maker" and a "price taker."
B) neither a "price maker" nor a "price taker."
C) a "price taker."
D) a "price maker."
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12
Chapter 11: Pure Competition in the Long Run
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Sample Questions
Q1) If production is occurring where marginal cost exceeds price,the purely competitive firm will:
A) maximize profit,but resources will be underallocated to the product.
B) maximize profit,but resources will be overallocated to the product.
C) fail to maximize profit and resources will be overallocated to the product.
D) fail to maximize profit and resources will be underallocated to the product.
Q2) If for a firm P = minimum ATC = MC,then:
A) neither allocative efficiency nor productive efficiency is being achieved.
B) productive efficiency is being achieved,but allocative efficiency is not.
C) both allocative efficiency and productive efficiency are being achieved.
D) allocative efficiency is being achieved,but productive efficiency is not.
Q3) Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs,competition produces an efficient allocation of economic resources.
A)True
B)False
Q4) The long-run supply curve for a decreasing-cost industry is downsloping.
A)True
B)False
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Chapter 12: Pure Monopoly
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Sample Questions
Q1) An important economic problem associated with pure monopoly is that,at the profit-maximizing outputs,resources are:
A) overallocated because price exceeds marginal cost.
B) overallocated because marginal cost exceeds price.
C) underallocated because price exceeds marginal cost.
D) underallocated because marginal cost exceeds price.
Q2) The pure monopolist's demand curve is relatively elastic:
A) in the price range where total revenue is declining.
B) at all points where the demand curve lies above the horizontal axis.
C) in the price range where marginal revenue is negative.
D) in the price range where marginal revenue is positive.
Q3) A natural monopoly occurs when:
A) long-run average costs decline continuously through the range of demand.
B) a firm owns or controls some resource essential to production.
C) long-run average costs rise continuously as output is increased.
D) economies of scale are obtained at relatively low levels of output.
Q4) In the short run a pure monopolist will charge the highest price the market will bear for its product.
A)True
B)False
Page 14
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Chapter 13: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) If neither player has an incentive to deviate from the outcome of a game,the outcome is a Nash equilibrium.
A)True
B)False
Q2) Which of the following is a unique feature of oligopoly?
A) Mutual interdependence.
B) Advertising expenditures.
C) Product differentiation.
D) Nonprice competition.
Q3) If an industry evolves from monopolistic competition to oligopoly,we would expect:
A) the four-firm concentration ratio to decrease.
B) the four-firm concentration ratio to increase.
C) the four-firm concentration ratio to remain the same.
D) barriers to entry to weaken.
Q4) The likelihood of a cartel being successful is greater when:
A) firms are producing a differentiated,rather than a homogeneous,product.
B) cost and demand curves of various participants are very similar.
C) the number of firms involved is relatively large.
D) the economy is in the recession phase of the business cycle.
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Chapter 14: Technology RD and Efficiency
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) All of the following increase the expected rate of return on R&D expenditures except:
A) patents.
B) trademarks.
C) imitation by others.
D) trade secrets.
Q2) Suppose that a firm's legal staff concludes that a new product that the firm is developing is patentable.Graphically,this new information would shift the firm's expected-rate-of-return curve on R&D to the:
A) right and reduce its optimal amount of R&D.
B) right and increase its optimal amount of R&D.
C) left and increase its optimal amount of R&D.
D) left and reduce its optimal amount of R&D.
Q3) Diffusion is the first successful commercial introduction of a product,the use of a new method,or the creation of a new form of business enterprise.
A)True
B)False
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16
Chapter 15: The Demand for Resources
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Sample Questions
Q1) The fact that monopoly and monopsony exist in resource markets means that:
A) the marginal productivity theory of income distribution is valid.
B) resource prices do not always measure contributions to output.
C) the resulting income distribution is ethically correct.
D) income shares do not exhaust the total output.
Q2) The equation MP<sub>L</sub>/P<sub>L</sub> = MP<sub>C</sub>/P<sub>C</sub>:
A) designates the MR = MC level of output.
B) assumes imperfect competition in the hiring of labor and capital.
C) is a sufficient condition for the maximization of profits.
D) is a necessary,but not sufficient,condition for the maximization of profits.
Q3) The labor demand curve of a purely competitive seller:
A) slopes downward because the elasticity of demand is always less than unity.
B) slopes downward because of diminishing marginal productivity.
C) is perfectly elastic at the going wage rate.
D) slopes downward because of diminishing marginal utility.
Q4) Marginal revenue product (MRP)is the change in total product (total output)associated with hiring an additional unit of labor.
A)True
B)False
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Chapter 16: Wage Determination
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Sample Questions
Q1) Critics of minimum-wage legislation argue that it:
A) keeps inefficient producers in business.
B) reduces employment.
C) undermines incentives to work.
D) is deflationary.
Q2) In which of the following U.S.occupations is the rate of unionization the lowest?
A) Transportation workers.
B) Teachers.
C) Legal workers.
D) Sales workers.
Q3) The majority of union members in the United States belong to unions that are:
A) affiliated with the United Workers of America (UWA).
B) affiliated with the AFL-CIO.
C) independent unions that are not affiliated with the AFL-CIO.
D) growing rapidly in membership.
Q4) Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves,reducing employment of low-wage workers.
A)True
B)False
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Chapter 17: Rent Interest and Profit
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Sample Questions
Q1) The marginal revenue product (MRP)of land declines as more land is brought into use.As a result the:
A) demand curve for land is downsloping.
B) demand curve for land is upsloping.
C) supply curve for land is downsloping.
D) supply curve for land is upsloping.
Q2) Economic profit affects:
A) the allocation of resources but not the level of resource use.
B) the level of resource use but not the allocation of resources.
C) the allocation of resources and the level of resource use.
D) neither the allocation of resources nor the level of resource use.
Q3) Other things equal,the shorter the loan period and the larger the loan size,the higher is the interest rate charged by the lender.
A)True
B)False
Q4) In the market for loanable funds:
A) an increase in available bank lending will increase the interest rate.
B) a decrease in saving will reduce the interest rate.
C) an increase in borrowing for investment will increase the interest rate.
D) a decrease in government borrowing will increase the interest rate.
Page 19
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Chapter 18: Natural Resource and Energy Economics
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165 Flashcards
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Sample Questions
Q1) The Economist's Commodity Price Index reveals that the supply of productive resources has increased faster than the demand for decades.
A)True
B)False
Q2) Which of the following would cause the present optimal extraction level of a nonrenewable resource to fall?
A) An increase in the present value of expected future profits.
B) A decrease in extraction costs.
C) A decrease in user costs.
D) An increase in the current price of the resource.
Q3) Which of the following is true about U.S.energy consumption and per capita real GDP since 1988?
A) Per capita energy consumption and per capita real GDP have both risen.
B) Per capita consumption of energy has been relatively constant,while per capita real GDP has risen.
C) Per capita energy consumption and per capita real GDP have both fallen.
D) Per capita energy consumption has fallen,while per capita real GDP has risen.
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Chapter 19: Public Finance: Expenditures and Taxes
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Sample Questions
Q1) If the demand for a product is perfectly elastic and supply is upsloping,a $1 excise tax per unit on suppliers will:
A) not raise price at all.
B) lower price by $1.
C) raise price by more than $1.
D) raise price by $1.
Q2) Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic.The burden of a $2 excise tax on each tire will be:
A) borne by resource suppliers that provide the inputs for manufacturing tires.
B) shared about equally by buyers and sellers of tires.
C) borne primarily by buyers of tires.
D) borne primarily by sellers of tires.
Q3) Assume you pay a tax of $4,000 on a taxable income of $24,000.If your taxable income were $30,000,your tax payment would be $5,000.This suggests that the tax is:
A) progressive.
B) proportional.
C) regressive.
D) discriminatory.
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21
Chapter 20: Antitrust Policy and Regulation
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Sample Questions
Q1) Tying agreements are contracts by which retailers agree to charge the prices that manufacturers set on branded goods.
A)True
B)False
Q2) Economists who adhere to the laissez-faire antitrust perspective:
A) view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved.
B) believe the antitrust laws are as important today as they were when they were passed in the early 1900s.
C) say that an industry's structure,which is based on economies of scale,usually predicts the behavior of the industry firms.
D) contend that large,dominant firms should be broken into smaller competitive firms and then government should stand back and let competition prevail.
Q3) The Americans with Disabilities Act of 1990 is an example of industrial regulation.
A)True
B)False
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22
Chapter 21: Agriculture: Economics and Policy
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Sample Questions
Q1) The demand for agricultural products rises less rapidly than income.This means that the demand for agricultural products is:
A) income inelastic.
B) income elastic.
C) price inelastic.
D) price elastic.
Q2) If in a certain year the indices of prices received and paid by farmers were 115 and 142 respectively,the parity ratio (in percentage terms)would be:
A) 123.
B) 81.
C) 69.
D) 27.
Q3) (Consider This)Which of the following has been an effect of the U.S.government's ethanol program?
A) Prices for crops such as soybeans and sorghum have fallen dramatically.
B) Prices for beef,pork,and chicken have risen.
C) Water use has declined as corn is a less water-intensive crop.
D) All of these effects have resulted from the ethanol program.
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