Economic Analysis
Exam Answer Key
Course Introduction
Economic Analysis is a foundational course that equips students with the tools and frameworks necessary to systematically evaluate economic problems and policy decisions. Through the study of microeconomic and macroeconomic concepts, students learn how to model market behavior, assess the impact of policy interventions, and analyze data to draw meaningful conclusions about resource allocation, production, consumption, and the broader economy. Emphasis is placed on real-world applications, critical thinking, and quantitative analysis to prepare students for advanced study or professional roles in economics, business, and public policy.
Recommended Textbook
Essentials of Economics 1st Edition by Dirk Mateer
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19 Chapters
2713 Verified Questions
2713 Flashcards
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Page 2
Chapter 1: Thinking Like an Economist
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) An example of a direct,negative incentive is:
A) providing a commission for sales.
B) awarding a promotion for hard work.
C) threatening to fire those who do not perform well.
D) providing an orientation for new employees.
E) providing generous benefits and pay for employees.
Answer: C
Q2) An economist is an individual who would be LEAST able to answer which research question?
A) how much of a product is purchased at a specific price
B) how the tastes and preferences of consumers are determined
C) what firms decide to produce
D) how goods and services are distributed to the population
E) how firms decide to produce a good or service
Answer: B
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Chapter 2: Economic Models and Gains From Trade
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Economists use the scientific method and the tools of economics to study:
A) only the decisions of individuals.
B) only the decisions of business firms.
C) only economic growth and gross domestic product (GDP).
D) only the production possibilities curve.
E) anything around them; the world is the economist's laboratory.
Answer: E
Q2) Which point(s)on the figure show inefficient use of resources?
A) point A.
B) point B.
C) point C.
D) point D.
E) points B, C, and E.
Answer: A
Q3) Draw a production possibilities frontier (PPF)that shows a pizza shop's production trade-offs between producing pizzas and stromboli.Suppose the pizza shop upgrades to a larger,more automated oven.On the same graph,show how the PPF changes.(The oven is used to bake both pizzas and stromboli.)
Answer: 11ea592c_b1fe_7dc1_af5c_cb9d8198940a_TB4867_00
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Page 4
Chapter 3: The Market at Work: Supply and Demand
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) When firms in a market are operating at a loss,you can expect some firms to exit the market,causing the ________ curve to shift to the ________ and making the equilibrium price ________ and the equilibrium quantity ________.
A) demand; right; increase; increase
B) demand; left; decrease; decrease
C) supply; right; decrease; increase
D) supply; left; increase; increase
E) supply; left; increase; decrease
Answer: E
Q2) When the demand curve shifts to the left and all else is held constant,the equilibrium price ________ and the equilibrium quantity ________.
A) falls; rises
B) rises; falls
C) falls; falls
D) rises; rises
E) falls; remains constant
Answer: C
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Chapter 4: Market Efficiency
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) If a store is able to sell a good at the market price,even though the government authorities have set the minimum price that can be charged,the store is selling the good in a(n):
A) black market for a market price that is higher.
B) black market for a market price that is lower.
C) effort to eliminate a surplus of the good.
D) legal market for a market price that is higher.
E) legal market for a market price that is lower.
Q2) Let's say that you are a politician who promises cheaper gasoline for everyone in the country if you are elected.Once you are elected,you make gas cheaper by imposing a price ceiling that is one full dollar less than the market's equilibrium price.What would be the reaction of the sellers of gasoline and of the public to your price ceiling law? Would you expect to be reelected in the long run?
Q3) All else held constant,a decrease in the price of a good would necessarily:
A) increase social well-being.
B) decrease producer surplus.
C) decrease consumer surplus.
D) increase demand for the good.
E) increase producer surplus.
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Page 6
Chapter 5: Costs and Production: How Do Businesses Work?
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Assume that a firm hires an additional employee.If the marginal product for that employee is greater than for the previous employee hired,it must be because:
A) the marginal product of labor is diminishing.
B) all workers are paid the same wage.
C) the workers all perform the exact same set of tasks.
D) there are gains from specialization.
E) all workers are not paid the same wage.
Q2) If a firm wants to cut its costs through more efficient production,we should assume that the firm is trying to:
A) fire its employees.
B) increase its profits.
C) eliminate its competition.
D) buy back its stock.
E) gain control over its market.
Q3) Explain the difference between an implicit cost and an explicit cost,and explain how both costs relate to economic profits and profits as computed by accountants.
Q4) What is an implicit cost?
Q5) How are long-run costs different from short-run costs?
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Chapter 6: Market Structures
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Holding all else constant,a decrease in the market demand for a product in a competitive market would cause:
A) the average total cost (ATC) curve of the firms to decrease.
B) an increase in the price a firm could charge for the product.
C) the marginal cost (MC) curve of the firms to decrease.
D) the marginal revenue (MR) curve of the firms to shift downward/leftward.
E) an increase in profits for the firm.
Q2) In the year 2576,intergalactic travel is possible.A firm on Earth,Plantorium,produces 95% of Earth's jetpacks.A planet with easy access to Earth,Xerckyia,is coming out with new technology that will allow it to produce jetpacks at a lower cost.Describe a scenario in which Plantorium will engage in rent seeking.
Q3) The consumer surplus that is transferred to the monopolist as a result of the monopolist taking over the market is:
A) $900.
B) $150.
C) $300.
D) $100.
E) $450.
Q4) Why are barriers to entry so important to obtaining monopoly power in a market?
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Chapter 7: Behavioral Economics and Game Theory
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Suppose that 34% of customers hearing the sales pitch from the first group purchased the warranty and that 34% of the customers hearing the sales pitch from the second group purchased the warranty.The managers concluded that ________ were not present,so it did not matter how the question about purchasing the warranty was asked.
A) rational effects
B) electronic aptitude effects
C) concerns about fairness
D) framing effects
E) fairness effects
Q2) A finding of no significant difference in 401(k)plan participation after the plan change provides evidence that employee 401(k)participation decisions are made ________ and ________ effects do not exist in the context of 401(k)plan participation.
A) rationally; rational
B) irrationally; priming
C) rationally; framing
D) irrationally; framing
E) rationally; fairness
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9
Chapter 8: Labor Markets and Earnings
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Beth is deciding whether to pick up more hours at work or to take a vacation.This decision best describes:
A) her hours decision.
B) her labor-force participation decision.
C) the value she places on income.
D) the labor-leisure trade-off.
E) the necessity of income.
Q2) Diminishing marginal product occurs when:
A) the marginal product of an input decreases as the quantity of the input increases.
B) total output decreases as the quantity of an input increases.
C) the marginal product of an input decreases as the quantity of the input decreases.
D) total output increases as the quantity of an input increases.
E) the marginal product of an input increases as the quantity of the input increases.
Q3) You and your friend get into an argument when she finds out that you earn more than she does.She says it is not fair,but you argue that there are many reasons why you legitimately earn more.Explain two possible reasons in detail.
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Chapter 9: Government in the Economy
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) A key difference between incentives for government and for business is:
A) government can run a budget deficit while a business cannot.
B) a business must make a profit to survive while a government need not.
C) government need not hire its employees from the labor market while a business must.
D) a business has a credit rating while a government does not.
E) government must elect its leaders while a publicly traded business does not elect its board members.
Q2) How many fishermen will choose to operate their boats?
A) 1
B) 2
C) 3
D) 4
E) 5
Q3) The ability to download music and movies from the Internet without paying is:
A) an example of a negative externality.
B) an example of a club good.
C) an illegal form of free-riding.
D) an illustration of the tragedy of the commons.
E) something that anyone who pays taxes should be allowed to do.
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Chapter 10: What Is Macroeconomics?
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Some individuals are unemployed because it takes time for them to find jobs that fit their skill sets.These individuals would be considered to be:
A) frictionally unemployed.
B) cyclically unemployed.
C) structurally unemployed.
D) overemployed.
E) discouraged workers.
Q2) GDP is best defined as the total market value of all ___________ produced within a country within a given time.
A) goods and services
B) final goods and services
C) services
D) goods
E) final goods
Q3) Define "inflation." List and discuss two views of inflation.
Q4) Explain why Italy experiences higher rates of unemployment during normal economic times than the United States does.
Q5) Analyze the following statement: "Unemployment insurance can cause unemployment."
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Chapter 11: Measuring the Macroeconomy, Inflation, and Unemployment
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) To calculate the labor-force participation rate,you only need to know the:
A) number of employed and unemployed.
B) number of employed and the relevant adult population.
C) unemployment rate.
D) number of employed and unemployed and the relevant adult population.
E) number of employed and the labor force.
Q2) Explain why intermediate goods and used goods do not count in GDP.
Q3) Which of the following equations represents the labor-force participation rate?
A) (number of unemployed / labor force) × 100
B) unemployed + employed
C) (number of employed / labor force) × 100
D) (number of unemployed / relevant population) × 100
E) (labor force / relevant population) × 100
Q4) The root cause of cyclical unemployment is:
A) unemployment insurance.
B) labor market regulations.
C) delays in matching available workers with open jobs.
D) recessions.
E) changes in the industrial makeup of the economy.
Q5) Describe the methodology of finding the consumer price index (CPI).
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Chapter 12: Aggregate Demand and Aggregate Supply
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) Which of the following causes an increase in short-run aggregate supply?
A) The price level increases.
B) The price level decreases.
C) Firms and workers expect the price level to fall.
D) Firms and workers expect the price level to rise.
E) There are fewer workers in the labor force.
Q2) The long-run average growth rate of real GDP in the U.S.economy is about:
A) 2%.
B) 3%.
C) 5%.
D) 10%.
E) 1%.
Q3) A rightward shift of the long-run aggregate supply curve means there has been:
A) a decrease in the unemployment rate.
B) an increase in the unemployment rate.
C) an increase in the price level.
D) a decrease in the price level.
E) economic growth.
Q4) Explain the difference between the short-run and long-run aggregate supply curves.
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Chapter 13: Economic Growth and the Wealth of Nations
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138 Flashcards
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Sample Questions
Q1) Between 2006 and 2010,per capita real gross domestic product (GDP)in India grew at an average rate of 7.11% per year.Which of the following factors would have contributed most to this rapid escalation in growth?
A) advances in technology
B) increases in government regulations
C) a decrease in education standards
D) a significant increase in taxes
E) restrictions on immigration
Q2) Which of the following is an example of an institution that promotes economic growth?
A) private-property rights
B) bartering as a means of trade
C) high barriers to international trade
D) constant war and conflict
E) collective property ownership
Q3) How would an increase in capital goods,holding the size of the labor force constant,help to make workers more productive and increase economic growth?
Q4) List,define,and give an example of each of three types of resources.
Q5) How did institutions promote economic growth during the Industrial Revolution?
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Chapter 14: Savings, Investment, and the Market for Loanable Funds
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Which of the following reflects an accurate economic chain of events?
A) Investment finances savings, which causes the economy to shrink.
B) Savings finances investment, which allows the economy to grow from a larger capital stock.
C) Savings finances future consumption, which allows future production to increase from a larger capital stock.
D) Investment finances future consumption, which allows incomes-and thus savings-to grow.
E) Higher interest rates increase savings, which causes consumption smoothing.
Q2) Which combination of events could have caused the equilibrium interest rate to fall and the equilibrium quantity of loanable funds (both borrowed and loaned)to fall?
A) Firms are more pessimistic, and governments run fewer deficits.
B) A baby boom begins, and investor confidence rises.
C) People have lower time preferences, and governments run larger deficits.
D) People have lower time preferences, and capital is more productive.
E) A baby boom begins, and people have higher time preferences.
Q3) Is it easy to "catch up" if one does not start saving until later in life? Explain your answer.
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Chapter 15: Money and the Federal Reserve
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) I have decided to use my credit card to purchase a new television.What is the immediate consequence of this purchase?
A) There would be a decrease in M1 and an increase in M2.
B) There would be an increase in M1 and an increase in M2.
C) There would be no changes to M1 or M2.
D) There would be a decrease in both M1 and M2.
E) There would be an increase in M1 and a decrease in M2.
Q2) Why do banks hold some deposits,but not 100% of deposits,in reserve?
Q3) The Coppock Bank began the day with $10 million in its reserve account and ended the day with the same amount.If loans were $3 million,what is the bank's total amount of assets?
A) $7 million
B) $11 million
C) $13 million
D) $15 million
E) There is not enough information to solve this.
Q4) Calculate the portion of M2 that was NOT included in M1.
Q5) If the required reserve ratio is 25%,write out the bank's balance sheet at the initial moment of the deposit and include the entries for required reserves,excess reserves,and deposits.
Page 17
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Chapter 16: Monetary Policy
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Sample Questions
Q1) Central banks can use monetary policy to:
A) turn prices from inflexible to flexible.
B) force private banks to lend out reserves.
C) make it easier for people and businesses to borrow.
D) print money.
E) steer the economy out of overexpansion.
Q2) ________ policy is when a central bank acts to increase the money supply in an effort to stimulate the economy.
A) Expansionary monetary
B) Expansionary fiscal
C) Contractionary monetary
D) Contractionary fiscal
E) Countercyclical monetary
Q3) During a financial crisis hit hard by bank failures,the money supply:
A) decreases because people start putting money into savings accounts.
B) increases because people start putting money into savings accounts.
C) increases because people start withdrawing their money from banks.
D) decreases because people start withdrawing their money from banks.
E) increases because people spend more instead of saving more.
Q4) What is quantitative easing? What are the benefits of this new monetary tool?
Page 18
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Chapter 17: Fiscal Policy and Budget Deficits
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Using the table,what is the marginal income tax rate of a $5,000 raise for someone who currently makes $67,000 per year?
A) 10%
B) 15%
C) 25%
D) 28%
E) 0%
Q2) The U.S.federal income tax began in:
A) 1910.
B) 1911.
C) 1912.
D) 1913.
E) 1914.
Q3) During recessionary periods,outlays:
A) increase and tax revenue falls.
B) increase and tax revenue increases.
C) decrease and tax revenue increases.
D) decrease and tax revenue falls.
E) and tax revenue stay the same.
Q4) Explain the differences and similarities between monetary and fiscal policy.
Page 19
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Chapter 18: International Economics
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Assume there is a 35% tariff on bananas imported into the United States.Also,assume that the market competition is at its beginning and the law of one price is not in effect.If the domestic market price of Hawaiian bananas is one dollar per bunch,imported bananas will sell for ________ per bunch.
A) $0.35
B) $0.65
C) $1.00
D) $1.35
E) $1.65
Q2) Many countries deliberately intervene in the foreign currency markets in an attempt to manipulate the value of their own currencies.How is a country able to devalue its currency? What is one advantage and one disadvantage of this type of intervention?
Q3) How many cars (in thousands)will this country import in a trading (open)economy situation?
A) 20
B) 40
C) 60
D) 80
E) 100
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Page 20
Chapter 19: Personal Finance
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Financial risk relates to the probability that the investment:
A) will fail to pay a return to the investor.
B) is subject to sharp price changes.
C) will fall in value.
D) is illiquid.
E) will be subject to government subsidy.
Q2) Opportunity cost refers to:
A) current spending habits.
B) changing economic conditions that affect a person's cost of living.
C) storage facilities to make financial documents easily available.
D) trade-offs associated with financial decisions.
E) avoiding the use of consumer credit.
Q3) Which of the following is the most diversified investment portfolio?
A) equal amounts of stock in Google, Apple, and Microsoft
B) municipal bonds issued by Los Angeles, Houston, and Atlanta
C) one-year, five-year, and ten-year certificates of deposit (CDs)
D) 100 ounces each of gold, silver, and platinum
E) 100 shares of Walmart stock, an IBM bond, and a two-year CD
Q4) What are some repayment options of student loans?
Q5) Explain what is meant by "There is an opportunity to spending found money."
Page 21
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