Economic Analysis
Exam Materials
Course Introduction
Economic Analysis focuses on the systematic study of how individuals, firms, and governments make decisions regarding the allocation of scarce resources. This course introduces essential concepts such as supply and demand, market equilibrium, elasticity, and consumer behavior, while exploring cost structures and the different market dynamics faced by businesses. Analytical tools and quantitative methods are emphasized to evaluate the impact of various economic policies and external factors on markets and society. Through practical applications, students learn to interpret data, construct economic models, and critically assess real-world economic issues, laying a strong foundation for further study in economics and related disciplines.
Recommended Textbook
Economics for Today 4th Asia Pacific Edition by Allan Layton
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19 Chapters
2245 Verified Questions
2245 Flashcards
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Chapter 1: Thinking like an economist
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89 Verified Questions
89 Flashcards
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Sample Questions
Q1) Policies to determine the price of troll dolls are a concern of macroeconomics.
A)True
B)False
Answer: False
Q2) Which of the following would be of particular interest to a microeconomist?
A)The price of fruit the typical household consumes.
B)The nation's inflation rate.
C)The nation's rate of unemployment.
D)The budget of the national government.
E)The growth of the economy.
Answer: A
Q3) Select the positive statement that completes the following sentence: 'If the competition is prohibited in the car manufacturing industry:
A)cost per unit of output will rise'.
B)cars will be unfairly priced'.
C)the rate of inflation should hold steady'.
D)government should pay compensation to workers'.
Answer: A
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Chapter 2: Production possibilities and opportunity cost
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Sample Questions
Q1) The production possibility curve illustrates the important economic concept of opportunity cost.
A)True
B)False
Answer: True
Q2) When the opportunity cost of producing laptops increases as more laptops are produced,then:
A)no more laptops will be produced.
B)resources are equally suited to the production of laptops and to other goods.
C)the production possibilities frontier is a straight line.
D)the production possibilities frontier becomes positively sloped.
E)the law of increasing costs is present.
Answer: E
Q3) The opportunity cost of good A has increased,as resources that are shifted from the production of good B to good A are less efficient in the production of good A.
A)True
B)False
Answer: True
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4
Chapter 3: Market demand and supply
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123 Flashcards
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Sample Questions
Q1) A shortage of wheat:
A)is impossible if people are hungry.
B)is impossible if the price of wheat is higher than the market equilibrium.
C)will result when the quantity supplied exceeds the quantity demanded at the current price.
D)is unlikely to cause any change in the price of wheat.
E)indicates that the problem of scarcity of wheat has been solved.
Answer: B
Q2) An increase in income increases the supply of all goods.
A)True
B)False
Answer: False
Q3) Suppose that X and Y are substitute goods.If the price of good X increases,we can expect:
A)the demand for good X to shift to the left.
B)an upward movement along the demand curve for good Y.
C)the demand curve for good Y to shift to the right.
D)a downward movement along the demand curve for good Y.
E)the demand curve for good Y to shift to the left.
Answer: C
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Chapter 4: Markets in action
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Sample Questions
Q1) In Exhibit 4-4,a movement from A to B in which price has decreased and quantity has increased is best explained by a/an:
A)increase in supply and demand.
B)decrease in supply and demand.
C)increase in supply that dominates a decrease in demand.
D)increase in demand that dominates a decrease in supply.
E)decrease in demand that dominates an increase in supply.
Q2) In Exhibit 4-2,a decrease in quantity demanded would cause a move from which equilibrium point to another,other things being equal?
A)E to E .
B)E to E .
C)E to E .
D)E to E .
Q3) Higher petrol prices would likely raise the price of large,gas-guzzling automobiles
A)True
B)False
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Chapter 5: Elasticity of demand and supply
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Sample Questions
Q1) The major determinants of price elasticity of demand are:
A)availability of complements.
B)availability of substitutes.
C)availability of normal goods.
D)availability of supply.
Q2) Which statement about price elasticity of demand along a linear demand curve is true?
A)As the quantity demanded increases, so does the buyer's sensitivity to price.
B)When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes.
C)The ratio of current price to quantity demanded is a good estimate of the elasticity of demand.
D)The elasticity of demand is less elastic at lower price.
E)When an individual buys 4 units of a good his/her elasticity of demand for each unit increases.
Q3) If the managers of a bus system find that revenues increase when fares are raised,they would conclude that price elasticity demand for a subway service is inelastic.
A)True
B)False
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Page 7
Chapter 6: Production costs
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Sample Questions
Q1) Marginal product measures the change in:
A)total cost brought about by changing production by one unit.
B)product price brought about by changing production by one unit.
C)a firm's revenue brought about by changing production by one unit.
D)the firm's output brought about by employing one additional unit of input.
E)the firm's profit brought about by employing one more input.
Q2) As shown in Exhibit 6-3,what was the marginal product of labour when the second worker was hired?
A)50.
B)100.
C)150.
D)175.
Q3) The short run is a period of time:
A)in which a firm uses at least one fixed input.
B)that is long enough to permit changes in the firm's plant size.
C)in which production occurs within one year.
D)in which production occurs within six months.
Q4) In the long run,all costs are considered variable.
A)True
B)False
Page 8
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Chapter 7: Perfect competition
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125 Flashcards
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Sample Questions
Q1) Refer to Exhibit 7-6.If market price is $22,the firm should:
A)increase the price.
B)increase the output.
C)decrease the output.
D)shut down.
E)continue to operate.
Q2) Marginal analysis is used to determine:
A)the maximum profit by comparing maximum revenue and marginal cost.
B)the profit maximising output.
C)the market price resulting from a one unit change in output.
D)the change in the total cost as the price changes.
Q3) Part of the ACCC's role is to:
A)improve efficiency in markets.
B)encourage adherence to fair trading practices.
C)inform the public about the Trade Practices Act.
D)promote competitive pricing.
E)do all of these listed here.
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Chapter 8: Monopoly
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Sample Questions
Q1) Monopolies exist because of:
A)diseconomies of scale.
B)lack of legal protection.
C)barriers to entry.
D)public ownership of resources.
Q2) Monopolists are criticised because they are inefficient.What is meant by this statement?
A)Monopolists charge too high a price.
B)Monopolists don't innovate enough to control pollution.
C)Monopolists produce a large quantity of waste.
D)Monopolists usually don't produce at the minimum of the ATC.
E)Monopolists could use their resources better elsewhere.
Q3) The monopoly can emerge naturally because:
A)as a firm becomes larger, the cost of production grows.
B)of the relationship between average cost and the scale of an operation.
C)new firms have excess capacity.
D)firms are not interested in entering the monopoly industry.
Q4) Monopolies can charge any price they like and sell as much as they want.
A)True
B)False
Page 10
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Chapter 9: Monopolistic competition and oligopoly
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Sample Questions
Q1) In a price leadership oligopoly model:
A)a cartel of leading firms determines price and industry output.
B)the industry, in consortium with the government, determines price and output.
C)one firm is the price leader and all other firms follow.
D)the firms abandon a profit-maximising goal.
E)firms do not operate where MR = MC.
Q2) The oligopoly market structure does not have which of the following characteristics?
A)Few sellers.
B)Homogeneous product.
C)Differentiated product.
D)Many small sellers.
Q3) Because a monopolistically competitive firm is usually in competition with other firms producing similar goods,we generally say:
A)their demand curve is perfectly elastic.
B)their demand curve is less elastic than that for a monopolist.
C)their demand curve is more elastic than that for a monopolist.
D)their demand curve is more elastic than that for a perfectly competitive firm.
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11
Chapter 10: Policy issues: resource taxes and climate change
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The royalties:
A)reduce the output.
B)increase the incentive for firms to produce more.
C)shift the industry supply curve to the right.
D)increase the quality of mining production.
Q2) Suppose a new emissions reducing production technology is installed.The price of emissions permits will:
A)increase due to the decrease in demand for permits.
B)reduce due to the increase in demand for permits.
C)increase due to the increase in demand for permits.
D)reduce due to the decrease in demand for permits.
Q3) Once the social cost of emissions is included in the price,the firms will reduce their production and will charge a higher price.
A)True
B)False
Q4) Today the royalties are usually paid:
A)as a percentage of the cost incurred by the firm.
B)at an increased rate.
C)at a flat rate.
D)as a percentage of the value of the mineral extracted.
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Chapter 11: Measuring the size of the economy
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124 Flashcards
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Sample Questions
Q1) GDP figures tend to understate the quantity of goods and services available because:
A)exports are subtracted from GDP but imports are not added back in.
B)many items are counted twice or more in intermediate stages of production.
C)more women are entering the labour force.
D)the changes in quality of products are not included in GDP.
Q2) Which one of the following statements is true?
A)Resources flow from the government to households.
B)Resources flow from firms to households.
C)Taxes flow from firms to the government.
D)Resource payments flow from firms to households.
E)Imports flow from firms to foreign economies.
Q3) GDP is equal to:
A)GNP minus net income payable to foreigners.
B)NNP plus depreciation, minus net income payable to foreigners.
C)C + I + G - NX.
D)C + I + G + NX.
Q4) In an open economy,domestic savings must always equal investment.
A)True
B)False
Page 13
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Chapter 12: Business cycles and economic growth
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Sample Questions
Q1) If an increase in labour and capital of 10 per cent leads to output increasing by 20 per cent then,ceteris paribus,the economy is operating with:
A)diseconomies of scale.
B)decreasing returns to scale.
C)constant returns to scale.
D)increasing returns to scale.
E)diminishing returns to output.
Q2) The GDP gap is the difference between:
A)full-employment nominal GDP and actual real GDP.
B)full-employment real GDP and nominal real GDP.
C)full-employment real GDP and actual real GDP.
D)full unemployment and actual nominal GDP.
Q3) In the Solow model,technological progress is assumed to occur:
A)systematically as part of capital accumulation.
B)randomly outside the system.
C)systematically as part of increases in output.
D)systematically as part of increases in investment.
Q4) The business cycle is the periodic but recurrent fluctuations in real GDP.
A)True
B)False
Page 14
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Chapter 13: Inflation and unemployment
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Sample Questions
Q1) During periods of hyperinflation,which of the following is the most likely response of consumers?
A)Save as much as possible.
B)Spend money as fast as possible.
C)Invest as much as possible.
D)Lend money.
E)Work harder.
Q2) The CPI measures:
A)changes in the prices of imported goods and services.
B)changes in the prices of exported goods and services.
C)changes in the production of imported goods and services.
D)changes in the production of exported goods and services.
Q3) Consider an economy made up of 100 people,60 of whom hold jobs,10 of whom are looking for work and 15 of whom are retired.The number of people in the civilian labour force is:
A)30.
B)60.
C)70.
D)85.
E)90.
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Chapter 14: A simple model of the macro economy
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Sample Questions
Q1) Real investment spending is _____ real personal consumption.
A)equal to
B)greater than
C)stable compared to
D)highly volatile compared to E)less thanks to
Q2) When the economy is operating well below capacity,an increase in spending tends to be reflected primarily in a/an:
A)lower level of employment.
B)increase in price.
C)lower level of output.
D)higher level of output and employment.
E)increase in business failures.
Q3) The aggregate supply curve is defined as:
A)net national product.
B)the sum of wages, rent, interest and profits.
C)the real GDP produced at different price levels.
D)the total dollar value of household expenditures.
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Chapter 15: The monetary and financial system
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Sample Questions
Q1) Assume a fixed demand for money curve and the RBA increases the money supply.The result is a temporary:
A)excess quantity of money demanded.
B)excess quantity of money supplied.
C)new equilibrium interest rate.
D)decrease in the demand for loans.
Q2) Which of the following relationships with respect to banks is correct?
A)assets = liabilities - shareholders' equity.
B)shareholders' equity = assets - liabilities.
C)shareholders' equity = minimum liquidity requirements + exchange settlement account balance.
D)liabilities = assets + shareholders' equity.
E)assets = minimum liquidity requirements + exchange settlement account balance.
Q3) If an exporter believes the $A is going to rise in three months when it receives payment for a shipload of its good,it may decide to:
A)enter the short-term money market to hedge against this.
B)borrow money in the interim.
C)enter the futures market to hedge against this.
D)buy Treasury notes in the interim.
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Page 17
Chapter 16: Macroeconomic policy I: monetary policy
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124 Verified Questions
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Sample Questions
Q1) 'Smoothing' occurs when the RBA is trying to:
A)reduce excessive fluctuations in the Australian dollar.
B)maintain the Australian dollar at its agreed fixed rate.
C)see whether movement in the value of the currency is real or speculative.
D)smooth the market.
Q2) According to Keynesians,for monetary policy to have a stimulative effect on GDP,a/an:
A)increase in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment.
B)increase in the money supply is needed which lowers the interest rate in order to lower levels of investment.
C)decrease in the money supply is needed which lowers the interest rate in order to stimulate higher levels of investment
D)decrease in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment.
E)increase in the money supply is needed which causes the interest rate to rise in order to stimulate higher levels of investment.
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Page 18
Chapter 17: Macroeconomic policy II: fiscal policy
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Sample Questions
Q1) The cyclically adjusted budget deficit is the planned deficit for future times.
A)True
B)False
Q2) Having a countercyclical discretionary fiscal policy would involve:
A)running budget deficits during an expansion and surpluses during a contraction.
B)running budget deficits during a contraction and surpluses during an expansion.
C)running balanced budgets at all times.
D)running consistent budget deficits.
Q3) By selling government securities to the RBA,the government effectively monetises its debt
A)True
B)False
Q4) If government deficits stimulate the private economy:
A)'crowding out' must be zero.
B)investment may rise.
C)'crowding out' is more than offset by increases in investment demand.
D)'crowding out' and 'crowding in' cancel each other out.
E)interest rates must fall.
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19
Chapter 18: International trade and finance
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Sample Questions
Q1) In terms of production possibilities curves,the benefits of trade between two nations is that each nation moves to:
A)a lower standard of living.
B)a more expansive consumption possibilities combination.
C)a higher standard of living.
D)a lower consumption possibilities combination.
Q2) The theory of comparative advantage suggests:
A)that an industrialised country should not import.
B)that a country that is not competitive should import everything.
C)that a country specialises according to the opportunity cost.
D)that a country specialises according to the absolute cost.
Q3) In Exhibit 18-4,the equilibrium exchange rate is:
A)5.
B)4.
C)3.
D)2.
E)1.
Q4) If the yen price of dollars falls,then the dollar price of yen rises.
A)True
B)False
Page 20
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Chapter 19: Applying graphs to economics
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Sample Questions
Q1) In Exhibit 1A-5,the slope of straight line A-D is:
A)positive.
B)zero.
C)negative.
D)variable.
Q2) A downward-sloping line has a negative slope.
A)True
B)False
Q3) As shown in Exhibit 1A-3,the intercept of straight line AB is:
A)1.
B)10.
C)20.
D)30.
E)not determinable from the information provided.
Q4) In Exhibit 1A-5,the slope of the straight line A-D is: A)zero.
B)1.
C)1/2. D)-1.
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