Economic Analysis
Final Test Solutions
Course Introduction
Economic Analysis provides students with a comprehensive understanding of how individuals, firms, and governments make choices regarding the allocation of scarce resources. The course introduces fundamental economic concepts such as supply and demand, market equilibrium, consumer behavior, production and cost analysis, and the role of market structures. Students also explore welfare analysis, market failures, and the impact of government interventions on economic outcomes. Through both theoretical frameworks and real-world applications, the course equips learners with the analytical tools needed to assess economic policies, interpret data, and make informed decisions in both business and public policy contexts.
Recommended Textbook
Fundamentals of Economics 6th Edition by William Boyes
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18 Chapters
2262 Verified Questions
2262 Flashcards
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Chapter 1: Economics and the World Around You
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following is not a limitation one faces when shopping for clothes?
A) The amount of time available to shop
B) One's budget
C) The various styles that are available
D) The store's selection
E) The freedom to make rational choices
Answer: E
Q2) Private property rights are important because
A) they create incentives for people to improve their standard of living.
B) the Constitution says so.
C) they allow students to choose their major field of study in college.
D) an economy cannot grow without them.
E) all of these
Answer: A
Q3) According to economic analysis, in making a decision, an individual compares the benefits expected from one option with the benefits expected from other options.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Markets and the Market Process
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Last year a firm made 1,000 units of its good available at a price of $5 per unit. This year, the firm will still make 1,000 units available, but only if the price is $7 per unit. What has most likely happened?
A) Supply has increased.
B) Supply has decreased.
C) Demand has decreased.
D) Demand has increased.
E) Quantity supplied has decreased.
Answer: B
Q2) Even in the United States, not all allocation is carried out in a market because, in some cases,
A) people want more of the product.
B) people want less of the product.
C) the market outcome is not always efficient.
D) people support the market outcome.
E) people disagree with a random allocation.
Answer: C
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Chapter 3: Applications of Demand and Supply
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) Wage differentials exist because not all workers and not all jobs are alike.
A)True
B)False
Answer: True
Q2) A ban has the effect of ____ the ____ for/of the product. Equilibrium price will
A) increasing; demand; increase
B) increasing; supply; decrease
C) decreasing; supply; increase
D) decreasing; demand; decrease
E) eliminating; demand; not exist
Answer: C
Q3) Prices above the equilibrium price cause a(n)
A) shortage to develop and an increase in prices.
B) shortage to develop and a decrease in prices.
C) surplus to develop and an increase in prices.
D) surplus to develop and a decrease in prices.
E) increase in supply.
Answer: D
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Page 5
Chapter 4: The Firm and the Consumer
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) The reason flowers cost so much more around February 14 and on Mother's Day can be explained by their elastic demand during those times of the year.
A)True
B)False
Q2) If a change in the price of a good causes an equal change in the quantity demanded, the demand for the good is unit elastic.
A)True
B)False
Q3) A product has an inelastic demand if
A) price falls and total revenue (or total consumer expenditures) rises.
B) price rises and total revenue (or total consumer expenditures) falls.
C) price rises and total revenue (or total consumer expenditures) rises.
D) its slope is less than 1.
E) price changes and there is no change in total revenue (or total consumer expenditures).
Q4) Firms practice price discrimination in order to increase revenue.
A)True
B)False
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6
Chapter 5: Costs and Profit Maximization
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) If the marginal cost exceeds the average cost, the average cost is rising.
A)True
B)False
Q2) Labor, land, and capital used in production are
A) resources.
B) outputs.
C) productivity.
D) technological progress.
E) innovations.
Q3) Which of the following is not a variable cost at the sandwich shop?
A) Cost of tomatoes
B) Cost of labor
C) Cost of rent
D) Cost of electricity
E) Cost of bread
Q4) Marginal revenue ultimately depends on the firms as they have the ability to set the price for their products.
A)True
B)False
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Chapter 6: Competition
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Creative destruction is the process by which
A) competition ends and monopolies are started.
B) environmental principles are replaced by market discipline.
C) deadweight loss is destroyed.
D) old, inefficient products are driven out of business.
E) all of these occurs.
Q2) When firms collude, they usually do so to
A) increase their size.
B) increase costs and raise barriers to entry.
C) avoid antitrust prohibitions.
D) increase their profits.
E) become more efficient.
Q3) A perfectly competitive market is characterized by
A) large numbers of producers of differentiated products.
B) large numbers of producers of commodities with barriers to entry.
C) small numbers of producers of commodities with ease of entry.
D) large numbers of producers of commodities with ease of entry.
E) none of these.
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Chapter 7: Business, Society, and the Government
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) A subprime loan is a loan ____, while an ARM is a loan ____.
A) that has a low initial interest rate, but the interest rate adjusts according to market conditions; made to individuals with a high risk of default.
B) that has low an interest rate made to low-risk borrowers; that has a low initial interest rate, but the interest rate adjusts according to market conditions.
C) that has a low initial interest rate, but the interest rate adjusts according to market conditions; made to low-risk borrowers.
D) made to individuals with a low risk of default, that has a low initial interest rate, but the interest rate adjusts according to market conditions
E) made to individuals with high risk of default; that has a low initial interest rate, but the interest rate adjusts according to market conditions.
Q2) The World Trade Organization is often asked to address charges of dumping by international companies.
A)True
B)False
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Chapter 8: Government Intervention Versus Free Markets
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) In Zimbabwe, private individuals are allowed to own elephants, to raise them, and then to butcher them and sell the parts. The supply of elephants in Zimbabwe has risen since this policy began because
A) the government has forced the private individuals to conserve.
B) the profit motive induces the private individuals to ensure that while they earn profits today they will also have sufficient resources to earn profits in the future.
C) the profit motive induces the private individuals not to purchase as many elephants.
D) other countries are supplying elephants to the Zimbabwe farmers.
E) neighboring elephant herds are migrating to Zimbabwe.
Q2) Which of the following is the most significant reason for the increased demand for medical care?
A) Medicare and Medicaid programs have increased individuals' ability to pay for medical services.
B) The average age of the population has decreased.
C) The elderly population's share of medical expenditures has decreased.
D) Medical technology has not improved significantly over the past decades.
E) The number of nursing homes constructed annually has risen.
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Page 10
Chapter 9: An Overview of the National and International Economies
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) An increase in the U.S. money supply by the Federal Reserve constitutes a microeconomic government policy action.
A)True
B)False
Q2) When the value of imports exceeds the value of exports for a given economy, the economy
A) is experiencing unemployment.
B) has an international trade surplus.
C) is in macroeconomic disequilibrium.
D) has an international trade deficit.
E) is unstable.
Q3) Big business is only a U.S. phenomenon, as evidenced by the largest corporations in the world.
A)True B)False
Q4) The U.S. money supply and government spending are controlled through legislation passed by Congress.
A)True
B)False
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Chapter 10: Macroeconomic Measures
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) In Table 10.3, the current account balance for Germany is
A) 172.
B) - 87.
C) - 13.
D) 47.
E) none of these.
Q2) A stereo system in Germany costs 1,200 Euros. If the dollar price of a Euro is $1.40, then the U.S. dollar value of the same stereo is $1,680.
A)True
B)False
Q3) The United States has been an international net creditor from the end of World War I until the mid-1980s, becoming an international net debtor in 1985, and growing steadily since.
A)True
B)False
Q4) To arrive at a more accurate measure of real output changes in an economy, nominal GDP figures should be adjusted for inflation.
A)True
B)False
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Chapter 11: Unemployment, Inflation, and Business Cycles
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) In the official labor statistics, discouraged workers are
A) counted as employed.
B) counted as unemployed.
C) included in the labor force.
D) not included in the labor force.
E) counted as part of the labor force but not fully employed.
Q2) At any time, job opportunities depend on all of the following except
A) the individual's ability.
B) the individual's experience.
C) the current state of the economy.
D) the individual's level of education.
E) all of these determine job opportunities.
Q3) Which type of unemployment arises as one of the worst effects of a recession?
A) Seasonal unemployment
B) Static unemployment
C) Cyclical unemployment
D) Frictional unemployment
E) Structural unemployment
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Chapter 12: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) In the 1970s, the world price of oil was driven upward due to an increase in demand.
A)True
B)False
Q2) The substitution effect, based on relative commodity price changes, represents one reason for the downward slope of the aggregate demand curve.
A)True
B)False
Q3) Refer to Table 12.3. Assume that labor is a major production cost. In year 2, employers would like to hire
A) more labor because profits are falling.
B) more labor because profits are rising.
C) less labor because profits are falling.
D) less labor because profits are rising.
E) the same amount of labor as in year 1.
Q4) The long-run aggregate supply curve corresponds to an economy that operates at its maximum potential GDP level.
A)True
B)False
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Chapter 13: Fiscal Policy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) When increases in national debt cause the domestic currency to appreciate, then debt-financed fiscal spending may be less effective than is implied by the simple government spending multiplier.
A)True
B)False
Q2) Changes in government spending and taxes represent movements along the aggregate demand curve.
A)True
B)False
Q3) When federal expenditures grow faster than tax revenues, the government will experience a(n)
A) declining budget deficit.
B) declining national debt.
C) increasing budget surplus.
D) increasing budget deficit.
E) balanced budget.
Q4) Fiscal policy is an important tool used by the government to attain the path of economic growth.
A)True
B)False
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Chapter 14: Money and Banking
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Refer to Table 14.2. What are Arizona Savings Bank's required reserves?
A) $10,000,000
B) $7,000,000
C) $3,000,000
D) $2,000,000
E) $1,000,000
Q2) The $5 price tag on a sandwich at the school cafeteria is an example of money being used as a
A) medium of exchange.
B) store of value.
C) unit of account.
D) standard of deferred payment.
E) barter transaction.
Q3) As a measure of money, M1 emphasizes the use of money as a(n) A) medium of exchange.
B) store of value.
C) unit of account.
D) non-liquid asset.
E) standard of deferred payment.
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Page 16
Chapter 15: Monetary Policy
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) The quantity theory of money asserts that changes in A) nominal GDP are inversely related to changes in the velocity of money.
B) the quantity of money are positively related to changes in the velocity of money.
C) the quantity of money are unrelated to changes in the price level.
D) the output level are unrelated to changes in the price level.
E) the quantity of money are directly related to changes in nominal GDP.
Q2) All members of the European Union are members of the European Central Bank. A)True
B)False
Q3) The transactions demand for money varies directly with the nominal income level. A)True
B)False
Q4) The European Central Bank oversees monetary policy for ____ country(ies).
A) 14
B) 7
C) 17
D) 13
E) 1
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Chapter 16: Macroeconomic Policy, Business Cycles, and Growth
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) According to the theory of rational expectations, an expected increase in government spending would cause the aggregate supply curve
A) to shift to the left at the same time that the aggregate demand curve shifts to the right.
B) to shift to the left some time after the aggregate demand curve has shifted to the right.
C) to shift to the right before the aggregate demand curve shifts to the right.
D) not to shift at all.
E) to shift to the right after the aggregate demand curve shifts.
Q2) Suppose that the economy grows by 3 percent, total factor productivity grows by 2 percent, and the labor force grows by 2 percent. If labor contributes 40 percent to real GDP, then the stock of capital must have risen by 0.33 percent.
A)True
B)False
Q3) We can say that the potential level of real GDP is fixed because the long-run aggregate supply curve is a vertical line.
A)True
B)False
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Chapter 17: Issues in International Trade and Finance
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Even though the costs to consumers may be greater than the benefits to protected industries, the government may still provide protection aimed at saving jobs.
A)True
B)False
Q2) According to the data in Table 17.1, the United States has an absolute advantage in producing
A) machinery, but not food.
B) food, but not machinery.
C) neither machinery nor food.
D) food and a comparative advantage in producing machinery.
E) both machinery and food.
Q3) A tariff is a tax on
A) imports only.
B) exports only.
C) domestically produced items only.
D) imports or exports.
E) shipping containers.
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Chapter 18: Globalization
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) The World Trade Organization primarily creates ____ for international trade.
A) rules
B) tariffs
C) quotas
D) financial assistance
E) technical cooperation
Q2) Over time, globalization has progressed at an uneven rate due to the uneven pace of ____ and ____.
A) technological change; wars
B) government support; airline schedules
C) economic integration; social contact
D) personal digitalization; interpersonal communication
E) organizational commitment; social acceptance
Q3) There is much more movement of people across international borders today than 100 years ago.
A)True
B)False
Q4) Supporters of globalization believe it has raised living standards.
A)True
B)False
Page 20
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