Economic Analysis
Mock Exam
Course Introduction
Economic Analysis explores the fundamental concepts and tools used to examine how individuals, firms, and governments make choices about the allocation of scarce resources. The course covers principles of microeconomics and macroeconomics, equipping students with analytical frameworks to assess market behavior, evaluate policy impacts, and understand economic efficiency and welfare. Emphasis is placed on demand and supply, cost structures, market equilibrium, consumer and producer behavior, and the implications of various market forms. Real-world applications and quantitative methods are integrated to develop problem-solving skills necessary for informed economic decision-making.
Recommended Textbook
Microeconomics 9th Edition by William Boyes
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Page 2
Chapter 1: Economics: The World Around You
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Sample Questions
Q1) The statement,"All Americans should be entitled to public health care," made by a politician would be considered a:
A)positive statement.
B)macroeconomic statement.
C)microeconomic statement.
D)normative statement.
E)model.
Answer: A
Q2) The study of inflation and unemployment in East Timor is in the realm of microeconomics.
A)True
B)False
Answer: False
Q3) Economics is the study of how people cope with:
A)limited human wants.
B)scarcity.
C)unlimited resources.
D)greed.
E)limited time and unlimited income.
Answer: B
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Chapter 2: Choice, opportunity Costs, and Specialization
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Sample Questions
Q1) Which of the following best describes a tradeoff?
A)An office executive enrolling into a management course to develop her skills.
B)An investor buying stocks of a start-up company.
C)A businessman investing a portion of company profits in research and development.
D)A college student sacrificing a few hours of study time to work at the town cafeteria.
E)A worker purchasing a new car with her bonus earnings.
Answer: D
Q2) The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:
A)comparative advantage.
B)a tradeoff.
C)marginal cost.
D)opportunity cost.
E)gains from trade.
Answer: E
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4
Chapter 3: Markets, Demand and Supply, and the Price System
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Sample Questions
Q1) Which of the following statements correctly defines the law of demand?
A)The lower the price of a commodity,the lower the quantity demanded of that commodity.
B)As the price of a commodity increases,the quantity demanded of that commodity also increases.
C)The lower the price of a commodity,the greater the quantity of that commodity that is demanded.
D)The lower the price of a commodity,the greater the quantity of that commodity that is supplied.
E)The quantity demanded of a particular good decreases with an increase in the price of a substitute good.
Answer: C
Q2) Refer to Table 3.5.If government imposes a price floor of $2:
A)the price floor will not have an effect.
B)the price will fall to $1 because producers will be forced to incur losses.
C)demand will increase.
D)a surplus will result equal to 20 units.
E)a shortage will result equal to 20 units.
Answer: A
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Chapter 4: The Market System and the Private and Public Sector
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Sample Questions
Q1) A trade deficit occurs when:
A)a country imposes a price floor.
B)a country's imports exceed its exports.
C)a country imposes a price ceiling.
D)a country's exports exceed its imports.
E)when the domestic product market is in disequilibrium.
Q2) Since the U.S.is organized as a market economy,the government sector does not play a role in economic activity.
A)True
B)False
Q3) A surplus in a country's trade balance means that:
A)net exports exceed transfer payments.
B)the country's currency is over-valued.
C)the value of net exports is positive.
D)imports into the country exceed exports.
E)domestic savings exceeds domestic investment.
Q4) An enterprise that has only one shareholder does not constitute a corporation.
A)True
B)False
6
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Chapter 5: Elasticity: Demand and Supply
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Sample Questions
Q1) Acme Tools manufactures anvils,a forging tool.When the price of anvils was increased from $7 to $13,Acme Tools was willing and able to increase production from 1 to 4 units per day.Using the midpoint formula,what is Acme's price elasticity of supply for anvils?
A)2
B)1
C)0.5
D)4
E)3.5
Q2) Tax incidence explains how taxes are shared between producers and consumers. A)True
B)False
Q3) Which of the following is explained by the price elasticity of demand?
A)The effect of price changes on supply.
B)The effect of quantity changes on supply.
C)The effect of quantity changes on price.
D)The effect of price changes on quantity demanded.
E)The effect of price changes on quantity supplied.
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7
Chapter 6: Consumer Choice
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Sample Questions
Q1) Refer to Table 6.4.If the consumer's income increases from $10 to $20 but the prices of each of the goods doubles,the consumer would maximize utility by purchasing
A)7 units of good A,7 units of good B,and 7 units of good C
B)3 units of good A,5 units of good B,and 6 units of good C
C)2 units of good A,6 units of good B,and 7 units of good C
D)3 units of good A,6 units of good B,and 4 units of good C
E)6 units of good A,0 units of good B,and 7 units of good C
Q2) According to indifference curve I<sub>1</sub> in Figure 6.1,for each extra apple the consumer eats,he or she must simultaneously sacrifice ____ of listening to music to keep total utility constant.
A)1 hour
B)2 hours
C)3 hours
D)4 hours
E)5 hours
Q3) The theory of bounded rationality states that it is likely for consumers to have perfect information.
A)True
B)False
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Chapter 7: Supply: The Costs of Doing Business
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Sample Questions
Q1) If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis,a line that is perfectly horizontal implies:
A)constant returns to scale.
B)economies of scale.
C)diseconomies of scale.
D)inefficient use of capital.
E)inefficient use of labor.
Q2) When average total cost is minimum,it is:
A)equal to average variable cost.
B)greater than marginal cost.
C)equal to average fixed cost.
D)equal to marginal cost.
E)less than marginal cost.
Q3) The minimum efficient scale is the level of output where the short-run average-total-cost curve reaches its minimum point.
A)True
B)False
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Chapter 8: Profit Maximization
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Sample Questions
Q1) Under perfect competition,at the profit maximizing level of output:
A)price is greater than marginal revenue.
B)price is equal to marginal revenue.
C)marginal revenue is equal to zero.
D)the marginal revenue curve is downward sloping.
E)the average revenue curve is upward sloping.
Q2) Suppose Mark invests a sum of $100,000 in a new venture.To fund his investment,Mark withdraws $50,000 from a savings account paying 10% per year and uses the proceeds from a bond that has just matured worth $50,000.If he had reinvested the proceeds from the bond he could have earned interest at the rate of 5%.Calculate the opportunity cost of capital for Mark in a particular year?
A)$5,000
B)$7,500
C)$10,000
D)$12,500
E)$100,000
Q3) When the average revenue falls,marginal revenue also falls and is less than the average revenue.
A)True
B)False
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Chapter 9: Perfect Competition
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Sample Questions
Q1) If at the profit maximizing level of output,the AR curve lies below the ATC curve in the short run,the firm is earning positive economic profit.
A)True
B)False
Q2) In Figure 9.3,at equilibrium,the firm enjoys a profit of:
A)$69.
B)$42.
C)$60.
D)$27.
E)$48.
Q3) One method that firms in many nations use to exit the market is the use of:
A)antitrust laws.
B)the uniform commercial code.
C)bankruptcy laws.
D)statutes laws.
E)the federal code.
Q4) The governmental interference with the market exchange often reduces the total surplus.
A)True B)False
Page 11
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Chapter 10: Monopoly
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Sample Questions
Q1) Refer to Figure 10.7.If the perfectly competitive industry and the monopoly produces the same quantity,then:
A)there are 10 firms in the perfectly competitive industry.
B)there are 800 firms in the perfectly competitive industry.
C)there are 1,000 firms in the perfectly competitive industry.
D)there are 2,000 firms in the perfectly competitive industry.
E)there are 100 firms in the perfectly competitive industry.
Q2) Which of the following is an assumption of the monopoly model?
A)There exists a large number of buyers and sellers.
B)There are no close substitutes of the good.
C)The firm faces a horizontal demand curve.
D)There is free entry and exit of firms.
E)The firm is a price taker.
Q3) Grocery coupons and mail-in rebates are forms of price discrimination.
A)True
B)False
Q4) A monopolist earns only normal profits in the long run.
A)True
B)False
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Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) A monopolistically competitive market is marked by the barriers to entry of new firms in the long run.
A)True
B)False
Q2) Compared with a perfectly competitive firm in long-run equilibrium,a monopolistically competitive firm will operate on the upward-sloping portion of the average-total-cost curve.
A)True
B)False
Q3) In an oligopoly market,firms do not produce identical product.
A)True
B)False
Q4) Refer to Table 11.2.If firm both firm A and firm B choose their dominant strategies then:
A)firm A makes a profit of $40 and firm B makes a profit of $45.
B)firm A makes a profit of $50 and firm B makes a profit of $45.
C)firm A makes a profit of $50 and firm B makes a profit of $40.
D)firm A makes a profit of $42 and firm B makes a profit of $40.
E)firm A makes a profit of $40 and firm B makes a profit of $20.
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Chapter 12: Antitrust and Regulation
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100 Flashcards
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Sample Questions
Q1) Which of the following factors helps to determine how the costs of social regulation are split between consumers and producers.
A)The price elasticities of demand and supply
B)The quantity produced by the firm
C)The average total costs of the firm before regulation
D)The number of consumers in the market
E)The number of producers in the market
Q2) Graphically,consumer surplus is the area:
A)above the demand curve.
B)below the supply curve.
C)under the demand curve and above the supply curve.
D)above the market supply curve and under the equilibrium price.
E)under the market demand curve and above the equilibrium price.
Q3) Which of the following practices is restricted by the antitrust laws of the United States?
A)Merger of smaller firms into a large firm
B)Entry of new firms in the long run
C)Standardization of products in a market
D)Exit of non-performing firms in the long run
E)Quality differentiation by competitive firms
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Chapter 13: Market Failures, Government Failures, and Rent Seeking
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Sample Questions
Q1) Refer to Table 13.2.Suppose fish sells for $1 per pound.If each fisherman decides whether or not to fish based on the average catch,what is the profit that each fisherman earns?
A)$500
B)$1,000
C)$3,000
D)$5,000
E)0
Q2) James insured his car with a renowned insurance company that checked his driving skills and verified his accident records before insuring his car.After paying two premiums for this insurance,James took to drinking and driving.This action of James is likely to create:
A)an economic loss.
B)a positive externality.
C)an economic bad.
D)a moral hazard.
E)diseconomies of scale.
Q3) Private costs exceed social cost when external benefits are created.
A)True
B)False
Page 15
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Chapter 14: Resource Markets
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112 Flashcards
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Sample Questions
Q1) A monopsonist firm pays a price to a factor that is:
A)equal to the marginal revenue product of the factor.
B)greater than the marginal revenue product of the factor.
C)equal to the marginal factor cost.
D)greater than the marginal factor cost.
E)less than the marginal revenue product of the factor.
Q2) If government-assured medical and other benefits increase the labor costs,everything else remaining constant,then firms will tend to hire more of the other resources instead of labor.
A)True B)False
Q3) Refer to Scenario 14.1.If the worker joins Firm B,his economic rent is:
A)$5,000.
B)$7,000.
C)less than $7,000 but more than $2,000.
D)$2,000.
E)less than $2,000.
Q4) A monopsonist firm faces a negatively sloped marginal factor cost curve.
A)True
B)False
Page 16
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Chapter 15: The Labor Market
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Sample Questions
Q1) Which of the following is an instance of employer prejudice that leads to wage differential?
A)Employers attempting to hire workers based on their marginal productivities
B)Employers attempting to hire only good looking female workers
C)Workers attempting to work for only certain particular organizations
D)Producers purchasing raw materials from selective suppliers
E)Workers ready to work for any employer in the labor market
Q2) As the wage rate increases,the quantity supplied of labor in a market will:
A)invariably increase
B)invariably decrease.
C)first increase and then decrease.
D)first decrease and then increase.
E)remain constant.
Q3) Since we all like to get richer,so when wage rate increases we always like to work longer hours to make more income.
A)True
B)False
Q4) Wage differentials exist because not all workers and all jobs are alike.
A)True
B)False
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Chapter 16: Capital Markets
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Sample Questions
Q1) A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:
A)pooled stock venue.
B)stock clump.
C)stock agreement.
D)mutual fund.
E)maximal diversified investment (MDI).
Q2) A mutual fund for which a fee is paid at the time of purchase is a:
A)no-load fund.
B)face-end load fund.
C)back-end load fund.
D)fixed-end fund.
E)front-end load fund.
Q3) Buying a newly issued bond implies:
A)borrowing money from a private bank.
B)taking over the ownership of a firm.
C)lending money to a firm.
D)paying the price for a service rendered by a firm.
E)borrowing funds from international organizations.
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Page 18
Chapter 17: The Land Market and Natural Resources
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Sample Questions
Q1) On account of a massive construction boom in a country,the demand for iron ore increases substantially.This causes iron ore prices to escalate.Producers increase iron ore mining considerably in the short run,in spite of knowing that this will adversely affect future availability of ore.Which of the following is most similar to the scenario described above?
A)Corn producers hoard their supplies in order to induce a price hike.
B)Petroleum manufacturers increase extraction in response to sky-rocketing fuel prices.
C)The government of a country makes aforestation mandatory for lumber firms.
D)Impressive revenue generation induces the government of a country to impose additional fuel surcharge.
E)To discourage smoking,the government of a country increases sales tax on cigarettes.
Q2) Which of the following is a nonrenewable source of energy?
A)Corn
B)Ethanol
C)Petroleum
D)Bagasse
E)Biomass
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Page 19
Chapter 18: Aging, Social Security and Health Care
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Sample Questions
Q1) The demand for unskilled workers is highly price elastic.This means that a tax imposed partly on unskilled workers and partly on their employers:
A)will be paid primarily by the employers.
B)will be paid primarily by the employees.
C)will be equally paid by employers and employees.
D)will be totally passed on to consumers.
E)will be paid only by the employers.
Q2) People who oppose the establishment of an open market in human organs justify their view on the ground that:
A)it would yield huge profits to the privately owned medical care centers.
B)it would lead to a chronic organ shortage.
C)it would result in the exploitation of the poor.
D)it would induce people to fritter away money earned through the sale of organs.
E)although the poor people are in greater need of the organs,yet they would not be able to afford them because of their high price.
Q3) The social security tax proceeds are often used to purchase government bonds.
A)True
B)False
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Chapter 19: Income Distribution,Poverty and Government Policy
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Sample Questions
Q1) Assume that any given percentage of the population earns an equal percentage of real GDP.This percentage of population will be represented by:
A)a point below the line of income equality.
B)a line lying below the line of income equality.
C)a point on the line of income equality.
D)a line lying above the line of income equality.
E)a point above the line of income equality.
Q2) A negative income tax system transfers increasing amounts of income to households earning incomes below some specified level as their income declines.
A)True
B)False
Q3) In order to ensure that the poor countries experience higher levels of economic growth,private property rights and title to property have to be created. A)True
B)False
Q4) A proportional tax is a tax whose rate increases as the tax base widens. A)True
B)False
21
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Chapter 20: World Trade Equilibrium
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Sample Questions
Q1) The Dutch Disease had occurred in Netherlands because:
A)the Netherlands government had borrowed heavily from the World Bank to meet its Balance of Payment deficits.
B)the price of the primary commodities declined in the international market.
C)the demand for natural gas exports from Netherlands increased substantially.
D)the currency of Netherlands depreciated in the international market.
E)the price of the commodities manufactured by Netherlands declined in the international market.
Q2) If the export supply curve of tomatoes and the import demand curve of tomatoes of Luxembourg intersect at the international price level of tomatoes,then Luxembourg will suspend trading tomatoes in the international market.
A)True
B)False
Q3) Nations trade what they produce in excess of their own consumption to:
A)generate jobs for the domestic economy.
B)earn "good will" from the World Bank.
C)prevent chronic surpluses from driving down domestic prices.
D)acquire other things they want to consume.
E)reduce the size of their foreign trade deficit.
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Page 22
Chapter 21: International Trade Restrictions
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Sample Questions
Q1) Suppose,in the United States,each farmer is given a federal agricultural subsidy worth $30,000.What will be the effect of such subsidy?
A)They discourage domestic agricultural production.
B)They allow U.S.farmers to sell their products for lower prices in foreign markets.
C)They give foreign producers an unfair cost advantage.
D)They increase the amount of agricultural imports into the United States.
E)The price of the primary products decline in the U.S.market.
Q2) Creating conditions for fair trade by limiting imports will make the domestic consumers better off,as they will be required to pay low prices for the products.
A)True
B)False
Q3) International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.
A)True
B)False
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Chapter 22: Exchange Rates and Financial Links Between Countries
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Sample Questions
Q1) Countries that maintain a constant gold value for their currencies are said to be on a gold standard.
A)True
B)False
Q2) Assume a U.S.investor buys a Mexican bond with a face value of MXP 1,000 and a 20 percent annual interest yield while the exchange rate is MXP 10 per dollar.What is the dollar return from the bond if the exchange rate at the end of the year is MXP 11 per dollar?
A)9.1%
B)10.0%
C)18.2%
D)20.0%
E)32.0%
Q3) Refer to Figure 22.1.The demand curves shown for Brazilian reals are based on:
A)the supply of Brazilian reals in the market.
B)the demand for Mexican pesos.
C)Brazilian demand for Brazilian products.
D)Brazilian demand for Mexican products.
E)Mexican demand for Brazilian products.
Page 24
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