Economics for Business Exam Materials
Course Introduction
Economics for Business examines fundamental economic principles and explains how they apply to real-world business decision-making. The course covers both microeconomic and macroeconomic concepts, focusing on topics such as supply and demand, market structures, pricing strategies, production costs, and the impact of government policies. Students will learn how economic forces shape business environments and influence company strategies. Through case studies and practical examples, the course emphasizes the importance of economic thinking in evaluating market opportunities, analyzing competition, and making informed managerial decisions.
Recommended Textbook
Microeconomics 1st Canadian Edition by R. Glenn Hubbard
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17 Chapters
2441 Verified Questions
2441 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) What is the "omitted variable" problem in determining cause and effect?
A)It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and effect.
B)It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and effect.
C)It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and effect.
D)It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.
Answer: D
Q2) A university must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of "what to produce."
A)True
B)False
Answer: True
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3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) For a person to have a comparative advantage in producing a product, she must be able to produce that product at a lower opportunity cost than her competitors.
A)True
B)False
Answer: True
Q2) The principle of opportunity cost is that
A)in a market economy, taking advantage of profitable opportunities involves some money cost.
B)the economic cost of using a factor of production is the alternative use of that factor that is given up.
C)taking advantage of investment opportunities involves costs.
D)the cost of production varies depending on the opportunity for technological application.
Answer: B
Q3) The basis for trade is comparative advantage, not absolute advantage. A)True
B)False
Answer: True
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) If the price of grapefruit rises, the substitution effect due to the price change will cause
A)a decrease in the demand for grapefruit.
B)a decrease in the demand for oranges, a substitute for grapefruit.
C)a decrease in the quantity demanded of grapefruit.
D)a decrease in the quantity supplied of grapefruit.
Answer: C
Q2) Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas.To Lonnie
A)raspberries and papayas are complements.
B)raspberries and papayas are inferior goods.
C)raspberries and papayas are normal goods.
D)raspberries and papayas are substitutes.
Answer: D
Q3) Explain the difference between a normal good and an inferior good.
Answer: A normal good is something for which the demand increases when income rises and the demand decreases when income falls.An inferior good is something for which the demand decreases when income rises and the demand increases when income falls.
Page 5
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) Refer to Figure 4.6.What area represents consumer surplus after the imposition of the price floor?
A)A + B + E
B)A + B
C)A + B + E + F
D)A
Q2) The minimum wage is an example of a price ceiling.
A)True
B)False
Q3) If equilibrium is achieved in a competitive market
A)there is no deadweight loss.
B)the deadweight loss will be maximized.
C)the deadweight loss will equal the sum of consumer surplus and producer surplus.
D)the deadweight loss will be the same as the opportunity cost of the last unit of output sold.
Q4) Marginal cost is the additional cost to a firm of producing one more unit of a good or service.
A)True
B)False
6
Chapter 5: Externalities, Environmental Policy, and Public Goods
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) One difference between the demand for a private good and that for a public good is that
A)with a private good, each consumer chooses the quantity she wants to consume but with a public good, each consumer chooses the price she is willing to pay for a fixed quantity.
B)with a private good, each consumer chooses the quantity she wants to consume but with a public good, everyone consumes the same quantity.
C)with a private good, each consumer receives different amounts of benefit from consuming the product but with a public good, every consumer realizes the same amount of benefit from consuming the product.
D)the marginal benefit from consuming the last unit of a public good always exceeds the marginal benefit from consuming the last unit of a private good because there are externalities in the consumption of the former.
Q2) Refer to Figure 5.2.The efficient output level is
A)Qd.
B)Qb.
C)Q .
D)Qb - Qd.
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Page 7
Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Cross-price elasticity of demand is calculated as the
A)percentage change in quantity demanded divided by percentage change in price of a good.
B)percentage change in quantity demanded of one good divided by percentage change in price of a different good.
C)percentage change in quantity sold divided by percentage change in buyers' incomes.
D)percentage change in quantity supplied divided by percentage change in price of a good.
Q2) In September 2006, the Canadian Food Inspection Agency recommended that Canadians avoid eating imported raw spinach in the wake of an outbreak of E.coli bacteria in the United States.Following this recommendation, the food industry looked at alternatives and many turned to arugula.One U.S.distributor claimed, "The sale of the stuff has gone through the roof." Based on this information,
A)arugula is a normal good while raw spinach is an inferior good.
B)the cross-price elasticity between arugula and spinach is negative.
C)the cross-price elasticity between arugula and spinach is positive
D)the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.
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Chapter 7: Comparative Advantage and the Gains From International Trade
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Which of the following describes the infant industry argument for protectionism?
A)An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition.
B)Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.
C)Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field.
D)Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.
Q2) In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.One reasons for this is
A)comparative advantage works better in theory than in practice.
B)some countries have more resources than other countries.
C)tastes for many traded goods are similar in many countries because of globalization.
D)production of most goods involves increasing opportunity costs.
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Chapter 8: Consumer Choice and Behavioral Economics
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?
A)MU/P has increased and Ewan should buy more of this good.
B)MU/P has increased and Ewan should buy less of this good.
C)MU/P has decreased and Ewan should buy more of this good.
D)MU/P has decreased and Ewan should buy less of this good.
Q2) Refer to Figure 8.4.The consumer can afford consumption bundles
A)r, s, t and u.
B)r, s, v and u.
C)s, v and u only.
D)s, v, t and u.
Q3) If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?
A)MU/P has increased and Callum should buy more of this good.
B)MU/P has increased and Callum should buy less of this good.
C)MU/P has decreased and Callum should buy more of this good.
D)MU/P has decreased and Callum should buy less of this good.
Q4) What is marginal utility and what is the law of diminishing marginal utility?
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Chapter 9: Technology, Production, and Costs
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169 Verified Questions
169 Flashcards
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Sample Questions
Q1) Accounting costs exclude implicit costs.
A)True
B)False
Q2) Average fixed costs of production
A)remain constant.
B)will rise at a fixed rate as more is produced.
C)graph as a U-shaped curve.
D)fall as long as output is increased.
Q3) Which of the following is a fixed cost?
A)payment to hire a security worker to guard the gate to the factory around the clock
B)wages to hire assembly line workers
C)payments to an electric utility
D)costs of raw materials
Q4) The formula for total fixed cost is
A)TFC = TC + TVC.
B)TFC = TVC - TC.
C)TFC = TC/TVC.
D)TFC = TC - TVC.
Q5) In economics, what is the difference between the short run and the long run?
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Chapter 10: Firms in Perfectly Competitive Markets
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Refer to Figure 10.2.The firm breaks even at an output level of A)Q units.
B)Q units.
C)Q units.
D)Q units.
Q2) Refer to Figure 10.11.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium?
A)Panel A
B)Panel B
C)Panel C
D)Panel D
Q3) Refer to Figure 10.6.At price P , the firm would
A)lose an amount equal to its fixed cost.
B)lose an amount more than fixed cost.
C)lose an amount less than fixed cost.
D)break even.
Q4) What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?
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Chapter 11: Monopolistic Competition
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.
A)True
B)False
Q2) Unlike a perfectly competitive firm, for a monopolistically competitive firm
A)price marginal cost for all output levels.
B)price marginal revenue for all output levels.
C)price average revenue for all output levels.
D)marginal revenue = marginal cost at the profit-maximizing output.
Q3) A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until
A)the original firm is driven into bankruptcy.
B)the firm's demand curve is perfectly elastic.
C)the firm's demand curve is tangent to its average total cost curve.
D)the firm exits the market.
Q4) Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.
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Chapter 12: Oligopoly: Firms in Less Competitive Markets
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) In a subgame perfect equilibrium,
A)the first mover has an advantage over other players.
B)the last mover has an advantage over other players.
C)each player's strategy constitutes a Nash equilibrium at every subgame of the original game.
D)each player has the same response as the others at every subgame of the tree.
Q2) All of the following are examples of oligopolistic markets except
A)the broadcasting industry.
B)aircraft manufacture.
C)college bookstores.
D)seafood restaurant chains.
Q3) A market comprised of only two firms is called a
A)competitive market.
B)duopoly.
C)monopoly.
D)monopolistically competitive market.
Q4) In a sequential game, one firm will act first and then other firms will respond.
A)True
B)False
Q5) List the competitive forces in the five competitive forces model.
Page 14
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Chapter 13: Monopoly and Antitrust Policy
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Refer to Table 13.2.What is the economically efficient output level?
A)5 units
B)6 units
C)7 units
D)8 units
Q2) Competition Bureau would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.
A)True
B)False
Q3) To maintain a monopoly, a firm must have
A)a perfectly inelastic demand.
B)an insurmountable barrier to entry.
C)marginal revenue equal to demand.
D)few competitors.
Q4) If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.
A)True
B)False
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Chapter 14: The Markets for Labour and Other Factors of Production
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Refer to Figure 14.3.Which of the following is true if the wage rate increases from W to W ?
A)The income effect is larger than the substitution effect.
B)The substitution effect is larger than the income effect.
C)The income effect and the substitution effect are equal.
D)The supply curve is unit-elastic.
Q2) Refer to Table 14.2.The marginal revenue product of labour from the third unit of labour is
A)$5,460.
B)$1,560.
C)$1,260.
D)$780.
Q3) What is the substitution effect of a wage increase? What is the income effect of a wage increase? Under what conditions will a worker's labour supply curve become downward sloping?
Q4) The primary purpose of labour unions is to
A)ensure that workers receive adequate safety training.
B)ensure that all members earn identical incomes.
C)negotiate with employers about wages and working conditions.
D)endorse candidates and donate money to them.
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Chapter 15: Public Choice, Taxes, and the Distribution of Income
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) As the value of the Gini coefficient approaches zero,
A)income distribution becomes less unequal.
B)income distribution becomes more unequal.
C)the percentage of the population under the poverty line increases.
D)the percentage of the population under the poverty line decreases.
Q2) Under a consumption tax, households
A)are exempt from taxes on interest earned on savings.
B)pay taxes only on the part of income they spend.
C)pay higher taxes on the part of income they spend and lower taxes on the part of income they save.
D)pay taxes only on their purchases of luxury items.
Q3) The largest source of revenue for the federal government of Canada
A)tariffs collected on imported goods.
B)property taxes imposed on private property.
C)sales taxes on items purchased for consumption.
D)individual income taxes.
Q4) For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.
A)True
B)False
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Chapter 16: Pricing Strategy
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) If marginal costs differ quite substantially from average total costs, then using a cost-plus pricing schedule will not lead to the profit maximizing price.
A)True
B)False
Q2) In a perfectly competitive market, in the long run, arbitrage profits will be bid away.
A)True
B)False
Q3) Refer to Figure 16.4.Consider the following two pricing strategies:
a)a fixed fee and a per-unit price equal to the monopoly price
b)a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.
A)b; b
B)a; b
C)a; neither strategy
D)b; neither strategy
Q4) What is the difference between price discrimination and other forms of discrimination?
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18
Chapter 17: Firms, the Stock Market, and Corporate Governance
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years, what is the size of the coupon payment?
A)$1,000
B)$300
C)$80
D)$8
Q2) Assume you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship
A)faces limited liability.
B)faces unlimited liability.
C)has little chance of succeeding.
D)is not a good type of business to set up.
Q3) In Canada, corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments when investors receive a share of profits.
A)True
B)False
Q4) What is a corporate bond and what does it specify?
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