Course Introduction
Economics for Business Exam Practice Tests
Economics for Business introduces students to the fundamental principles of microeconomics and macroeconomics with a focus on their practical application in the business environment. The course explores how economic theories help businesses in decision-making, pricing, market analysis, and strategic planning. Topics include demand and supply, market structures, production and cost analysis, macroeconomic indicators, and the influence of government policies on business operations. Through real-world case studies and problem-solving exercises, students gain the analytical tools to interpret economic trends and make informed business decisions.
Recommended Textbook
ECON MICRO 5th Edition by William
A. McEachern
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21 Chapters
3187 Verified Questions
3187 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/74251
Sample Questions
Q1) A good economic theory:
A)has realistic assumptions.
B)contains as much detail as possible.
C)cannot be proven false.
D)predicts well.
E)can only be presented in mathematical terms.
Answer: D
Q2) Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy. Harnessing wind power by setting up wind farms had been one alternative proposed and implemented. As it is now known that these wind farms lead to the slicing and dicing of migratory birds and the decimation of the local bat population, we could say that environmentalists have committed the:
A)fallacy of composition.
B)fallacy that association is causation.
C)fallacy of segmentation.
D)mistake of ignoring secondary effects.
E)mistake of ignoring the obvious.
Answer: D
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3
Chapter 2: Economic Tools and Economic Systems
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.
A)True
B)False
Answer: True
Q2) If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is true?
A)The opportunity cost of painting is higher for Helen.
B)The opportunity cost of baking cakes is lower for Josh.
C)The opportunity cost of painting one room is 1/40 of a cake for Helen.
D)The opportunity cost of baking one cake is 60 rooms painted for Josh.
E) The opportunity cost of cakes cannot be computed.
Answer: B
Q3) A command economic system does not need to be concerned with what to produce, how to produce things, or who will get the goods and services produced.
A)True
B)False
Answer: False
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Chapter 3: Economic Decision Makers
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Mr. Thomson had a before-tax income of $20,000 and paid taxes of $2,000. Ms. Lynch had a before-tax income of $10,000 and paid taxes of $1,500. Based on this information, which of the following is correct?
A)The tax system is progressive for incomes below $10,000.
B)The tax system is proportional.
C)The tax system is regressive.
D)The tax system is based on the benefits received.
E)The tax system is progressive for incomes above $20,000.
Answer: C
Q2) Which of the following is one of the chief reasons for the increased number of married women in the U.S. workforce?
A)The marginal cost of working in the labor force has increased.
B)Jobs provide greater independence and self-worth.
C)The opportunity cost of household work has increased.
D)The sunk cost of household appliances has risen to the point where women must work to make payments on them.
E)Women spend more time shopping as a result of the increasing division of labor in household production.
Answer: C
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Page 5
Chapter 4: Demand, Supply, and Markets
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action?
A)Positive relation between money income and demand
B)Inverse relation between price and quantity supplied
C)Substitution effect of a price change
D)Income effect of a price change
E)Positive relation between price and quantity demanded
Q2) If the price of vanilla ice cream decreases, it is likely that:
A)the demand for vanilla ice cream will increase.
B)the demand for vanilla ice cream will decrease.
C)the demand for chocolate ice cream will increase.
D)the demand for chocolate ice cream will decrease.
E)the quantity demanded of vanilla ice cream will decrease.
Q3) Markets tend to increase the costs of time and information required for exchange.
A)True
B)False
Q4) The slope of the demand curve for a normal good must be positive.
A)True
B)False
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Chapter 5: Elasticity of Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Which of the following is a possible reason for the price elasticity of demand for cigarettes being large for young smokers?
A)They have large discretionary incomes.
B)The price of cigarettes has increased recently.
C)They are no longer permitted to smoke in public.
D)Cigarette advertising on television has been banned.
E)The proportion of income a young smoker spends on cigarettes is usually quite large.
Q2) As DVDs become popular substitutes for video cassettes, demand for video cassettes is likely to:
A)become less price elastic.
B)become more price elastic.
C)increase.
D)stay the same.
E)become unit elastic.
Q3) Substitutes are pairs of goods that have a positive cross-price elasticity of demand.
A)True
B)False
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Page 7
Chapter 6: Consumer Choice and Demand
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) The law of diminishing marginal utility states that as one consumes more and more of a good, other things constant, _____.
A)total utility keeps on increasing
B)marginal utility always stays positive
C)marginal utility approaches but never becomes zero
D)marginal utility keeps on increasing
E)marginal utility eventually declines
Q2) Suppose John goes to a wedding reception where free drinks are served. He will drink until the marginal utility of an additional drink is _____.
A)infinite
B)zero
C)one
D)less than zero
E)greater than one
Q3) For any given price, the more elastic is the demand for a good, the greater will be the consumer surplus.
A)True
B)False
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8
Chapter 7: Production and Cost in the Firm
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) The opportunity cost of a resource:
A)includes both explicit and implicit cost.
B)includes explicit cost only.
C)includes implicit cost only.
D)is equal to the market price of the resource.
E)is not related to the market price of the resource.
Q2) Normal profit is defined as:
A)accounting profit.
B)economic profit.
C)the profit necessary to ensure that opportunity costs are covered.
D)accounting profit minus economic profit.
E)economic profit minus accounting profit.
Q3) Long-run average costs are the same as long-run total costs.
A)True
B)False
Q4) If a firm is experiencing diminishing marginal returns, its marginal product is negative.
A)True B)False
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Chapter 8: Perfect Competition
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150 Flashcards
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Sample Questions
Q1) A firm said to be is productively efficient if, _____.
A)it produces its output at the lowest possible cost
B)it sells its product at the lowest possible price
C)it earns a positive economic profit
D)it produces what consumers demand
E)it earns a normal profit in the short run
Q2) Mobility of resources ensures productive efficiency in a perfectly competitive market.
A)True
B)False
Q3) Average revenue is:
A)total revenue minus total cost.
B)total revenue divided by the quantity of output.
C)total revenue divided by the quantity of the variable input.
D)the change in total revenue divided by the change in output.
E)the change in total revenue divided by the change in the quantity of an input used.
Q4) A firm that minimizes average cost will not survive in the long run.
A)True
B)False
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10
Chapter 9: Monopoly
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Sample Questions
Q1) A monopolist is likely to overcome a short-run economic loss in the long run by:
A)allowing other firms to enter the market.
B)employing lesser number of inputs.
C)increasing the price of its output.
D)advertising for its product.
E)reducing its total output.
Q2) Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier to entry.
A)True
B)False
Q3) McDonald's makes its unique McRib sandwich "available for a limited time only," usually in the fall. Such a strategy is likely to:
A)increase its marginal value to the consumer.
B)decrease its average cost of production.
C)restrict the entry of competitors in the long run.
D)decrease its demand.
E)result in a short-run economic loss.
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11
Chapter 10: Monopolistic Competition and Oligopoly
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) A cartel's marginal cost curve is the:
A)highest of all the individual firms' marginal cost curves.
B)lowest of all the individual firms' marginal cost curves.
C)horizontal sum of all the individual firms' marginal cost curves.
D)same as the market supply curve.
E)same as the marginal cost curve faced by all firms in the market.
Q2) In the long run, a monopolistically competitive firm will:
A)produce a greater variety of goods than do firms in other market structures.
B)produce at a greater output level than a perfectly competitive firm.
C)produce where price equals average total cost.
D)earn an economic profit.
E)suffer a loss because of its advertising budget.
Q3) In the short run, a monopolistically competitive firm continues to increase production _____ if it can at least cover its variable cost.
A)as long as MR > AVC
B)until MR = ATC
C)as long as MC > MR
D)until MR = AR
E)until MR = MC
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Page 12
Chapter 11: Resource Markets
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150 Flashcards
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Sample Questions
Q1) Marginal revenue product is defined as:
A)the total revenue generated by resources.
B)the additional output produced by one additional unit of a resource, other things constant.
C)the marginal revenue from each unit of output.
D)the total revenue divided by the number of resources employed.
E)the additional revenue generated by one additional unit of a resource, other things constant.
Q2) If the market wage is below the marginal revenue product of labor, then:
A)a profit-maximizing firm will employ more workers.
B)a profit-maximizing firm will employ fewer workers.
C)there is an increase in the demand for labor.
D)there is a decrease in the demand for labor.
E)the opportunity cost of leisure increases.
Q3) An increase in the price of a resource will cause a rightward shift of its supply curve.
A)True
B)False
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13
Chapter 12: Labor Markets and Labor Unions
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150 Flashcards
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Sample Questions
Q1) Which of the following happens if the government intervenes in a labor dispute and requires settlement through binding arbitration?
A)A neutral third party makes a decision that both parties must accept.
B)A neutral third party makes a decision that both parties may reject.
C)One party sues the other in court.
D)The two parties negotiate an agreement without assistance and both must accept it.
E)The two parties negotiate an agreement with assistance from their attorneys and both must accept it.
Q2) The equilibrium wage:
A)is the same in all labor markets.
B)occurs where the supply of labor curve begins to bend backward.
C)cannot be calculated because there are so many labor markets.
D)is determined by the market demand for labor and the market supply of labor.
E)is irrelevant because of unions.
Q3) A consumer maximizes utility by allocating time so that the expected marginal utilities of the last unit of time spent in each activity are identical.
A)True
B)False
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Chapter 13: Capital, Interest, Entrepreneurship, and Corporate Finance
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) As the interest rate increases, the opportunity cost of _____.
A)saving decreases
B)past consumption decreases
C)saving increases
D)current consumption increases
E)borrowing decreases
Q2) A technological breakthrough that increases the marginal productivity of capital will increase the:
A)demand for loanable funds, leading to a lower equilibrium market interest rate.
B)supply of loanable funds, leading to a lower equilibrium market interest rate.
C)demand for loanable funds, leading to a higher equilibrium market interest rate.
D)supply of loanable funds, leading to a higher equilibrium market interest rate.
E)supply of loanable funds, but have no impact on the equilibrium market interest rate.
Q3) The retained earnings of a firm are a source of corporate finance.
A)True
B)False
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15
Chapter 14: Transaction Costs, Asymmetric Information, and Behavioral Economics
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) A firm that produces mouthwash branches out into producing toothpaste. If this expansion reduces its average cost of production, which of the following can be concluded about this firm?
A)The firm is benefiting from vertical integration.
B)The firm is benefiting from horizontal integration.
C)The firm is experiencing economies of scale.
D)The firm is experiencing economies of scope.
E)The firm is not incurring any transaction cost.
Q2) The more complicated the process used to produce a good, _____.
A)the greater the transaction costs of organizing production through markets
B)the lower the transaction costs of organizing production through markets
C)the less likely a firm will use administrative controls to organize the production process
D)the more likely a firm will use the market to organize the production process
E)the more likely that consumers will choose to purchase the good over other alternatives in the market
Q3) In the market for used cars, owners of lemons usually sell their cars to friends and relatives.
A)True
B)False
Page 16
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Chapter 15: Economic Regulation and Antitrust Policy
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) If ball bearings producers support a proposed regulation of their industry, then it is likely that:
A)the prices of ball bearings will decrease under the regulation.
B)the profits of firms in the ball-bearing industry will decrease after the regulation.
C)ball bearings producers will promote the interests of the public.
D)ball bearings producers will promote the interests of the public
E)consumers of ball bearings will suffer from the proposed regulation
Q2) If an industry currently has a Herfindahl index of 900 and a merger would raise that to 950, then the Department of Justice would:
A)challenge the merger because the index would become too large.
B)challenge the merger because the change in the index is too large.
C)not challenge the merger because the post-merger index would be less than 2,500.
D)not challenge the merger if it is a horizontal merger.
E)challenge the merger if it is a vertical merger.
Q3) Horizontal mergers involve firms in different industries.
A)True
B)False
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Page 17
Chapter 16: Public Goods and Public Choice
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150 Flashcards
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Sample Questions
Q1) Payments higher than necessary to call forth a resource are known as _____.
A)profit
B)rents
C)consumer surplus
D)opportunity costs
E)subsidies
Q2) The questions of what type of public goods to produce and how much to produce are resolved:
A)in product markets.
B)in resource markets.
C)only by central planners.
D)through public choices.
E)through referenda.
Q3) With special-interest legislation, _____.
A)benefits are concentrated but costs widespread
B)both benefits and costs are concentrated
C)benefits are widespread but costs concentrated
D)both benefits and costs are widespread
E)benefits are widespread and costs are zero
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Page 18
Chapter 17: Externalities and the Environment
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Sample Questions
Q1) Which of the following responses to a positive externality enhances society's welfare?
A)Taxes
B)Subsidies
C)Effluent fees
D)Quotas
E)A cut in funding
Q2) In order to increase society's well-being, education should be:
A)taxed to discourage production.
B)subsidized to encourage production.
C)taxed to encourage production.
D)subsidized to discourage production.
E)provided without government intervention.
Q3) In order to increase a society's total welfare, a production process that produces a negative externality should be _____.
A)taxed
B)encouraged to produce goods in excess of the socially optimum level
C)prohibited
D)subsidized if the good is produced for foreign markets
E)subsidized if the good is produced for the domestic market
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Page 19
Chapter 18: Poverty and Redistribution
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Sample Questions
Q1) Which of the following is included in the calculation of the official poverty level in the United States?
A)Medicare
B)Medicaid
C)Pretax money income
D)Food vouchers
E)Employer-provided health insurance
Q2) The income distribution in the United States became more equal between 1980 and 2013.
A)True
B)False
Q3) The normal life cycle pattern of income reflects differences in earnings based on:
A)race and education.
B)gender and education.
C)age and education.
D)race.
E)household size.
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Page 20
Chapter 19: International Trade
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150 Flashcards
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Sample Questions
Q1) Autarky is:
A)the situation of national self-sufficiency, in which there is no economic interaction with foreign producers or consumers.
B)the situation in which there is no legal limit on the amount of a commodity that can be imported.
C)the situation in which countries export products they can produce more cheaply in return for products that are unavailable domestically or are cheaper elsewhere.
D)the situation in which world price is determined by the world supply and demand for a product.
E)the situation in which each country specializes in making goods with the lowest opportunity cost.
Q2) A country should export only those goods for which it has _____ relative to its trading partners.
A)a higher absolute advantage
B)lower terms of trade
C)higher consumption possibilities
D)a stronger domestic demand
E)a lower opportunity cost
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Page 21
Chapter 20: International Finance
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150 Flashcards
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Sample Questions
Q1) Current account transactions are records of the income and expenditures from exports and imports, plus international financial investments and borrowing.
A)True
B)False
Q2) The current account reflects:
A)trade in only tangible products.
B)trade in goods as well as services.
C)trade in services only.
D)the purchase of securities from foreigners.
E)the sale of securities to foreigners.
Q3) Critics of the system of flexible exchange rates allege that it:
A)causes inflation.
B)causes unemployment.
C)gives central banks too little discretion over their money supplies.
D)restricts the growth of developing countries.
E)gives too much financial power to industrial countries.
Q4) U.S. capital outflows occur when foreigners purchase U.S. assets.
A)True
B)False
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Chapter 21: Economic Development
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150 Flashcards
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Sample Questions
Q1) Foreign aid includes loans that:
A)have high interest rates and short repayment periods.
B)have high interest rates and long repayment periods.
C)have low interest rates and short repayment periods.
D)have low interest rates and long repayment periods.
E)require no interest payments at all.
Q2) Japan has one of the most developed economies in the world because Japan is rich in natural resources.
A)True
B)False
Q3) A study by the World Bank suggests a strong link in Africa between governments that _____ special-interest groups and _____ rates of economic growth.
A)cater to; high
B)cater to; moderate
C)cater to; low
D)ignore; low
E)ignore; moderate
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