Economics for Business Exam Questions
Course Introduction
Economics for Business introduces students to the fundamental principles of microeconomics and macroeconomics with an emphasis on their practical application in the business world. The course explores concepts such as supply and demand, market structures, pricing strategies, consumer behavior, production costs, and the impact of government policies on businesses. Students will analyze real-world case studies to understand how economic forces influence business decisions and operations. Additionally, the course covers issues like globalization, economic cycles, and current economic trends, equipping students with the analytical tools necessary to assess and respond to changing market conditions.
Recommended Textbook
Economics for Today 5th Edition by Allan Layton
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19 Chapters
2164 Verified Questions
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Page 2
Chapter 1: Thinking Like an Economist
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Sample Questions
Q1) The statement: 'John buys more of good X as his income increases, ceteris paribus', means:
A) John's income is being held constant.
B) John's purchases of good X are being held constant.
C) John's income and purchases of this good are being held constant.
D) John's income is the only influence that is being allowed to change.
Answer: D
Q2) Consider the statement: 'The increase in money supply will push the prices downwards'. This is a statement of a:
A) microeconomist.
B) both resource economist and microeconomist.
C) macroeconomist.
D) resource economist.
E) social science economist.
Answer: C
Q3) Abstracting from reality is an important element of all economic models.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Applying Graphs to Economics
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Sample Questions
Q1) As shown in Exhibit A1.3, the intercept of straight line AB is:
A)1.
B)10.
C)20.
D)30.
E) not determinable from the information provided.
Answer: B
Q2) Basic economic analysis typically concerns:
A) the relationship between two variables, one of which has negative values.
B) the relationship between two variables, both of which have negative values.
C) the relationship between two variables, both of which have positive values.
D) the relationship between two variables, one variable always increases and the other variable always decreases.
Answer: C
Q3) As shown in Exhibit A1.3, the slope of straight line AB:
A) decreases with increases in X.
B) increases with increases in X.
C) increases with decreases in X.
D) remains constant with changes in X.
Answer: D
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Chapter 3: Production Possibilities and Opportunity Cost
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Sample Questions
Q1) Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:
A) people in Portugal will not want to buy as many hats.
B) Spain no longer has a comparative advantage in hats.
C) Portugal is flooding the market with too many doormats.
D) some of the gains from trade shift to Portugal.
Answer: D
Q2) For the economy to operate efficiently, it must shift workers from producing consumer goods to producing capital goods.
A)True
B)False
Answer: False
Q3) If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.
A)True
B)False
Answer: False
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Chapter 4: Market Demand and Supply
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Sample Questions
Q1) If a shortage exists in a market then:
A) the price cannot be determined.
B) the quantity demanded is less than the quantity supplied.
C) the price will fall in the near future.
D) the price will increase in the near future.
Q2) Which of the following is true about the market equilibrium?
A) As the price increases, the quantity demanded and the quantity supplied increases.
B) As the price increases, the quantity demanded and the quantity supplied decreases.
C) As the price increases, the quantity demanded increases and the quantity supplied Decreases.
D) As the price increases, the quantity demanded decreases and the quantity supplied Increases.
Q3) An increase in supply is reflected as a rightward (outward) shift of the supply curve and is caused by an increase in price.
A)True
B)False
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6
Chapter 5: Markets in Action
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Sample Questions
Q1) A price floor is:
A) the lowest price a producer will accept.
B) the lowest price a consumer will pay.
C) a minimum price set by the government above equilibrium price.
D) a maximum price set by the government above equilibrium price
Q2) If the free market is called upon to provide public goods, then:
A) there will more goods provided than is optimal.
B) there will be fewer goods provided than is optimal.
C) the market will provide the optimal number of goods.
D) the market price will be correct, but the optimal amount of output will not be produced.
Q3) A severe storm destroyed the banana plantations in northern Queensland. Shortly thereafter the price of bananas rose significantly. These events suggest that a/an:
A) decrease in the supply of bananas caused the price of bananas to rise.
B) increase in the supply of bananas caused the price of bananas to rise.
C) increase in demand caused the price of bananas to rise.
D) decrease in demand caused the price of bananas to rise.
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Chapter 6: Elasticity of Demand and Supply
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Sample Questions
Q1) Demand sensitivity depends on all of the following except:
A) how low the price of the good is.
B) the sensitivity of a firm's output to changes in its price.
C) the consumer's income.
D) the availability and closeness of substitutes.
Q2) Which of the statements below does not describe a demand curve that is unit elastic?
A) The percentage change in the quantity demanded equals the percentage change in product price.
B) An increase in product price will not change total revenue.
C) The price elasticity of demand equals one.
D) A change in price does not change quantity demanded.
Q3) Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?
A) 3.
B) 1.5.
C) 0.2.
D) 2.
E) 0.3.
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Page 8
Chapter 7: Production Costs
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Sample Questions
Q1) Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.
A)True
B)False
Q2) The _____ is the situation in which the marginal product of labour is greater than zero and declining as more labour is hired.
A) law of demand
B) law of diminishing supply
C) law of diminishing returns
D) law of returns to scale
Q3) As shown in Exhibit 6.3, the law of diminishing returns applies where there are:
A) more than five workers per day.
B) more than four workers per day.
C) more than three workers per day.
D) between zero and five workers per day.
Q4) In the long run, all costs are considered variable.
A)True
B)False
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Chapter 8: Perfect Competition
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Sample Questions
Q1) According to Exhibit 7.8, the output level of the short-run equilibrium for this firm is:
A)1200.
B)100.
C)110.
D) 120.
Q2) In a constant-cost industry, input prices remain constant as:
A) the supply of inputs fluctuates.
B) firms encounter diseconomies of scale.
C) workers become more experienced.
D) firms enter and exit the industry.
Q3) A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:
A) average total cost curve.
B) average variable cost curve.
C) average fixed curve.
D) average price curve.
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Chapter 9: Monopoly
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Sample Questions
Q1) The demand curve for a monopolist is:
A) the demand curve for the industry.
B) less than the market demand curve.
C) below the marginal revenue curve.
D) non-existent.
Q2) If the monopolist can discriminate between buyers, then it is optimal to charge:
A) a higher price to the buyers with high elasticity of demand, and a lower price to the buyers with low elasticity of demand.
B) a lower price to all buyers.
C) a higher price to all buyers.
D) a lower price to the buyers with high elasticity of demand, and a higher price to the buyers with low elasticity of demand.
Q3) In the long run, a monopoly:
A) will always earn economic profit.
B) is always free from competition, either real or potential.
C) will always be protected by the government to prevent competition.
D) can change its plant size.
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11
Chapter 10: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) As presented in Exhibit 9.1, in the short-run the monopolistically competitive firm will charge a price per unit of:
A) $0.
B) just below $5.
C) just below $10.
D) just below $15.
Q2) Cartel members have an incentive to cheat on the cartel because:
A) the cartel does not maximise profits.
B) the cartel price is the competitive price.
C) each member's output quota is too high.
D) each members MR is not equal to the cartel's MC.
Q3) A high-concentration ratio indicates the market structure is likely to be:
A) monopolistically competitive.
B) perfectly competitive.
C) monopolistic.
D) oligopolistic.
Q4) The number of sellers is the largest in oligopoly.
A)True
B)False
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Chapter 11: Policy Issues: Housing Affordability and Climate Change
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Sample Questions
Q1) If the external costs of carbon emissions were included in the industry supply curve:
A) the supply curve would shift to the right decreasing the price and increasing the output.
B) the supply curve would shift to the left increasing the price and increasing the output.
C) the supply curve would shift to the left increasing the price and reducing the output level.
D) the supply curve would shift to the right increasing the price and reducing the output.
Q2) The revenue from the carbon tax:
A) could be used to fund more hospitals.
B) could be used to fully compensate those damaged by the pollution.
C) could be used to fully compensate those who are paying the carbon tax.
D) could be used to make industries more competitive internationally.
Q3) The objective of the carbon tax is to encourage more production using carbon intensive technologies.
A)True
B)False
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13
Chapter 12: Measuring the Size of the Economy
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Sample Questions
Q1) Intermediate goods are goods and services used:
A) by the ultimate user.
B) by state and local governments.
C) as inputs.
D) both as inputs and final goods.
Q2) GDP understates national wellbeing because:
A) there is not enough data on working hours.
B) no allowance is made for leisure time.
C) people can afford leisure time now.
D) people are working more now than they did a century ago.
Q3) Economic values that are measured in units per period of time are referred to as: A) stocks.
B) insignificant.
C) unit values.
D) flows.
Q4) Flows are measured per period of time, while stocks are measured at a particular point in time.
A)True
B)False
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Chapter 13: Business Cycles and Economic Growth
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Sample Questions
Q1) According to the Solow growth model, technological progress:
A) was thought to occur within the economic system.
B) was thought to occur independently of the economic growth process.
C) was thought not to exist.
D) was thought to exist but only inside the economic system.
Q2) In the Solow model, technological progress is assumed to be:
A) zero.
B) endogenous.
C) exogenous.
D) continually increasing.
Q3) Exogenous technological progress is the progress that:
A) depends on the economic growth process.
B) is independent of the economic growth process.
C) is undefinable.
D) is growing slowly according to spending in the economy.
Q4) The term 'trough' refers to the maximum point of the business cycle.
A)True
B)False
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Chapter 14: Inflation and Unemployment
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Sample Questions
Q1) The highest unemployment rate in the 20th century was:
A) over 5 per cent.
B) over 15 per cent.
C) over 25 per cent.
D) less than 20 per cent.
Q2) Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?
A) Only the borrowers benefit.
B) Only the lenders benefit.
C) Both borrowers and lenders benefit.
D) Neither borrowers nor lenders benefit.
Q3) If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be:
A) a redistribution of wealth from borrowers to lenders.
B) a net gain in purchasing power for lenders relative to borrowers.
C) no change in the distribution of wealth between lenders and borrowers.
D) that the borrow will be a winner.
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16
Chapter 15: A Simple Model of the Macro Economy
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Sample Questions
Q1) The aggregate demand curve:
A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time.
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time.
C) shifts to the left whenever there is an increase in aggregate expenditures.
D) slopes upward and shifts to the left whenever there is an increase in aggregate Expenditures.
Q2) The aggregate supply curve will shift to the right when the:
A) amount of labour in the society decreases.
B) capital stock of the society shrinks.
C) amount of natural resources in the society gets smaller.
D) amount of labour in the society increases.
Q3) If the terms of trade increase then, ceteris paribus:
A) imports will fall.
B) imports will rise.
C) exports will rise.
D) exports will fall.
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Chapter 16: The Monetary and Financial System
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Sample Questions
Q1) An individual's liability in relation to public companies is:
A) unlimited.
B) limited to their investment in that company.
C) guaranteed by the Australian Stock Exchange.
D) guaranteed by the Reserve Bank.
E) guaranteed by the Corporations Law.
Q2) The short-term money market is:
A) located in Sydney for the purpose of providing short-term funds for financial institutions.
B) used by financial institutions to borrow or lend money for short periods of time.
C) only accessed by trading banks.
D) used for the trading of shares in companies.
Q3) Fiat money is paper money:
A) backed dollar for dollar by gold.
B) backed dollar for dollar by silver.
C) produced by an Italian car manufacturer.
D) which is not backed by or convertible into any good.
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Chapter 17: Macroeconomic Policy I: Monetary Policy
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Sample Questions
Q1) Which of the following statements is least likely to be true?
A) By targeting the growth in the money supply, the government will be more successful in keeping inflation low if the demand for money becomes volatile.
B) Targeting the growth in the money supply will be more successful in keeping inflation low if the velocity of money is stable.
C) The demand for money influences the velocity of money.
D) A rules-based approach to monetary policy will be less effective when the demand for money is volatile.
Q2) Monetary targeting was abandoned in Australia because:
A) the demand for money became more stable.
B) the supply of money became more volatile.
C) the velocity of money became more volatile.
D) the velocity of money became more stable.
Q3) If the velocity of money is constant then the money supply will also be constant.
A)True
B)False
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19
Chapter 18: Macroeconomic Policy II: Fiscal Policy
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Sample Questions
Q1) If the government wants to run an expansionary fiscal policy by increasing consumption, the best alternative is likely to be:
A) an income tax cut.
B) a company tax cut.
C) an income tax rise.
D) a company tax rise.
Q2) According to Exhibit 17.3, if we assume the MPC is 0.8, then a shift in the AD curve from AD0 to AD1 would require an increase in government spending of:
A) $5 billion.
B) $10 billion.
C) $50 billion.
D) greater than $50 billion to allow for inflation.
Q3) According to supply-side economists, substantial tax cuts will result in:
A) a decrease in the supply of labour.
B) a decrease in the after-tax wage.
C) an increase in the AS curve.
D) a decrease in productive investment.
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Chapter 19: International Trade and Finance
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Sample Questions
Q1) An embargo is:
A) an ad valorem tariff.
B) the strongest limit on trade.
C) a law that allows free trade with another country.
D) a direct tax on production.
Q2) If the Australian dollar appreciates, the effect of this is likely to be:
A) exports will be more expensive.
B) imports will be more expensive.
C) import-competing domestic goods will be relatively cheaper.
D) 'imported inflation' may become a problem.
Q3) If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:
A) Japanese-produced goods would become more expensive.
B) the dollar has depreciated.
C) the yen has appreciated.
D) Australian-produced goods would become more expensive.
Q4) Strategic trade theory refers to the idea that governments should be using the game theory advances to facilitate the free trade.
A)True
B)False
Page 21
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