Economics for Business Exam Review
Course Introduction
Economics for Business provides students with a foundational understanding of key economic principles and how they apply to real-world business decision-making. The course explores both microeconomic and macroeconomic concepts, including supply and demand, market structures, pricing strategies, and the role of government in the economy. Emphasis is placed on interpreting economic data, assessing business environments, and analyzing how economic forces influence business operations and strategic planning. Through case studies and practical examples, students develop the skills necessary to make informed decisions within a dynamic economic landscape.
Recommended Textbook
Microeconomics Student Value 4th Edition by R. Glenn Hubbard
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18 Chapters
2548 Verified Questions
2548 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Which of the following is a normative economic statement?
A)Rising global demand for diesel and heating oil has led to increases in the price of crude oil.
B)With falling home prices and rising mortgage interest rates,the amount of foreclosures has increased.
C)The federal government is considering raising the gasoline tax to promote the use of public transportation.
D)Fashion designers should be allowed to copyright designs to promote innovation.
Answer: D
Q2) If a graph has a line that shows the quantity of flat-screen televisions sold in the last five years,it is known as
A)a pie chart.
B)a time-series graph.
C)a demand curve for outsourcing.
D)a supply curve of outsourcing.
Answer: B
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) In a production possibilities frontier model,a point inside the frontier is
A)allocatively efficient.
B)productively efficient
C)allocatively inefficient.
D)productively inefficient.
Answer: D
Q2) Refer to Table 2-1.Dina faces ________ opportunity costs in the production of sliders and hot wings.
A)increasing
B)decreasing
C)constant
D)negative
Answer: C
Q3) Refer to Table 2-4.If the two countries specialize and trade,who should export cell phones?
A)There is no basis for trade between the two countries.
B)Estonia
C)Finland
D)They should both be importing cell phones.
Answer: C
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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147 Flashcards
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Sample Questions
Q1) Farmers can plant either corn or soybeans in their fields.Which of the following would cause the supply of soybeans to increase?
A)an increase in the price of soybeans
B)a decrease in the price of corn
C)an increase in the demand for corn
D)an increase in the price of soybean seeds
Answer: B
Q2) If the demand for a product increases and the supply of the same product decreases,the equilibrium price will increase.
A)True
B)False
Answer: True
Q3) Explain the Law of Demand.
Answer: The law of demand is the rule that,holding everything else constant,when the price of a product falls,the quantity demanded of the product will increase,and when the price of a product rises,the quantity demanded of the product will decrease.
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5
Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3,what changes in the market would result in an economically efficient output?
A)The price would decrease,the quantity supplied would increase,and the quantity demanded would decrease.
B)The quantity supplied would decrease,the quantity demanded would increase and the equilibrium price would decrease.
C)The price would decrease,the demand would increase and the supply would decrease.
D)The price would decrease,quantity demanded would increase and quantity supplied would decrease.
Q2) Employers withhold several taxes from employees ' paychecks,one of which is FICA.Congress requires employers to pay half of the FICA tax and workers to pay the other half.Does this mean that the burden of the FICA tax falls evenly on employers and employees? Briefly explain.
Q3) Government intervention in agriculture began in the Untied States in the 1930s. A)True B)False
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Chapter 5: Externalities, environmental Policy, and Public Goods
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) The efficient level of paper production will occur where the A)marginal private benefit from consuming paper is equal to the marginal social cost of production.
B)marginal social benefit from consuming paper is equal to the marginal social cost of production.
C)the economically efficient level of the output of paper is equal to the economically efficient level of inputs.
D)production of paper no longer produces negative externalities.
Q2) The 2005 European Union Emission Trading Scheme is an agreement among ________ to reduce carbon dioxide emissions.
A)the European Union and the United States
B)24 European Union nations
C)Western Europe and Africa
D)The European Union and the Asian nations of China,Japan,and South Korea
Q3) A modern example of the tragedy of the commons is the forests in many poor countries.
A)True
B)False
Q4) How does a positive externality in consumption reduce economic efficiency?
Page 7
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) As gasoline prices increased throughout 2010 and into 2011,consumers began to explore alternatives to driving their cars and more people eventually ended up using public transportation.This exemplifies that for a specific product,the longer the time period involved,
A)the larger (in absolute value)the price elasticity of demand.
B)the smaller (in absolute value)the price elasticity of demand.
C)the closer the price elasticity of demand is to reaching a value of zero.
D)the more people come to rely on that product.
Q2) During an economic expansion as consumer incomes rise,holding everything else constant,
A)the demand for most goods,except luxuries,will rise.
B)the demand for luxuries will rise while the demand for inferior goods will fall.
C)the demand for luxuries and inferior goods will rise.
D)the prices of luxuries will fall while the prices of inferior goods will rise.
Q3) If a supply curve is a horizontal line,supply is said to be
A)perfectly inelastic.
B)unit-elastic.
C)inelastic.
D)perfectly elastic.
Page 8
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Chapter 7: The Economics of Health Care
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) The Congressional Budget Office estimates that the Patient Protection and Affordable Care Act (PPACA)will increase government spending
A)by just under $1 trillion over 10 years.
B)by more than the additional taxes and fees enacted under the law will bring in.
C)by less than $50 billion over the next decade.
D)by more than $20 trillion dollars over the next 5 years.
Q2) In the United States in 2009,the percentage of people with some form of health insurance was about
A)17%.
B)29%.
C)54%.
D)83%.
Q3) Two key consequences of asymmetric information are adverse selection and moral hazard.Define each concept,provide one example of each and explain how the two concepts differ.
Q4) What is asymmetric information?
Q5) How do adverse selection and moral hazard affect the market for insurance?
Q6) How can increases in a country's total income improve health?
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Chapter 8: Firms, the Stock Market, and Corporate Governance
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Corporate managers and shareholders always have the same goals.
A)True
B)False
Q2) When you buy previously-issued shares of Google stock,this transaction takes place in the
A)primary market.
B)bond market.
C)secondary market.
D)bear market.
Q3) Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?
A)$150,000
B)$350,000
C)$600,000
D)$1.2 million
Q4) Define a sole proprietorship.
Q5) Who is the seller in a primary market and who is the seller in a secondary market?
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Refer to Figure 9-3.If there was no quota,how many pounds of peanuts would be imported?
A)16 million
B)28 million
C)30 million
D)40 million
Q2) Which of the following statements is true?
A)Economic efficiency would be increased if the United States eliminated all of its trade restrictions,but only if all other countries eliminated their trade restrictions too.
B)The U.S.economy would gain from the elimination of its tariffs but not from the elimination of its quotas.
C)Eliminating its tariffs and quotas unilaterally would not benefit the United States because this would remove the leverage it would have to persuade other countries to eliminate their trade restrictions.
D)The U.S.economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.
Q3) What are terms of trade?
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Page 11
Chapter 10: Consumer Choice and Behavioral Economics
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) In making decisions about what to consume,a person's goal is to
A)allocate her limited income among all the products she wishes to buy so that she receives the highest total utility.
B)buy low-priced goods rather than high-priced goods.
C)maximize her marginal utility from the goods and services she wishes to buy using her limited income.
D)consume as many necessities as possible and then,if there is money left over,to buy luxuries.
Q2) Suppose the marginal utilities for the first three cans of soda are 100,80 and 60,respectively.The total utility received from consuming 2 cans is A)20.
B)80.
C)90.
D)180.
Q3) Total utility is constant along a given indifference curve.
A)True
B)False
Q4) Describe the demand curve for a Giffen good.
Q5) Explain the concept of network externalities.
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Chapter 11: Technology, production, and Costs
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165 Flashcards
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Sample Questions
Q1) Refer to Table 11-5.What is the minimum efficient scale of production?
A)100 units
B)200 units
C)300 units
D)400 units
Q2) Which of the following statements is false?
A)Marginal cost will equal average total cost when marginal cost is at its lowest point.
B)When marginal cost is less than average total cost,average total cost will fall.
C)When marginal cost is greater than average total cost,average total cost will rise.
D)Marginal cost will equal average total cost when average total cost is at its lowest point.
Q3) Refer to Figure 11-6.In the short run,if the firm sells fewer than 5,000 picture frames per month
A)it should produce with the scale of operation associated with ATCa.
B)it should produce with the scale of operation associated with ATCb.
C)it should produce with the scale of operation associated with ATCc.
D)it will experience constant returns to scale.
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Chapter 12: Firms in Perfectly Competitive Markets
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151 Flashcards
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Sample Questions
Q1) For a perfectly competitive firm,at profit maximization
A)market price exceeds marginal cost.
B)total revenue is maximized.
C)marginal revenue equals marginal cost.
D)production must occur where average cost is minimized.
Q2) How are sunk costs and fixed costs related?
A)They are not related in any way.
B)Sunk costs cannot be recovered and fixed costs can be avoided by shutting down.
C)In the short run they are equal to each other.
D)In the long run they are equal to each other.
Q3) Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market's transition to the long run when some firms in the market are earning economic profits?
A)Panel A
B)Panel B
C)Panel C
D)Panel D
Q4) Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.
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Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?
Q2) Refer to Figure 13-1.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,
A)X represents the gain (price effect)and Y the loss (output effect).
B)X + Z represents the loss (output effect)and Y the gain (price effect).
C)Y represents the gain (output effect)and X the loss (price effect).
D)X represents the loss (price effect)and Y + Z the gain (output effect).
Q3) Refer to Figure 13-3.Which of the following is the area that represents the profit or loss experienced by the firm?
A)A loss represented by the rectangle P<sub>2</sub>uvP<sub>1</sub>.
B)A loss represented by the rectangle P<sub>2</sub>uwP<sub>0</sub>.
C)A loss represented by the rectangle P<sub>1</sub>vwP<sub>0</sub>.
D)An accounting profit equal to P<sub>1</sub>vwP<sub>0</sub>.
Q4) Discuss the role of product differentiation and advertising in monopolistic competition.
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Refer to Table 14-4.Which of the following statements is true?
A)Neither Pepsi nor Coca-Cola have a dominant strategy.
B)Pepsi's dominant strategy is to advertise; Coca-Cola's dominant strategy is to not advertise.
C)Coca-Cola's dominant strategy is to advertise; Pepsi's dominant strategy is to not advertise.
D)The dominant strategy for both firms is to advertise.
Q2) A consequence of the quota that has been imposed on the importation of sugar into the United States is
A)consumers are protected from eating unsafe products made from cheap imported sugar.
B)competition in the U.S.sugar market is reduced.
C)the cost of producing cereal,chocolate and candy products in the United States is reduced.
D)the market for sugar in the United States has become monopolistically competitive rather than oligopolistic.
Q3) Explain why selling output at a price below that at which marginal revenue equals marginal cost (MR = MC)might serve to deter entry of a potential competitor.
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Page 16
Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) Consider two industries,industry W and industry X.In industry W there are five companies,each with a market share of 20% of total sales.In industry X,there are six companies.One company has a 50% market share and each of the other five firms has a market share of 10%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?
Q2) A horizontal merger
A)is a merger between firms in the same industry.
B)results in a trust (for example,the Standard Oil Company).
C)is a merger between firms at different stages of production of a good.
D)was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.
Q3) A monopolist's demand curve is the same as the marginal revenue curve for the product.
A)True
B)False
Q4) What is a public franchise? Are all public franchises natural monopolies?
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?
A)clothing items sold through Macy's Department Store
B)a hamburger sold at Burger King
C)a cafe latte sold at Starbucks
D)tickets to matinee shows at a movie theatre
Q2) What is cost-plus pricing? Why do some firms use cost-plus pricing even when the firms' managers have the resources to devise a pricing strategy that would result in greater profits?
Q3) Which of the following pricing strategies allows a firm to earn economic profit?
A)price discrimination
B)charging a price equal to marginal cost
C)charging a price equal to the average total cost of production
D)charging a price equal to the average variable cost of production
Q4) A successful strategy of price discrimination requires that a firm be a price-taker.
A)True
B)False
Q5) Are restaurant coupons a form of price discrimination? Why or why not?
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Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) Explain how the market for opticians is affected as a result of the development of laser technology which reduces the demand for glasses and contact lenses.In your explanation be sure to show the connection between the market for glasses and contact lenses and the market for opticians.
Q2) Adrian Gonzalez and other star baseball players earn millions of dollars annually.These salaries are due to
A)the greed of players and their agents.
B)the demand and supply of labor in the market for baseball players.
C)the elastic demand for jobs in Major League Baseball.
D)the irrational behavior of team owners.
Q3) In equilibrium,what determines the price of capital and what determines the price of natural resources?
Q4) In general,the supply curve for a natural resource
A)is vertical.
B)is horizontal.
C)slopes downward to reflect decreasing available quantities over time.
D)slopes upward.
Q5) Why are there superstar baseball players but no superstar chiropractors?
Page 19
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Chapter 18: Public Choice, taxes, and the Distribution of Income
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Sample Questions
Q1) The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as
A)sales taxes.
B)sin taxes.
C)specific taxes.
D)excise taxes.
Q2) All Gini coefficients must lie between 0 and 1.The lower the value,
A)the more unequal the income distribution.
B)the closer the income distribution is to being equal.
C)the greater the degree of poverty.
D)the lower the degree of poverty according to the federal government's definition of poverty.
Q3) The marginal tax rate is
A)the amount of taxes paid as a percentage of income.
B)the amount of per-capita taxes paid.
C)the amount of taxes paid as a percentage of gross domestic product (GDP).
D)the fraction of each additional dollar of income that must be paid in taxes.
Q4) What is the difference between the poverty line and the poverty rate?
Page 20
Q5) What is rent seeking and how is it related to regulatory capture?
Q6) What is a Lorenz curve and what is a Gini coefficient?
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Page 21