Economics for Business Question Bank
Course Introduction
Economics for Business introduces students to fundamental economic concepts and principles relevant to the world of business. The course explores key topics such as supply and demand, market structures, consumer behavior, production and costs, and the economics of business strategy. Emphasis is placed on understanding how economic theory is applied to real-world business decision-making, including pricing, resource allocation, and the impact of government policies. Through case studies and practical examples, students learn to analyze economic challenges and opportunities facing businesses in both domestic and global markets.
Recommended Textbook
Essential Foundations of Economics 6th Edition by Robin Bade
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5980 Verified Questions
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Page 2
Chapter 1: Getting Started
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Sample Questions
Q1) Which of the following is true?
I. A rational choice is made on the margin.
Ii. Microeconomics is the study of the national economy while macroeconomics is the study of the global economy.
Iii. Economists try to understand how the economic world works by testing normative statements.
A)Only i
B)i and iii
C)Only ii
D)Only iii
E)i and ii
Answer: A
Q2) The graph shows
A)a relationship with a minimum.
B)a relationship with a maximum.
C)no relationship.
D)a relationship that becomes less steep.
E)a cross-section relationship.
Answer: A
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Page 3
Chapter 2: The Us and Global Economies
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Sample Questions
Q1) In the circular flow model, which of the following flows in the opposite direction from the flow of factors of production?
A)finished goods and services
B)wages, rent, interest, and profit
C)interests payments of Federal, state, and local governments
D)firm's profit incentives
E)the goods market
Answer: B
Q2) Margo orders a MacBook Pro computer from The Apple Store online to use it in her graphic design business. How will this be reflected in the figure above?
A)As a flow of a factor of production
B)As a flow of goods and services bought
C)As expenditures on goods and services
D)As goods and services supplied
E)It won't be shown in the figure because this transaction takes place neither in goods markets nor in factor markets.
Answer: A
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Chapter 3: The Economic Problem
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Sample Questions
Q1) "Comparative advantage" is defined as a situation in which one person can produce
A)more of all goods than another person.
B)more of a good than another person.
C)a good for a lower dollar cost than another person.
D)a good for a lower opportunity cost than another person.
E)all goods for lower opportunity costs than another person.
Answer: D
Q2) A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?
A)It would shift outward because unemployment would be reduced.
B)Nothing would happen because the nation would still have the same capabilities.
C)A tradeoff would occur to replace the resources and goods destroyed.
D)It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed.
E)It would not shift because people would get to work to replace any capital that was destroyed.
Answer: D
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Chapter 4: Demand and Supply
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Sample Questions
Q1) Which of the following lower the equilibrium price of a canoe?
A)an increase in the supply of canoes
B)an increase in the demand for canoes
C)an increase in the quantity of canoes supplied
D)a decrease in the supply of canoes
E)Both answers A and B are correct.
Q2) In a recession, consumers have less income to spend. As a result, if dining out is a normal good, then which of the following would happen to the demand curve for dining out?
A)The demand curve would shift leftward.
B)The demand curve would not shift but the price of dining out would rise.
C)The effect on the demand curve is unknown.
D)The demand curve would shift rightward.
E)The demand curve would not shift but the price of dining out would fall.
Q3) Consumers can use either natural gas or heating oil to warm their houses. Suppose the price of natural gas increases. Use a demand and supply diagram to show the impact of the higher price of natural gas on the market for home heating oil.
Q4) Soft drinks are a normal good. Draw a graph showing the effect of an increase in income on the demand for soft drinks.
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Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) The demand for oil is inelastic. So, does an increase in the price of oil mean an increase in total revenue or a decrease in total revenue for oil producers?
Q2) If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is
A)greater than one and supply is elastic.
B)negative and supply is inelastic.
C)less than one and supply is elastic.
D)less than one and supply is inelastic.
E)greater than one and supply is inelastic.
Q3) What is the price elasticity of supply?
List and briefly define three cases of the price elasticity of supply.
Q4) The longer the time that has elapsed since the price of a good changed, the
A)more elastic the demand for that good.
B)steeper the demand curve.
C)less elastic the demand for that good.
D)smaller the amount of that good bought.
E)fewer substitutes available for the good.
Q5) If a good has only a few, poor substitutes, is its demand elastic or inelastic?
Q6) Explain the total revenue test.
Page 7
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) The figure shows the demand curve for hotel rooms at a local resort.
a. If the hotel charges $120 per night, how many rooms will they rent?
b. If there are only 40 rooms available, how much are customers willing to pay for a room?
c. If 60 rooms are available, how much are customers willing to pay?
d. What do the dollars in your answer to part (c)represent?
Q2) Lauren and Katy each bought a new bike lock for $20. Both Lauren and Katy would have paid $25 for the lock. Katy's consumer surplus equaled
A)$10.
B)$40.
C)$5.
D)$20.
E)$50.
Q3) If you split your dessert with your date, you are using a ________ allocation method.
A)first-come, first-served
B)sharing equally
C)contest
D)personal characteristics
E)command
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Chapter 7: Government Actions in Markets
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Sample Questions
Q1) Both price supports and a price floor can
A)create a deadweight loss.
B)decrease output below the equilibrium quantity.
C)decrease the price below the equilibrium price.
D)increase consumer surplus.
E)have no effect on producer surplus.
Q2) After the tax is imposed, the price paid by the buyer is ________, and the price received (and kept)by the seller is ________.
A)$2.20; $2.00
B)$2.00; $2.20
C)$2.00; $2.00
D)$2.20; $2.20
E)$2.00; $1.80
Q3) Suppose that producers are richer than consumers. Is a price support program fair? Explain your answer.
Q4) Explain why in cities such as New York City that have rent ceiling laws, so many people who work in the city commute from outside the city.
Q5) Why do rent ceilings lead to shortages and black markets?
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Chapter 8: Global Markets in Action
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Sample Questions
Q1) If the United States imposed a quota on the amount of salmon imported from Chile, the result would be ________ salmon prices in the United States and ________ in the quantity of salmon demanded in the United States.
A)higher; an increase
B)higher; a decrease
C)lower; an increase
D)lower; a decrease
E)higher; no change
Q2) The above figure shows the U.S. market for replacement cell phone batteries. Area E is the
A)producer surplus when there is free trade.
B)deadweight loss from tariff.
C)tariff revenue.
D)increase in producer surplus due to the tariff.
E)gain in total surplus due to the tariff.
Q3) What is "rent seeking"?
How does it apply to restricting imports?
Q4) Explain how governments restrict international trade and who benefits as well as who loses from the restrictions.
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Chapter 9: Externalities: Pollution, Education, and Health Care
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Sample Questions
Q1) The table above gives the private costs and external costs of producing paper.
a. Complete the table by finding the marginal social cost at each level of production.
b. If the market is competitive and is left unregulated and 400 tons of paper are produced, what is the price of a ton of paper?
c. If the government imposes a tax equal to the external cost at each level of production, what price would be charged if 400 tons are produced?
Q2) Why does the existence of an external benefit lead to the production of less than the efficient quantity?
Q3) Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?
A)removing property rights
B)subsidizing production
C)marketable permits
D)lottery
E)vouchers
Q4) What do we mean by "property rights" and why are they important?
Q5) How has air quality changed in the United States since 1980?
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Chapter 10: Production and Cost
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Sample Questions
Q1) The main source of economies of scale is
A)better management.
B)constant returns to plant size.
C)specialization.
D)long-run cost curves eventually sloping downward.
E)increases in the labor force not matched by increases in the plant size.
Q2) In the long run all costs are variable costs. Why?
Q3) When marginal cost is positive, total cost is ________ as output increases.
A)increasing
B)decreasing
C)constant
D)negative
E)undefined
Q4) ________ cost is defined as a cost of production that does not entail a direct money payment.
A)An explicit
B)An implicit
C)A total
D)A fixed
E)A marginal
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Chapter 11: Perfect Competition
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Sample Questions
Q1) When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
A)increase.
B)decrease.
C)not change.
D)become vertical.
E)become the same as the individual producers' supplies.
Q2) "A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect?
Briefly explain your answer.
Q3) Which of the following market types has only a few competing firms?
A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly
E)perfect competition and monopolistic competition
Q4) What are the four types of markets?
Give a brief description of each type.
Q5) What is a perfectly competitive firm's short-run supply curve?
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Chapter 12: Monopoly
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Sample
Questions
Q1) Suppose that along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the
A)marginal revenue is negative when output exceeds 100 units.
B)elasticity of demand is less than 1 when output exceeds 100 units.
C)marginal revenue is 0 when output equals 100 units.
D)Only answers A and B are correct.
E)Answers A, B, and C are correct.
Q2) Rent seeking is defined as
A)charging higher prices for an apartment.
B)the act of obtaining special treatment by the government to create an economic profit.
C)charging a price below marginal cost.
D)selling a greater quantity than is profitable.
E)charging different prices for different units of the good or service.
Q3) Which of the following is an example of a natural monopoly?
A)the Pittsburgh Penguins hockey team, a National Hockey League team
B)Ford Motors, the large automobile producing company
C)Florida Power and Light, an electric utility in Florida
D)Sony, the Japanese producer of the Playstation III
E)JCPenney, the large department store chain
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Chapter 13: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Daryl's Inc. has formed a cartel with the two other firms in its industry. In which of the following market structures does Daryl's operate?
A)monopolistic competition.
B)oligopoly.
C)perfect competition.
D)monopoly.
E)legally protected monopoly.
Q2) When duopoly games are repeated and a "tit for tat" strategy is used,
A)the competitive outcome is more likely to be reached than when the game is played once.
B)the monopoly outcome is more likely to be reached than when the game is played once.
C)both firms begin to incur economic losses.
D)one firm goes out of business.
E)because the game is repeated, it is impossible to predict whether the competitive or the monopoly outcome is more likely.
Q3) In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?
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Chapter 14: Gdp: a Measure of Total Production and Income
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Sample Questions
Q1) The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is nominal GDP in 2009?
A)$410
B)$450
C)$900
D)$550
E)$460
Q2) Even though it is not a perfect measure, economists can use real GDP to i) compare how the value of the goods and services produced in China have changed over the past 10 years.
Ii) look at the length of recessions and expansions in the United States.
Iii) to compare the standard of living in China versus the standard of living in Vietnam.
A)ii only.
B)i, ii and iii
C)i and iii
D)i and ii
E)ii and iii
Q3) Is it possible for nominal GDP to increase while real GDP does not change?
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Chapter 15: Jobs and Unemployment
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Sample Questions
Q1) As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences
A)structural unemployment.
B)frictional unemployment.
C)cyclical unemployment.
D)changes in the business cycle.
E)avoidable unemployment.
Q2) Bill just graduated with his degree in economics. Through Career Services he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered
A)not in the labor force.
B)frictionally unemployed.
C)structurally unemployed.
D)cyclically unemployed.
E)employed because he is visiting firms.
Q3) Explain the difference between frictional and structural unemployment.
Q4) Explain the relationship between real GDP and potential GDP and between the unemployment rate and the natural unemployment rate as the economy moves through a business cycle.
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Chapter 16: The Cpi and the Cost of Living
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Sample Questions
Q1) Looking at the annual inflation rates in the United States from 2000 to 2011, we see that they
A)were above 10 percent throughout the period.
B)were at or below 5 percent throughout the period and was negative for a year.
C)started low, but increased to over 9 percent by the end of the period.
D)started out above 10 percent but fell to 5 percent by the end of the period.
E)were negative for most of the years during this period.
Q2) An example of the quality change bias, and not a new goods bias, in the calculation of the CPI is a price increase in
A)Coke versus Pepsi.
B)DVDs purchased on Craigslist, an online classified website.
C)a 2011 GPS unit versus a 2008 GPS unit.
D)etexts versus used books .
E)pants purchased by a first-time shopper at Aeropostale.
Q3) Which of the following is true?
A)The real interest rate is always positive.
B)The nominal interest rate is usually negative.
C)The real interest rate can be negative.
D)The real interest rate can never be zero.
E)The nominal interest rate is usually less than the real interest rate.
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Chapter 17: Potential Gdp and Economic Growth
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Sample Questions
Q1) Explain how the labor market and the production function determine potential GDP.
Q2) Sustained increases in the standard of living depend on
A)increases in the quantity of labor.
B)increases in the population.
C)increases in aggregate hours.
D)increases in labor productivity.
E)decreases in labor productivity.
Q3) What is economic freedom and why is it important for economic growth?
Q4) What is the Rule of 70?
Q5) If real GDP was $14 trillion last year and is $16 trillion this year, what is the growth rate?
A)12.5 percent
B)-12.5 percent
C)14 percent
D)$2 trillion
E)47 percent
Q6) What does a productivity curve reflect?
What leads to movements along a productivity curve and what leads to shifts in a productivity curve?
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Chapter 18: Money and the Monetary System
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Sample Questions
Q1) Are checks money?
Q2) A bank has $250 in checking deposits, $1,000 in savings deposits, $1,200 in time deposits, $1,000 in loans to businesses, $400 in outstanding credit card balances, $800 in government securities, $25 in currency in its vault, and $25 in deposits at the Fed.The bank's reserves are equal to A)$25.
B)$275.
C)$2,225
D)$50.
E)$350.
Q3) The desired reserve ratio is 10 percent and banks have no excess reserves. Juliet deposits $300 in her bank. What is the maximum that Juliet's bank can now loan?
A)$3,000
B)$270
C)$30
D)$330
E)$300
Q4) Are credit cards or debit cards money?
Explain your answer.
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Chapter 19: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) If the price level falls and the money wage rate does not change, some firms ________ and there is ________.
A)shut down; a leftward shift of the aggregate supply curve
B)start up; a rightward shift of the aggregate supply curve
C)shut down; a decrease in the quantity of real GDP supplied
D)shut down; a decrease in potential GDP
E)start up; an increase in potential GDP
Q2) The slope of the aggregate supply curve shows that, all else the same, the
A)quantity of real GDP supplied increases as the price level increases.
B)quantity of real GDP supplied decreases as the price level increases.
C)quantity of real GDP supplied remains constant as the price level increases.
D)price level remains constant as real GDP increases.
E)price level remains constant as potential GDP increases.
Q3) The quantity of real GDP supplied increases when the price level increases because A)investment increases.
B)the quantity of money increases.
C)the real wage rate falls.
D)the real wage rate rises.
E)aggregate demand increases.
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Chapter 20: Fiscal Policy and Monetary Policy
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Sample Questions
Q1) An income tax hike
A)increases potential GDP.
B)increases employment.
C)decreases potential GDP.
D)Both answers A and B are correct.
E)Both answers B and C are correct.
Q2) In the United States for the year 2012, the federal government had a ________ so the national debt was ________.
A)budget deficit; increasing
B)balanced budget; not changing C)budget surplus; decreasing D)budget deficit; decreasing E)budget surplus; increasing
Q3) To eliminate a recessionary gap, what fiscal policy should the government pursue?
Q4) In the above figure, is the Fed likely to be afraid that inflation will occur or that a recession will occur?
Discuss the appropriate monetary policy that should be made to restore the economy to potential GDP.
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