Economics for Business Test Preparation
Course Introduction
Economics for Business provides an essential introduction to economic principles and their practical application in the business environment. The course explores key concepts such as supply and demand, market structures, pricing strategies, production costs, and the impact of government policies on business operations. Students learn how macroeconomic and microeconomic factors influence business decision-making and strategic planning, preparing them to analyze economic trends, assess market opportunities, and make informed managerial choices in a dynamic global economy.
Recommended Textbook
Microeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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18 Chapters
2570 Verified Questions
2570 Flashcards
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Chapter 1: What Is Economics
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) The two big economic questions
A)involve self-interest only.
B)involve only social interest.
C)involve neither self-interest nor social interest.
D)do not arise from scarcity.
E)involve both self-interest and social interest.
Answer: E
Q2) In Figure 1A.3.4, the slope across arc BC is
A)-2/3.
B)-3/2.
C)-2.
D)-4/3.
E)-3/4.
Answer: E
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Page 3
Chapter 2: The Economic Problem
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) The economy illustrated by the data in Table 2.1.1 exhibits
A)decreasing opportunity cost.
B)constant opportunity cost in the production of X.
C)constant opportunity cost in the production of Y.
D)increasing opportunity cost.
E)initially increasing, then decreasing opportunity cost.
Answer: D
Q2) Economic growth ________ overcome scarcity because ________.
A)does; with economic growth the PPF rotates outward and eventually becomes a horizontal line
B)does; we will eventually reach the point where we have too much
C)does not; we can produce more goods and services but it is still impossible to satisfy all our wants
D)does not; economic growth requires capital accumulation and technological change
E)does; with economic growth the PPF rotates outward and eventually becomes a vertical line
Answer: C
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Chapter 3: Demand and Supply
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198 Flashcards
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Sample Questions
Q1) Refer to Figure 3.5.2, which represents the market for beer.If the price of pizza, a complement of beer rises, what is the new beer equilibrium, ceteris paribus? A)8 B)3 C)9 D)5
E)6
Answer: B
Q2) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of
A)both A and B will rise.
B)both A and B will fall.
C)A will fall and the price of B will rise.
D)A will rise and the price of B will fall.
E)A will fall and the price of B will remain unchanged.
Answer: C
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5
Chapter 4: Elasticity
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186 Flashcards
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Sample Questions
Q1) Refer to Table 4.2.2.All of the following statements regarding Jolt are true except
A)it has an elastic demand.
B)it is an inferior good.
C)it is a substitute for Coke.
D)it has a negative cross elasticity of demand with respect to Coke.
E)it has a negative income elasticity of demand.
Q2) If the cross elasticity of demand between goods A and B is positive, then
A)the demands for A and B are both price elastic.
B)the demands for A and B are both price inelastic.
C)A and B are complements.
D)A and B are substitutes.
E)A and B are independent goods.
Q3) When the price elasticity of demand is ________, demand for the good is perfectly inelastic.
A)equal to infinity
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero
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Page 6
Chapter 5: Efficiency and Equity
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) If we produce one more bottle of water,
A)we cannot be acting efficiently.
B)we incur a marginal cost.
C)we must move away from market equilibrium.
D)the price of a bottle of water must rise.
E)the marginal social benefit from bottled water increases.
Q2) All of the following statements are true except:
A)An externality is a cost or a benefit that affects someone other than the seller or the buyer of a good.
B)When an electric utility does not consider the cost of pollution when it decides how much power to produce, the result is overproduction.
C)An electric utility creates an external cost by burning coal.
D)All externalities create overproduction.
E)An external cost creates overproduction.
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Chapter 6: Government Actions in Markets
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130 Flashcards
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Sample Questions
Q1) If a sales tax is imposed on food, who is likely to pay most of the tax?
A)mostly the buyer
B)mostly the seller
C)neither the seller nor the buyer
D)the buyer and the seller equally
E)The burden of the tax depends on the size of the tax.
Q2) A production quota is set equal to the equilibrium quantity.At the quota quantity, marginal social benefit is ________ marginal social cost and the level of production is
A)less than; efficient
B)greater than; efficient
C)greater than; inefficient
D)less than; inefficient
E)equal to; efficient
Q3) If enforcement is aimed at sellers of an illegal good, the
A)price and quantity bought decrease.
B)price and quantity bought increase.
C)price rises and quantity bought decreases.
D)price falls and quantity bought increases.
E)price change is uncertain and quantity bought decreases.
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Chapter 7: Global Markets in Action
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Reducing a tariff ________ the domestic production of the good and ________ the total domestic consumption of the good.
A)increases; increases
B)increases; decreases
C)decreases; increases D)decreases; decreases
E)does not change; increases
Q2) Which of the following is an explanation for the existence of trade restrictions?
A)tariffs generate revenue for the government
B)rent seeking
C)inefficient quotas
D)both A and B
E)both A and C
Q3) The argument that protection
A)penalizes poor environmental standards is true.
B)allows us to compete with cheap foreign wages is true.
C)is necessary for infant industries is true.
D)saves jobs is flawed.
E)prevents rich countries from exploiting poor countries is true.
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Page 9
Chapter 8: Utility and Demand
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Utility is similar to temperature because
A)both are positive.
B)both are negative.
C)both have units of measurement that are arbitrary.
D)both are observable.
E)both are measured in the same scale.
Q2) You are consuming hot dogs and Cokes and believe you are maximizing utility for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Suppose the price of hot dogs rises to $4 and the price of a Coke remains at $2.You adjust your consumption of hot dogs and Cokes and believe you are once again receiving maximum total utility from the meal.Which one of the following can you conclude?
A)The total utility from hot dogs is maximized.
B)The marginal utilities from hot dogs and Cokes must be equal.
C)The marginal utility from hot dogs must rise compared to the marginal utility from Cokes.
D)You are purchasing 2 hot dogs and 2 Cokes.
E)You are purchasing 1 hot dog and 4 Cokes.
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Chapter 9: Possibilities, Preferences, and Choices
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Karen consumes chocolate and candles.When Karen is at her best affordable point, she is
A)on or inside her budget line, on her highest attainable indifference curve, and has a marginal rate of substitution between chocolate and candles that is equal to the relative price of chocolate and candles.
B)on the indifference curve that is closest to the origin and minimizing the marginal rate of substitution.
C)on the indifference curve that is farthest from the origin and maximizing the marginal rate of substitution.
D)on her budget line, on her highest attainable indifference curve, and has a marginal rate of substitution between chocolate and candles that is equal to the relative price of chocolate and candles.
E)on her budget line, on her highest attainable indifference curve, and maximizing the marginal rate of substitution.
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Chapter 10: Organizing Production
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111 Flashcards
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Sample Questions
Q1) A firm with two or more owners who have unlimited liability is
A)a sole proprietorship.
B)a partnership.
C)a conglomerate.
D)a corporation.
E)a public company.
Q2) What is a disadvantage of a corporation relative to a sole proprietorship or partnership?
A)Owners have unlimited liability.
B)Profits are taxed twice: as corporate profits and as dividend income and capital gains to stockholders.
C)high cost of capital
D)perpetual life
E)dies with the owner
Q3) The implicit rental rate
A)is the firm's opportunity cost of using the capital it owns.
B)is paid with cash.
C)has two components: economic depreciation and foregone interest.
D)both A and C are correct.
E)both B and C are correct.
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Chapter 11: Output and Costs
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Refer to Table 11.2.1 which gives Tania's total product schedule.The average product when the firm hires two workers is
A)3 teapots per worker.
B)6 teapots per worker.
C)7 teapots per worker.
D)9 teapots per worker.
E)12 teapots per worker.
Q2) Refer to Fact 11.3.1.The deal with farmers to avoid fluctuations in costs benefits PepsiCo for all the following reasons except
A)the type of corn it is buying is best suited to its products.
B)it eliminates variable costs.
C)transportation costs are lower.
D)corn costs remain low and stable.
E)the type of corn it is buying is best suited to its processes.
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Chapter 12: Perfect Competition
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117 Flashcards
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Sample Questions
Q1) Suppose a firm is trying to decide whether or not to temporarily shut down to minimize total loss.If price equals average variable cost, then
A)total revenue equals total fixed cost, and the loss equals total variable cost.
B)total revenue equals total variable cost, and the loss equals total fixed cost.
C)total fixed cost is zero.
D)total variable cost equals total fixed cost.
E)total cost equals total variable cost.
Q2) Refer to Fact 12.1.1.Each of these gas stations has little control over the price of gasoline because
A)the price of gasoline is determined by head office.
B)lowering the price will eliminate competition and the government mandates that gasoline stations must have competition.
C)if it raises its price, the station will lose customers.
D)the price of gasoline is set according to the price of oil.
E)the demand for gasoline is perfectly inelastic.
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Chapter 13: Monopoly
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118 Flashcards
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Sample Questions
Q1) The capture theory holds that regulations are supplied to maximize A)total sales.
B)economic profit.
C)marginal product.
D)consumer surplus.
E)marginal revenue.
Q2) Social interest theory predicts that the political process will seek to minimize
A)producer surplus.
B)consumer surplus.
C)total surplus.
D)deadweight loss.
E)average total cost.
Q3) Suppose in an industry a firm realizes economies of scale over the entire length of its LRAC curve.In this situation, the firm is
A)a natural monopoly.
B)a fixed-cost monopoly.
C)an output-discriminating monopoly.
D)a perfect-price discriminating monopoly.
E)a constant total variable cost monopoly.
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Page 15
Chapter 14: Monopolistic Competition
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122 Flashcards
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Sample Questions
Q1) Refer to Figure 14.2.6, which shows the demand curve, marginal revenue curve and cost curves faced by Gap.Gap's economic ________ is ________ a day.
A)loss; $8,000
B)loss; $13,000
C)profit; $7,200
D)profit; $13,000
E)loss; $8,960
Q2) Monopolistic competition might be efficient if A)firms invested in technology that decreased the marginal cost of production.
B)more firms entered the industry.
C)firms left the industry.
D)the loss that arises because the quantity produced is less than the efficient quantity is offset by the gain that arises from having a greater degree of product variety. E)firms made more use of brand names.
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16
Chapter 15: Oligopoly
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106 Flashcards
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Sample Questions
Q1) Refer to Table 15.2.4.The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products.The payoffs in the table are the economic profit made by Bud and Miller.Which one of the following observations is correct?
A)This is a game described as a prisoners' dilemma.
B)If Bud offers a new advertising campaign and Miller does not, Bud will earn a $100 profit.
C)If Bud offers a new advertising campaign, then Miller will be better off by not offering a new advertising campaign.
D)Both Bud and Miller would be better off if they could collude and agree to coordinate their new advertising campaigns.
E)If Miller does not offer a new advertising campaign, then Bud is better off if it doesn't offer a new advertising campaign.
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Chapter 16: Externalities
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Sample Questions
Q1) The Coase theorem will apply only when
A)an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
B)transactions cost are low.
C)the market is perfectly competitive.
D)the courts can be used to determine the amount of compensation that must be made to the damaged party.
E)the amount of compensation that must be made to the damaged party is small.
Q2) Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then the quantity produced is A)zero.
B)Q .
C)Q .
D)Q .
E)greater than Q .
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Chapter 17: Public Goods and Common Resources
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98 Flashcards
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Sample Questions
Q1) When a good is rival and excludable, it is a
A)natural monopoly good.
B)public good.
C)regulated good.
D)private good.
E)common resource.
Q2) A Canada Day fireworks display
A)does not have a free-rider problem.
B)has a free-rider problem that cannot be eliminated.
C)has a free-rider problem that can be eliminated by using taxes paid by area residents to finance the display.
D)is a private good.
E)is a natural monopoly good.
Q3) The air in the atmosphere is
A)nonrival and nonexcludable.
B)rival and nonexcludable.
C)nonrival and excludable.
D)rival and excludable.
E)a private good.
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Page 19
Chapter 18: Markets for Factors of Production
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252 Verified Questions
252 Flashcards
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Sample Questions
Q1) Globalization means that firms recruit top talent from the global talent pool.As a result, the payoffs won by the contest winners
A)are increasing.
B)are decreasing.
C)are remaining relatively constant.
D)are paid in U.S. dollars.
E)are limited by the number of people in a given competition.
Q2) If the interest rate is 10 percent per year, the present value of $100 in two years is
A)$80.00.
B)$82.64.
C)$90.91.
D)$120.00.
E)$121.00.
Q3) When the price of a firm's output increases,
A)the supply of labour increases.
B)the firm hires less labour.
C)the marginal product of labour increases.
D)the firm's demand for labour curve shifts leftward.
E)the value of marginal product of labour increases.
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Page 20