Economics for Decision Making Exam Review
Course Introduction
Economics for Decision Making introduces students to fundamental economic concepts and analytical tools essential for informed decision-making in business and public policy. The course explores microeconomic and macroeconomic principles, focusing on how individuals, firms, and governments allocate scarce resources. Through real-world case studies and practical examples, students learn to evaluate choices, assess opportunity costs, analyze market outcomes, and understand the impact of economic policies. Emphasis is placed on critical thinking, problem-solving, and the application of economic reasoning to organizational and societal challenges.
Recommended Textbook
Microeconomics 10th Edition by William Boyes
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22 Chapters
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2295 Flashcards
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Page 2
Chapter 1: The Wealth of Nations: Ownership and Economic
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) When an economy is operating on its production possibilities curve, more production of one good means less production of another because:
A)resources are limited.
B)resources are not perfectly adaptable to alternative uses.
C)wants are limited.
D)wants are unlimited.
E)some resources are not employed.
Answer: A
Q2) Which of the following should not be considered as an opportunity cost of attending college?
A)Expenses that are the same whether or not you attend college
B)Lost salary
C)Business lunches
D)Interest that could have been earned on your money had you put the money into a savings account, rather than spent it on tuition
E)Opportunities sacrificed in the decision to attend college
Answer: A
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Chapter 2: Scarcity and Opportunity Costs
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Sample Questions
Q1) Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. What is the opportunity cost of repairing one car to Bob?
A)10 toys
B)8 toys
C)16 toys
D)12 toys
E)4 toys
Answer: E
Q2) In economics, the concept of opportunity cost is:
A)negated by ensuring that the government has a role in a capitalist society.
B)defined to be the highest-valued alternative that must be forgone when a choice is made.
C)best illustrated by knowing why consumers choose one good over another.
D)quantifiable only if you know the real dollar price of the goods and services you are giving up to consume something.
E)the methodology that government economists use to determine the total amount of the national debt.
Answer: B
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Chapter 3: Markets and the Price System
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96 Flashcards
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Sample Questions
Q1) In the market for eggs, a removal of the price ceiling on eggs results in:
A)an increase in the demand for eggs.
B)farmers supplying more eggs to the market.
C)consumers demanding a larger quantity of eggs.
D)farmers supplying less eggs to the market.
E)consumers demanding a smaller quantity of eggs.
Answer: B
Q2) The relationship between prices and the corresponding quantities supplied is shown in a:
A)supply schedule.
B)demand schedule.
C)price-earnings ratio.
D)production possibilities curve.
E)total output schedule.
Answer: A
Q3) The demand schedule is a price list for a fixed basket of consumer goods following a particular format.
A)True
B)False
Answer: False
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Chapter 4: The Aggregate Economy
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Sample Questions
Q1) The income transferred by the government from a citizen who is earning income to another citizen is referred to as:
A)fiscal spending.
B)transfer payment.
C)budgetary allowance.
D)taxation.
E)internal debt.
Q2) Which of the following sectors in the economy accounted for about 70% of the spending in the U.S. during 2009?
A)The government
B)Firms
C)The foreign sector
D)Investors
E)Households
Q3) The term net exports refers to:
A)the situation in which a country's exports exceed its imports.
B)the situation in which a country's imports exceed its exports.
C)the shortages that result when a country imposes a price ceiling.
D)the shortages that result when a country imposes a price floor.
E)the difference between the value of exports and the value of imports.
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Chapter 5: Using Economics to Understand the World
Around You
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Sample Questions
Q1) Refer to figure 5.2. Which of the following is true?
A)The supply curve of the product shifts to the left, with a fall in the cost of producing the commodity.
B)With a fall in the cost of production, sellers are willing to supply Q<sub>1</sub> units of the product at a price of P<sub>2</sub>, which is lower than the initial price P.
C)With a fall in the cost of production, sellers are willing to supply Q units of the product at a price of P<sub>2</sub>, which is lower than the initial price P.
D)There is an increase in the demand for the product with a fall in the cost of producing the commodity.
E)An increase in the cost of producing the commodity leads to an upward movement along the supply curve of the product.
Q2) One of the assumptions of an economic analysis is that market functions are controlled by the government.
A)True
B)False
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Page 7
Chapter 6: Elasticity: Demand and Supply
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Sample Questions
Q1) Based on the information given in Table 6.2, coffee would be considered:
A)an inferior good.
B)a necessity.
C)a substitute good.
D)a complement good.
E)a luxury good.
Q2) Tax incidence explains how taxes are shared between producers and consumers.
A)True
B)False
Q3) If the demand for a product is unit-elastic, a 25 percent increase in its price will result in:
A)a 25 percent change in total revenue.
B)no change in quantity demanded.
C)a 1 percent increase in quantity demanded.
D)a 25 percent decrease in quantity demanded.
E)a 100 percent change in quantity demanded.
Q4) Other things remaining unchanged, the longer the time period under consideration, the greater will be the price elasticity of demand.
A)True
B)False
Page 8
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Chapter 7: Demand: Consumer Choice
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Sample Questions
Q1) Refer to Table 7.4. With an income of $10, the consumer would maximize utility by purchasing _____.
A)7 units of good A, 7 units of good B, and 7 units of good C
B)2 units of good A, 6 units of good B, and 7 units of good C
C)3 units of good A, 5 units of good B, and 6 units of good C
D)3 units of good A, 6 units of good B, and 4 units of good C
E)6 units of good A, 0 units of good B, and 7 units of good C
Q2) The law of diminishing marginal utility states that:
A)the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed.
B)as more of a good or service is consumed, the marginal utility derived from it, relative to other products, increases.
C)as more of a good or service is consumed, the marginal utility derived from it decreases.
D)as more of a good or service is consumed, the marginal utility derived from it, relative to other products, remains the same.
E)the marginal utility of all products consumed must be equal.
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Page 9
Chapter 8: Supply: the Costs of Doing Business
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105 Flashcards
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Sample Questions
Q1) The phrase "to spread the overhead" refers to reducing the costs that are not directly attributable to the production process.
A)True
B)False
Q2) As the output produced by a firm increases, the average fixed cost:
A)continues to decline.
B)initially increases, and then declines.
C)quickly drops to zero.
D)becomes constant.
E)declines and finally becomes negative.
Q3) The minimum efficient scale is the level of output where the short-run average-total-cost curve reaches its minimum point.
A)True
B)False
Q4) Economies and diseconomies of scale are the reasons why short-run average total cost decreases and then increases.
A)True
B)False
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Chapter 9: Profit Maximization
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Sample Questions
Q1) Suppose that ABC Industries, a perfectly competitive firm, currently produces 500 units of imitation ham spread for a total cost of $1,500. The marginal cost of the 500th unit is $20, and the marginal revenue of the 500th unit is $15. To maximize profits, Cheapo Industries should:
A)continue to produce 500 units.
B)produce more than 500 units but less than 1500 units.
C)produce less than 500 units.
D)produce more than 1500 units.
E)stop producing at 500 units.
Q2) Under imperfect competition, a firm's:
A)demand curve lies below its marginal revenue curve.
B)demand curve lies above its marginal revenue curve.
C)demand curve coincides with its marginal revenue curve.
D)demand curve coincides with its marginal cost curve.
E)demand curve coincides with its average cost curve.
Q3) A firm will always maximize profit at the level of output where average total costs are minimized.
A)True
B)False
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Page 11
Chapter 10: Perfect Competition
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135 Flashcards
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Sample
Questions
Q1) Why is a perfectly competitive firm said to be a price taker?
A)It produces such a good which is not produced by any other firm in the market.
B)It faces a downward sloping market demand curve.
C)The firm's individual production is insignificant relative to the production in the industry.
D)There are no barriers to the entry of new firms in the industry.
E)The firm's marginal-revenue curve is downward sloping.
Q2) Assume the price facing the firm in Figure 10.5 is P<sub>1.</sub>Which of the following statements is true?
A)Total revenue for the firm is area 0BDQ<sub>1</sub>.
B)The firm should produce Q<sub>2</sub>.
C)Total cost for the firm is area 0P<sub>1</sub>EQ<sub>1</sub>.
D)The firm's total revenue is more than sufficient to cover its variable costs, so it should remain in operation.
E)The firm should shut down because price per unit received is less than average total cost.
Q3) A perfectly competitive firm faces a downward sloping market demand curve.
A)True
B)False
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Page 12
Chapter 11: Monopoly
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Sample Questions
Q1) According to Figure 11.7, when the monopolist is maximizing profit:
A)its resources are not being used efficiently.
B)its price is higher than that charged by the perfectly competitive firm.
C)its price is equal to the price charged by the perfectly competitive firm.
D)a firm in perfect competition is earning above-normal profit.
E)a firm in perfect competition is incurring a loss.
Q2) If a monopolist is producing at the profit-maximizing level of output, what price will it charge?
A)The price given by the marginal-revenue curve at that level of output.
B)The price given by the marginal-cost curve at that level of output.
C)The price given by the average-cost curve at that level of output.
D)The price given by the average-revenue curve at that level of output.
E)The price given by the total revenue curve at that level of output.
Q3) A monopolist's demand curve is less elastic than a perfect competitor's demand curve.
A)True
B)False
Q4) A monopolist always produces on the elastic portion of the demand curve.
A)True
B)False
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Chapter 12: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) In the short-run, a monopolistically competitive firm:
A)can earn only a normal profit.
B)will produce at the point where marginal revenue is greater than marginal cost, in order to maximize profits.
C)will produce at the point at which price equals minimum ATC, to maximize profits.
D)will charge a price equal to its marginal revenue.
E)will shut down temporarily if price is less than AVC.
Q2) A monopolistically competitive firm faces a relatively less elastic demand curve than a monopolist.
A)True
B)False
Q3) Which of the following theories applies to strategic behavior?
A)Field Theory
B)Game Theory
C)Theory of Consumers' Behavior
D)Social Contract Theory
E)Rational Choice Theory
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Chapter 13: Markets and Government
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113 Flashcards
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Sample Questions
Q1) Why does an existing less efficient technology drive out a new, more efficient technology?
A)The existing technology is a network that has become locked in.
B)People are receptive to the new technology.
C)The new technology is costlier to hire.
D)The existing technology is a network that has become locked out.
E)The government imposes taxes on the new technology.
Q2) In the case of public goods, _____.
A)the free rider problem does not arise
B)one person's consumption of the good reduces the consumption of the good by others
C)individuals can be easily excluded from consuming the good once it is provided
D)the quantity produced by a private market would be too large from society's viewpoint
E)the principle of mutual excludability and principle of rivalry do not apply
Q3) When resources are commonly owned, there are incentives in place to ensure that the resources are used efficiently.
A)True
B)False
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Chapter 14: Antitrust and Regulation
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Sample Questions
Q1) Antitrust laws in the United States rely more on economic theory and the rule of reason approach, whereas the European Union relies more on the per se approach.
A)True
B)False
Q2) Restrictions on the types of food additives that breakfast cereal manufacturers can use is an example of a social regulation.
A)True
B)False
Q3) Which of the following is not a component of the index which measures economic freedom of a country?
A)Monetary freedom
B)Cultural freedom
C)Government size
D)Freedom from corruption
E)Labor freedom
Q4) When a monopoly is regulated it is required to sell lower output at a lower price.
A)True
B)False
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Page 16
Chapter 15: Resource Markets
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Sample Questions
Q1) Refer to Scenario 14.1. If the worker joins Firm B, his economic rent is:
A)$5,000.
B)$7,000.
C)less than $7,000 but more than $2,000.
D)$2,000.
E)less than $2,000.
Q2) The marginal revenue product curve of a factor is negatively sloped because:
A)the additional revenue generated from an additional unit of a factor remains constant as more resources are hired.
B)the additional revenue generated from an additional unit of a factor declines as more resources are hired.
C)the additional revenue generated from an additional unit of a factor usually becomes zero as more resources are hired.
D)the additional revenue generated from an additional unit of a factor increases as more resources are hired.
E)the additional revenue generated from an additional unit of a factor doubles every time new resources are hired.
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17
Chapter 16: The Labor Market
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Sample Questions
Q1) Refer to Figure 16.3. If the wage rates in market A and market B were set at $20, then:
A)both the markets would be in equilibrium.
B)there would be a shortage of workers in market A and a surplus of workers in market B.
C)there would be a shortage of workers in market B and a surplus of workers in market A.
D)there would be a surplus of workers in both markets.
E)there would be a shortage of workers in both markets.
Q2) Outsourcing refers to the process in which:
A)a firm purchases service from another firm in another country.
B)a firm hires laborers from a foreign market.
C)the government of a country works toward providing social security and other rights to migrant workers.
D)a firm purchases service from another firm.
E) workers of a particular country seek employment in a firm of a foreign country.
Q3) An example of human capital is the purchase of a computer to help accountants.
A)True
B)False
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Page 18
Chapter 17: The Capital Market
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Sample Questions
Q1) If the number of people who want to sell off stocks are higher than those who want to buy it, the stock prices move up.
A)True
B)False
Q2) The largest stock exchange in the world is:
A)the Munich Stock Exchange.
B)the London Stock Exchange.
C)the New York Stock Exchange.
D)the Tokyo Stock Exchange.
E)the Shanghai Stock Exchange.
Q3) Most stock indexes use which of the following measures to weight the companies that participate in the index?
A)The company's sales volume
B)The company's book value
C)The current profits
D)The available cash
E)The market capitalization
Q4) The S&P 500 index includes the stocks of 500 largest companies in the U.S.
A)True
B)False
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Chapter 18: The Land Market and Natural Resources
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Sample Questions
Q1) Like profit-seeking, rent seeking is also a productive activity and contributes to the growth of the economy.
A)True
B)False
Q2) In Figure 18.1, the curve B indicates:
A)supply curve of land.
B)marginal revenue product curve for land.
C)value of marginal product curve of land.
D)marginal factor cost curve of land.
E)marginal product curve of land.
Q3) Anything that affects the marginal revenue product of a nonrenewable resource will affect the demand for that resource.
A)True B)False
Q4) An increase in demand for housing will reduce the availability of land for cultivation. A)True
B)False
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20
Chapter 19: Current Issues: Income, Income Distribution,
Poverty, and Government Policy
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Sample Questions
Q1) If an individual who earns $20,000 pays $2,000 in taxes and another individual who earns $100,000 pays $10,000 in taxes, then these individuals are being taxed under a _______ tax system.
A)toll
B)regressive
C)progressive
D)proportional
E)negative income
Q2) Government policies designed to change the distribution of income to one that is more equal involve taking from the rich and giving to the poor.
A)True
B)False
Q3) The horizontal and vertical axes of the Lorenz curve respectively measure:
A)total income and total expenditure as cumulative percentages.
B)total income and total population as cumulative percentages.
C)total population and total expenditure as cumulative percentages.
D)total expenditure and total income as cumulative percentages.
E)total population and total income as cumulative percentages.
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Chapter 20: World Trade Equilibrium
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Sample Questions
Q1) According to Table 20.2, Australia has an:
A)absolute advantage in the production of only food.
B)absolute advantage in the production of both food and computers.
C)absolute disadvantage in the production of both food and computers.
D)absolute advantage in the production of only computers.
E)absolute disadvantage in the production of food.
Q2) A country benefits from trade if it is able to obtain a good from a foreign country by giving up more of other goods than it would have to give up to obtain the good at home.
A)True
B)False
Q3) The oldest theory of comparative advantage is based on:
A)factor abundance.
B)productivity differences.
C)product life cycles.
D)preferences.
E)human skills.
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Chapter 21: International Trade Restrictions
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Sample Questions
Q1) According to Figure 21.1, if the international price of the good is P<sub>1</sub>, which of the following statements is true?
A)The domestic market is in equilibrium.
B)There is an excess supply in the domestic market by the amount Q<sub>4</sub>Q<sub>2</sub>.
C)The country will export Q<sub>3</sub> - Q<sub>1</sub> units of the good.
D)There is an excess demand of Q<sub>4</sub> - Q<sub>2</sub> units in the domestic market.
E)The country needs to import Q<sub>5</sub> - Q<sub>1</sub> units of the good to satisfy domestic demand.
Q2) Every country imposes tariffs on at least some imports.
A)True
B)False
Q3) When dealing with strategic trade policy, one practical problem for government is the likelihood of retaliation by foreign governments.
A)True
B)False
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Page 23
Chapter 22: Exchange Rates and Financial Links Between Countries
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Sample Questions
Q1) When a U.S. importer needs $22,000 to settle an invoice for 25,520 Swiss francs, the exchange rate must be:
A)1 Swiss franc = $1.16.
B)1 Swiss franc = $0.16.
C)1 Swiss franc = $0.84.
D)$1 = 1.16 Swiss franc.
E)$1 = 1.84 Swiss franc.
Q2) If the price of an ounce of gold is 200 ZARs in South Africa and $75 in Canada, what will be the South African Rand (ZAR) per Canadian dollar (C$) exchange rate?
A)C$1 = 4.25 ZAR
B)C$1 = 1.75 ZAR
C)C$1 = 2 ZAR
D)C$1 = 2.67 ZAR
E)C$1 = 4 ZAR
Q3) When a U.S. importer needs $20,000 to settle an invoice for 228,000 Uruguayan pesos, the price of 1 dollar is 11.4 Uruguayan pesos.
A)True
B)False
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