Economics for Non-Majors Test Bank
Course Introduction
Economics for Non-Majors introduces foundational economic concepts and principles designed for students from diverse academic backgrounds. The course covers basic microeconomic and macroeconomic topics such as supply and demand, market structures, inflation, unemployment, government intervention, and international trade. Emphasis is placed on applying economic reasoning to real-world issues and everyday decision-making, enabling students to better understand how economies function on both individual and societal levels. No prior background in economics is required, making the material accessible and relevant for students from all disciplines.
Recommended Textbook
Survey of ECON 3rd Edition by Robert L.
Sexton
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18 Chapters
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Page 2
Chapter 1: The Role and Method of Economics
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Sample Questions
Q1) Economists assume that when people act rationally they:
A)make decisions based on complete and accurate information
B)make decisions that they will not regret later on.
C)make decisions based on what they believe is best for themselves, using available information.
D)make decisions based on what they believe is best for themselves, using available information..
E)make decisions that cannot be altered in the future.
Answer: C
Q2) A hypothesis is a:
A)normative economic statement
B)testable proposition.
C)statement that cannot be evaluated using real-world data.
D)model with no connection to the real world.
E)positive economic statement.
Answer: B
Q3) It is possible to completely eliminate scarcity.
A)True
B)False
Answer: False
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Chapter 2: The Economic Way of Thinking
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Sample Questions
Q1) Why do people generally switch channels when a movie's final credits are being displayed?
Answer: Answers will vary. Individuals will only pursue an activity if expected marginal benefits are greater than the expected marginal costs. If an individual perceives the marginal benefits of watching something else to be greater than watching the credit line of the movie, he or she will choose to switch channels. REJ: Please see the section ''Marginal Thinking'' for more information.
Q2) Output combinations outside the production possibilities curve are attainable in the current period only if prices decrease.
A)True
B)False
Answer: False
Q3) Opportunity cost includes:
A)monetary costs only.
B)non-monetary costs only.
C)both monetary and non-monetary costs.
D)neither monetary nor non-monetary costs.
E)all the costs of living.
Answer: C
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Page 4
Chapter 3: Supply and Demand
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Sample Questions
Q1) According to the law of supply, ceteris paribus, the:
A)quantity supplied of a good will vary directly with the price of the good.
B)quantity supplied of a good will vary indirectly with the price of the good.
C)quantity supplied of a good will vary directly with consumers' income
D)quantity supplied of a good will vary indirectly with consumers' income.
E)quantity supplied of a good will vary indirectly with the size of the population.
Answer: A
Q2) Ceteris paribus, an increase in the equilibrium price and the equilibrium quantity would be caused by an increase in supply
A)True
B)False
Answer: False
Q3) A decrease in the price of a good will:
A)increase the demand for the good
B)decrease the demand for the good.
C)increase quantity demanded of the good
D)decrease quantity demanded of the good.
E)decrease the slope of the demand curve.
Answer: C
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Page 5
Chapter 4: Using Supply and Demand
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Q1) If the demand for a good is price inelastic, a decrease in the price of the good will result in a decrease in the total revenue of a firm producing the good.
A)True
B)False
Q2) Given an upward-sloping supply curve, the more inelastic the demand, the greater the fraction of the burden of taxation borne by the consumer.
A)True
B)False
Q3) A steel mill raises the price of steel by 7 percent, which results in a 20 percent reduction in the quantity of steel demanded. The price elasticity of demand is _____.
A)2.9
B)5.5
C)6.5
D)10.5
E)15.5
Q4) If a price ceiling is set above the equilibrium price, it is not binding.
A)True
B)False
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6
Chapter 5: Market Failure and Public Choice
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Sample Questions
Q1) Private costs are borne by:
A)the government.
B)the producer of a good.
C)the consumer of a good.
D)outside parties who are affected by a negative externality.
E)outside parties who benefit from a positive externality.
Q2) National defense is commonly provided by the government, but food is not, because:
A)food is too essential for survival to be provided by a bureaucratic organization.
B)food suppliers have successfully lobbied the government to stay out of the food industry.
C)food can be easily withheld from those who refuse to pay for it.
D)the distribution of food is subject to the free-rider problem.
E)food is available at low prices and government undertakes the supply of only expensive goods.
Q3) Comparing the consumers' willingness to pay with the cost of production of a good is a part of hypothesis testing.
A)True
B)False
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Page 7
Chapter 6: Production and Costs
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Sample Questions
Q1) An economic profit of zero indicates a satisfactory situation for a firm.
A)True
B)False
Q2) Which of the following is not an explicit cost to the owner of a local pizza parlor?
A)The cost of flour for making pizzas
B)The cost of cleaning products required to clean the parlor
C)The cost of using his garage as the parlor
D)The cost of ovens required to make pizzas
E)The cost of hiring a chef
Q3) Marginal cost refers to the change in total cost for a one-unit change in output and also to the change in total variable cost for a one-unit change in output
A)True
B)False
Q4) The total fixed cost curve is an upward-sloping curve that starts from the origin.
A)True
B)False
Q5) How short is the short-run production period?
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8
Chapter 7: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Productive efficiency occurs in perfect competition because the firm produces at the minimum of the:
A)average fixed cost curve.
B)average variable cost curve.
C)average total cost curve.
D)marginal revenue curve.
E)marginal cost curve.
Q2) In a perfectly competitive industry, influence over price is exerted by:
A)individual sellers.
B)individual buyers.
C)the largest firms.
D)the forces of market supply and demand.
E)the largest buyer.
Q3) A perfectly competitive firm faces a demand curve that is:
A)parallel to the horizontal axis.
B)parallel to the vertical axis.
C)downward sloping.
D)upward sloping.
E)U-shaped.
Q4) What are the characteristics of a perfectly competitive industry?
Page 9
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Chapter 8: Monopoly
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Sample Questions
Q1) Some near-monopolies have been important innovators.
A)True
B)False
Q2) The demand curve for a monopolist lies below the marginal revenue curve.
A)True
B)False
Q3) For price discrimination to work, the person buying the product at a discount must face difficulty reselling the product.
A)True
B)False
Q4) Monopolists do not worry about efficient production and cost saving since they can just pass along any increase in costs to their consumers. Is this statement true? Explain your answer.
Q5) Control of a scarce resource or input can serve as an entry barrier.
A)True
B)False
Q6) Many people believe that a monopolist can set its own price, for which consumers have little recourse but to pay, and thereby reap enormous profits. Is this true?
Q7) Will all monopolistic firms always generate economic profits? Why or why not?
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Chapter 9: Monopolistic Competition and Oligopoly
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Q1) Cartels are legal in many countries, including the United States.
A)True
B)False
Q2) Which of the following is generally true of a monopolistically competitive firm operating in the long run?
A)Price is greater than minimum average total cost
B)Price is equal to marginal revenue.
C)Price is equal to marginal cost.
D)Economic profits are positive.
E)Price is greater than average revenue.
Q3) Collusive oligopoly behavior guarantees economic profits in the long run.
A)True
B)False
Q4) Explain why firms in oligopolies might wish to choose pricing and output strategies together. What is this arrangement called?
Q5) Define monopolistic competition.
Q6) What are the characteristics of oligopoly?
Q7) Why is it difficult for an oligopolist to determine its profit-maximizing price and output?
11
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Chapter 10: Labor Markets, Income Distribution, and Poverty
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Sample Questions
Q1) Under a progressive tax system, _____.
A)only the rich are taxed
B)higher marginal taxes are imposed on higher incomes
C)lower taxes are imposed on everyone
D)everyone pays the same percent of their income in tax
E)the rich are taxed and the poor are subsidized
Q2) Skilled workers earn more than unskilled workers because they invested more in acquiring their skills.
A)True
B)False
Q3) From 1935 to 2010, the proportion of income received by the poorest 20 percent of Americans has:
A)increased substantially due to the government's efforts
B)decreased sharply due to the impact of the Second World War.
C)slightly decreased due to the impact of the Great Depression.
D)increased from 12 percent to 14 percent.
E)remained virtually unchanged.
Q4) Why does an increasing divorce rate tend to increase income inequality?
Q5) What income groups are most likely to benefit from state and federal subsidies to higher education? Why?
Page 12
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Chapter 11: Introduction to Macroeconomics:
Unemployment, Inflation, and Economic Fluctuations
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Q1) What are the three major macroeconomic goals?
Q2) Seasonal unemployment is the temporary unemployment that results from the search time that people require when searching for suitable jobs and that firms require when looking for suitable workers.
A)True
B)False
Q3) Explain how the use of leading economic indicators to predict recessions can lead to less accurate policy decisions.
Q4) Suppose you live in a community of 100 people where everyone who is able to do so seeks work. If 80 people are over 16 years old and 72 of them are employed, what is the unemployment rate in this community?
Q5) In the 1970s, savings and loan associations primarily earned their income from extending fixed-rate home loans. They extended many of these loans in the early 1970s when inflation was low. Were the savings and loan associations winners or losers as inflation skyrocketed in the late 1970s?
Q6) What are the four phases of the classical business cycle and how is employment typically affected during each phase?
Q7) What are the three major types of unemployment? What are their causes?
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Chapter 12: Economic Growth
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Sample Questions
Q1) Which of the following will lead to greater economic growth?
A)Individuals consuming their entire current income
B)Governments investing more in national defense
C)Governments investing in U.S. infrastructure
D)Governments importing capital equipment from abroad without investing in research
E)High taxes on companies that spend a lot on capital formation
Q2) Allowing free trade can lead to greater output because of:
A)the principle of absolute advantage.
B)the Rule of 70
C)the principle of comparative advantage
D)diseconomies of scale.
E)the rule of law
Q3) Which of the following is included in gross domestic product (GDP)?
A)A U.S. company purchasing stock of a foreign company
B)The value of an accountant's services
C)A U.S. company purchasing stock of another U.S. company
D)The purchase of a used Ford by a U.S. citizen
E)A social security payment received by a retired teacher
Q4) State the formula for the expenditure approach to GDP accounting.
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Chapter 13: Aggregate Demand and Aggregate Supply
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Q1) Ceteris paribus, which of the following would cause the aggregate demand curve to shift to the left?
A)A decrease in personal taxes
B)A rise in consumer confidence
C)An increase in stock market wealth
D)A decrease in transfer payments
E)A cut in corporate taxes
Q2) Which of the following would shift the short-run aggregate supply curve of an industry rightward but not change its short-run aggregate supply curve?
A)An increase in money supply
B)A positive supply shock
C)A decrease in the price level
D)An increase in the price level
E)An increase in the interest rate
Q3) The real wealth effect is one reason for the negative slope of the aggregate demand curve.
A)True
B)False
Q4) Discuss the impact of efficiency wages on unemployment and wage inflexibility.
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Chapter 14: Fiscal Policy
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Sample Questions
Q1) The extent of the multiplier effect visible within a short time will be _____ the total effect indicated by the multiplier formula.
A)significantly higher than B)equal to
C)less than
D)slightly higher than
E)insignificant compared to
Q2) Which of the following accounted for the largest percentage of federal taxes in the United States in 2012?
A)Excise taxes
B)Social security taxes
C)Individual income taxes
D)Corporate income taxes
E)Property taxes
Q3) An excess of government revenues over expenditures results in a budget deficit
A)True
B)False
Q4) How does the multiplier work, and how can the government make use of it?
Q5) How serious is the national debt to the economic stability of the United States?
Q6) Why doesn't the U.S. government print money in order to solve its debt problems?
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Chapter 15: Monetary Institutions
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Sample Questions
Q1) A decrease in currency in circulation combined with an equal increase in savings account deposits would:
A)increase M1.
B)have no effect on M1.
C)increase M2.
D)have no effect on M2.
E)decrease M2.
Q2) The problem of double coincidence of wants is associated with:
A)paper money.
B)insurance.
C)credit cards.
D)a barter system.
E)fiat money.
Q3) Which of the following is an asset to a commercial bank?
A)Borrowings from the Central Bank
B)Time deposits
C)Checkable deposits
D)Making loans
E)Savings accounts
Q4) What is fiat money? Why is fiat money important in the United States today?
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Chapter 16: The Federal Reserve and Monetary Policy
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Q1) Higher rates of interest increase the opportunity cost of holding money balances
A)True
B)False
Q2) The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.
A)True
B)False
Q3) According to the equation of exchange, velocity will tend to rise when:
A)the price level falls, other things being equal
B)real GDP decreases, other things being equal.
C)the money supply increases, other things being equal
D). the price level rises, other things being equal
E)the level of investment decreases, other things being equal
Q4) In the United States, fiscal policy is the responsibility of the Federal Reserve Board of Governors and the Federal Open Market Committee
A)True
B)False
Q5) Explain how the Fed's structure provides a high degree of independence from the U.S. government. What are some of the benefits of this independence?
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Chapter 17: Issues in Macroeconomic Theory and Policy
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Q1) The belief that workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices is known as _____.
A)the theory of supply and demand
B)the rational choice theory
C)the prospect theory
D)the new trade theory
E)the theory of rational expectations
Q2) The crowding-out effect occurs when household consumption and investment spending increase as a result of a decrease in the demand for money.
A)True
B)False
Q3) An impact lag refers to the time required to:
A)gather enough data to indicate the beginning of an economic downturn.
B)bring about an actual fiscal stimulus desired.
C)analyze the importance of a stable policy tool.
D)identify an appropriate policy and get it approved by Congress.
E)determine an appropriate policy during an economic downturn.
Q4) Can monetary policy be used to successfully fine-tune the economy?
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Chapter 18: International Economics
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Q1) Which of the following people would most likely benefit if the U.S. dollar is stronger than other currencies?
A)A German professor on vacation in Iowa
B)An American professor on an extended vacation in Paris
C)An American farmer who relies on exports
D)A German firm which exports automobiles to the U.S. market
E)An American multinational technological company that sells computers to China
Q2) Classify each of the following as transactions involving debits or credits in the U.S. balance of payments.A. Russian tourists travelling to the United StatesB. The United States giving foreign aid to BosniaC. British investors purchasing U.S. government bondsD. American tourists travelling to AustraliaE. Volkswagen earning profits in the United States from its new carsF. Toyota building a new plant in OhioG. Capital Records selling rock and roll music in SwedenH. German consumers buying Ronco Veg-o-Matics made in the United StatesI. Procter & Gamble earning profits in their Mexican facility
Q3) Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.
A)True
B)False
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