Economics for Policy Analysis Exam
Bank
Course Introduction
Economics for Policy Analysis introduces students to fundamental economic concepts and methodologies essential for evaluating and designing effective public policies. The course covers key microeconomic and macroeconomic principles, including market dynamics, externalities, public goods, and cost-benefit analysis. Emphasis is placed on applying economic reasoning to real-world policy issues such as taxation, regulation, social welfare, education, and healthcare. Through case studies and practical examples, students develop critical skills in interpreting economic data, forecasting policy impacts, and making evidence-based recommendations to inform decision-making in the public sector.
Recommended Textbook
Microeconomics Principles and Applications 6th Edition by Robert E. Hall
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18 Chapters
2377 Verified Questions
2377 Flashcards
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Chapter 1: What Is Economics
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Sample Questions
Q1) A newspaper headline announces that "more college graduates than ever are in the labor force." This is an example of
A)microeconomic analysis
B)an abstraction
C)a value judgment
D)a positive statement
E)macroeconomic analysis
Answer: D
Q2) Grant has four hours of time to divide between studying for a physics exam and a geology exam.Figure 1-1 shows his estimates of the grades (on a scale of 0 to 100)that he could earn from studying a particular number of hours on each subject.If he plans on spending two hours studying each subject,what would be his opportunity cost of an additional hour studying physics?
A)10 points on his geology exam
B)20 points on his geology exam
C)80 points on his geology exam
D)25 points on his physics exam
E)85 points on his physics exam
Answer: B
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3
Chapter 2: Scarcity, choice, and Economic Systems
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Sample Questions
Q1) If the economy is producing a combination of goods inside its production possibilities frontier,then
A)workers are on vacation
B)a significant number of workers have little education
C)some resources are being wasted
D)technology must improve before output can increase
E)the opportunity cost of producing more output is greater than the value of the additional output that could be produced
Answer: C
Q2) Maximizing output by following the principle of comparative advantage requires
A)specialization only
B)exchange only
C)both specialization and exchange
D)neither specialization nor exchange
E)either specialization or exchange,but not both
Answer: C
Q3) Every economic system requires a means for determining resource allocation.
A)True
B)False
Answer: True
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Chapter 3: Supply and Demand
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Sample Questions
Q1) If the supply of coffee falls due to bad weather conditions in coffee-exporting countries,then the
A)price and quantity will rise
B)price and quantity will fall
C)price will fall and quantity will rise
D)price will rise and quantity will fall
E)quantity will fall,but price may rise or fall
Answer: D
Q2) Income is to wealth as
A)hours are to minutes
B)inches are to feet
C)periods are to sentences
D)demand is to quantity demanded
E)learning is to knowledge
Answer: E
Q3) The law of demand says that as the price of a good rises,the quantity demanded of the good tends to fall.
A)True
B)False
Answer: True
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) A $10,000 federal subsidy per student in higher education would benefit
A)a student by exactly $10,000
B)a university by exactly
C)the student and the university in such a way that they would split the $10,000.
D)the student and the university in such a way that they would each get $10,000.
Q2) Which of the following is not an example of a flow variable?
A)The amount of income that a person earns each month
B)The amount of interest that a savings account earns each week
C)The amount of money in a savings account
D)The amount of taxes that a person pays each year
E)All of these are flow variables
Q3) A stock variable
A)measures a process that takes place over a period of time
B)is used often used to measure the quantity demanded of a good at various prices
C)is related to inventory controls
D)measures a quantity in existence at a moment in time
E)is a definition unique to economics
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6
Chapter 5: Elasticity
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Sample Questions
Q1) A perfectly inelastic supply curve
A)cannot exist
B)is horizontal
C)has an elasticity of 0
D)has an elasticity of 1
E)is vertical
Q2) Generally,as goods are more broadly defined,
A)demand becomes more price elastic
B)demand becomes less price elastic
C)total expenditure falls as the price decreases
D)the demand curve becomes straighter
E)more substitute goods can be identified
Q3) For which of the following goods is the income elasticity of demand likely to be largest?
A)poultry products
B)meals at restaurants
C)lemonade
D)used books
E)paperback mystery novels
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Page 7
Chapter 6: Consumer Choice
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Sample Questions
Q1) If the price of good X (measured on the horizontal axis of a budget line diagram)increases at the same time that the price of good Y (measured on the vertical axis)increases,the budget line
A)will necessarily become steeper
B)will necessarily become flatter
C)will remain unchanged
D)will shift outward in a parallel fashion
E)could become either steeper or flatter,depending on the sizes of the price changes
Q2) Steak is a normal good.If the price of steak increases,
A)the income effect on the demand for steak will reinforce the substitution effect
B)the income effect on the supply of steak will,to some extent,offset the substitution effect
C)the budget line will rotate outward
D)consumers' purchasing power will increase
E)the budget line will shift outward
Q3) The budget line is useful for illustrating the notion of opportunity cost.
A)True
B)False
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8
Chapter 7: Production and Cost
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Sample Questions
Q1) The short run for Barbara's Bakery is defined as
A)one year
B)one month
C)the period of time during which all inputs are variable
D)the period of time during which at least one input is fixed
E)the time needed for a transaction to occur
Q2) The Marginal Cost curve will
A)cut ATC at the minimum of ATC but cut AVC at a point to the left of the minimum of AVC.
B)cut ATC at the minimum of ATC but cut AVC at a point to the right of the minimum of AVC.
C)cut AVC at the minimum of AVC but cut ATC at a point to the left of the minimum of ATC.
D)cut AVC at the minimum of AVC but cut ATC at a point to the right of the minimum of ATC.
E)cut both ATC and AVC at their respective minimums
Q3) Marginal product is the change in output divided by the change in the amount of an input used.
A)True
B)False
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Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) Figure 8-9 shows the demand schedule faced by an artist for reproductions of one of his paintings.His marginal revenue falls as output rises because
A)marginal cost is rising
B)the artist must lower the price on all reproductions in order to sell a larger quantity
C)total revenue is increasing at an increasing rate
D)the price is equal to marginal revenue
E)the artist works in a perfectly competitive market for art
Q2) Which of the following statements about the firm's total revenue is correct?
A)If the firm sold 3 units of output,it would have revenues totaling $540.
B)If the firm sold 7 units of output,it would have revenues totaling $980.
C)If the firm increased output from 2 units to 3 units,total revenue would increase.
D)If the firm increased output from 6 units to 7 units,total revenue would increase.
E)If the firm decreased output from 6 units to 5 units,total revenue would decline.
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Chapter 9: Perfect Competition
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Sample Questions
Q1) The firm earns an economic profit whenever
A)price is less than average total cost
B)marginal revenue exceeds total revenue
C)average variable cost exceeds total revenue
D)marginal cost minus average cost is positive
E)price is greater than average total cost
Q2) Under conditions of perfect competition,if any one buyer increases her purchases,the market price
A)rises
B)remains unchanged
C)falls
D)either rises or falls
E)will change,but in an unpredictable fashion
Q3) The demand curve facing a perfectly competitive firm is A)vertical.
B)horizontal.
C)positively sloped.
D)negatively sloped.
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11
Chapter 10: B:Perfect Competition
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Sample Questions
Q1) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q2) Which of the following is not a characteristic of a perfectly competitive market
A)buyers and sellers are well informed about the market
B)standardized product
C)many buyers and few sellers
D)easy exit out of the industry
E)easy entry into the industry
Q3) In perfect competition,technological advances will allow economic profits for A)all firms.
B)only the firm developing the new technology.
C)early adopters.
D)none of the firms,as the advance will be immediately adopted by all of them.
Q4) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
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Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The profit-maximizing,or loss-minimizing,output for the firm in Figure 11-3 is
A)zero units
B)50 units
C)70 units
D)75 units
E)83 units
Q2) Firms in a monopolistically competitive market follow the same MR = MC profit maximization rule used by firms in other market structures.
A)True
B)False
Q3) Which of the following must be true in an oligopoly?
A)The firms produce a differentiated product.
B)There is one dominant firm in the market.
C)The firms are strategically interacting.
D)The market is international in scope.
E)There are no significant barriers to entry.
Q4) Cartels are more likely to succeed the larger the number of firms in an industry.
A)True
B)False
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Chapter 11: Monopoly
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Sample Questions
Q1) Price discrimination always harms consumers.
A)True
B)False
Q2) The marginal revenue curve of a perfectly price-discriminating monopolist
A)coincides with the marginal cost curve
B)lies below the market demand curve
C)coincides with the market demand curve
D)is a horizontal line through the midpoint of the market demand curve
E)does not exist
Q3) Figure 10-1 shows the demand schedule facing the only gas station in a small Midwestern town.The station does not price discriminate.Which of the following statements is correct?
A)The demand curve facing Friendly Stop has a constant price elasticity.
B)If the station increases sales from 100 to 110 gallons,marginal revenue will equal $1.40.
C)If the station increases sales from 100 to 110 gallons,marginal revenue will equal $14.00.
D)Demand is price elastic throughout the demand schedule.
E)The owner of the station would be unwilling to charge either $1.00 or $0.90 per gallon.
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Chapter 12: Labor Markets
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Sample Questions
Q1) An increase in the cost of acquiring human capital will shift the labor supply curve to the left;eventually,this will tend to decrease the equilibrium wage rate.
A)True
B)False
Q2) The demand for labor depends upon each of the following,except one.Which is the exception?
A)the level of technology
B)the quantity of labor available
C)the prices of complements to labor
D)the prices of substitutes for labor
E)the number of firms hiring in that labor market
Q3) As the wage rate increases for computer programmers,the
A)supply curve for computer programmers will shift to the right
B)supply curve for computer programmers will shift to the left
C)demand curve for computer programmers will shift to the left
D)minimum wage will fall in this labor market
E)supply curves for workers in similar industries will shift to the left
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Chapter 13: B: Labor Markets
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Sample Questions
Q1) Economists consider the minimum wage to be a
A)blunt instrument of social policy
B)finely tuned instrument of social policy
C)universally bad idea
D)policy that has no impact on poverty
Q2) The "vicious cycle of discrimination" refers to
A)the use of statistical discrimination to perpetuate the impact of employer prejudice on minorities
B)the portion of the wage differential between two groups that cannot be accounted for by differences in education and job experience
C)lower wage rates that reduce incentives to improve skill levels and gain job experience,which perpetuates lower wage rates
D)any job-market discrimination that remains after all premarket discrimination has been eliminated
E)job-market discrimination that leads to increased prejudices among workers and customers,thus generating more discrimination
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Chapter 14: Capital and Financial Markets
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Sample Questions
Q1) Claire was trying to decide if she should buy a share of stock in her favorite company or a bond issued by that same company.She discussed the dilemma with her father.Her father made the following five statements.All of them are accurate except for one.Which one is the exception?
A)"If you buy a share of stock you will own a piece of the company"
B)"If you buy a bond you will own a piece of the company"
C)"If you buy a bond and change your mind you can sell it on the secondary bond market"
D)"You should be careful because if you buy a share of stock you could loose your original investment"
E)"If you buy a stock it may be worth more in the future"
Q2) The payments made to shareholders from a firm's profits are called
A)owner subsidies
B)principal
C)coupon payments
D)retained earnings
E)dividends
Q3) The supply curve for a particular bond is horizontal.
A)True
B)False
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Chapter 15: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) Pareto improvements occur
A)through the tax system
B)rarely in the real world
C)when the economy has reached the point of economic efficiency
D)when market exchanges take place
E)when consumers are not perfectly informed
Q2) In figure 14-1,which area represents total net benefits gained in the market
A)A + B
B)B + D
C)A + C
D)B + C
E)A + E
Q3) A mutually advantageous trade leads a Pareto improvement.
A)True
B)False
Q4) A Pareto improvement is any action that makes at least one individual better off,and harms no one.
A)True
B)False
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Chapter 16: Governments Role in Economic Efficiency
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Sample Questions
Q1) Left to itself,a natural monopoly will produce
A)nothing
B)the efficient level of output
C)the quantity at which marginal cost equals marginal revenue
D)the quantity at which the marginal cost and demand curves intersect
E)the quantity at which the long-run average total cost and demand curves intersect
Q2) A candy bar is an example of a good that is
A)both rival and excludable
B)non-rival but excludable
C)both non-rival and non-excludable
D)rival but non-excludable
E)rival but usually produced inefficiently
Q3) If a monopoly arises as a natural monopoly
A)using anti-trust law to break it up is a poor remedy
B)anti-trust law should be used to break it up
C)that is most likely due to a patent or copyright
D)it will evolve into a perfectly competitive market in the long run
E)it should be encouraged,because it is "natural"
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Chapter 17: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) The United States does not impose tariffs or quotas;however,many of its trading partners do have these trade restrictions.
A)True
B)False
Q2) Objections to free trade
A)arise because trade harms everyone
B)arise when some groups within a nation are harmed by trade
C)arise because importers and exporters are often the same people
D)are inconsistent with economic rationality
E)arise because people prefer not to consume foreign-produced goods
Q3) In general,a society will benefit more,the more interdependent it is.
A)True
B)False
Q4) U.S.imports of sugar
A)have been illegal since the mid-1980s
B)harm U.S.sugar producers
C)increase the U.S.government's revenue
D)are restricted by tariffs
E)are restricted by import quotas
20
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