Economics for Social Sciences
Final Test Solutions
Course Introduction
Economics for Social Sciences introduces students to fundamental economic principles and illustrates how these concepts intersect with social phenomena and public issues. The course covers topics such as scarcity, market dynamics, supply and demand, resource allocation, and the role of governments, with an emphasis on how economic theories are applied in real-world social contexts. Students will analyze contemporary social issues including poverty, inequality, education, healthcare, and environmental challenges through an economic lens, developing the ability to critically assess policies and their effects on different segments of society. The course aims to equip learners with analytical tools and frameworks to understand and evaluate the economic dimensions behind social structures and policy decisions.
Recommended Textbook
Microeconomics Principles and Policy 12th Edition by William J. Baumol
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22 Chapters
4555 Verified Questions
4555 Flashcards
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) How useful is economic analysis in solving complex social problems?
A)It is reliable in analyzing problems, and can usefully serve as the "final word" on solutions.
B)It is unreliable for understanding much of anything about social problems, and cannot offer much advice.
C)It is useful in clarifying options, but the final decision often rests on ethical decisions about which people differ.
D)It is useful in understanding economic problems but is only useful within that very narrow boundary.
E)It is not useful because economists agree on so little when they use their analysis.
Answer: C
Q2) Economists disagree on most economic issues facing an economy.
A)True
B)False
Answer: False
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Chapter 2: The Economy: Myth and Reality
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Sample Questions
Q1) Antitrust laws are designed to promote competition.
A)True
B)False
Answer: True
Q2) The U.S.economy rarely grows.
A)True
B)False Answer: False
Q3) A recession is a period of time in which real GDP falls.
A)True
B)False
Answer: True
Q4) The portion of income which is earned in the form of wages for labor is about A)12%
B)30%
C)51%
D)70%
Answer: D
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Page 4
Chapter 3: The Fundamental Economic Problem: Scarcity and
Choice
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Sample Questions
Q1) Some authors claim that any point not on the frontier cannot be best.What is their reasoning to support this?
A)A point inside the frontier implies that society is not facing up to the problem of scarcity.
B)A point inside the frontier limits growth, and growth is always a goal worth pursuing.
C)A point inside the frontier represents inflation, and inflation is a dangerous situation.
D)A point inside the frontier results in fewer goods, and more is always better.
E)A point inside the frontier is inefficient, and represents wasted resources.
Answer: E
Q2) The tendency of opportunity cost to increase as production increases
A)is an example of theory that has not been proven by facts.
B)is a general principle, but not a universal fact.
C)is a universal fact, with no known exceptions.
D)rarely holds in reality, but is a useful theory.
E)cannot be tested with standard economic tools.
Answer: B
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Chapter 4: Supply and Demand: An Initial Look
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Sample Questions
Q1) When used in a professional or technical sense,the law of supply and demand refers to
A)some vague influences on economic affairs.
B)the fact that prices go up when commodities are scarce.
C)the market forces that show how prices and quantities are determined.
D)the controls that regulate the amount of scarce goods that each consumer can purchase.
Q2) Refer to Exhibit 4-1.If the government imposes a price floor of $4 a weezil,how many weezils will be sold?
A)5
B)10
C)12
D)14
Q3) The price of gasoline has risen and the quantity sold has fallen.This was likely caused by
A)a rise in the price of crude oil.
B)a seasonal rise in the demand for gasoline.
C)use of a new public transit system.
D)the discovery of crude oil in New Jersey.
Q4) Distinguish the terms price ceiling and price floor.
Page 6
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Chapter 5: Consumer Choice: Individual and Market Demand
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Sample Questions
Q1) The slope of a consumer's indifference curve between two commodities represents A)her marginal rate of substitution between the commodities.
B)the relative prices of the goods.
C)her marginal revenue from selling the commodities.
D)her marginal revenue product from consuming the commodities.
Q2) A change in consumer preferences will shift the budget line.
A)True
B)False
Q3) According to Table 5-2,Robinson's total utility from having two coconuts is ____.
A)$1.87
B)$1.66
C)$3.88
D)This is not determinable from the information in the table.
Q4) The law of diminishing marginal utility states that total utility will increase at a decreasing rate as additional units of a commodity are acquired.
A)True
B)False
Q5) What is marginal analysis?
Q6) Using Table 5-3,graph the marginal utility curve.
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Chapter 6: Demand and Elasticity
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Sample Questions
Q1) If a product constitutes a large portion of a consumer's income,demand will be more inelastic.
A)True
B)False
Q2) The demand for French Roast coffee is likely to be
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.
Q3) A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.
A)True
B)False
Q4) Total expenditure equals price times elasticity.
A)True
B)False
Q5) A unit-elastic demand curve will be concave toward the origin.
A)True
B)False
Q6) Why are time series data unlikely to give an accurate estimate of demand?
Page 8
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Chapter 7: Production,Inputs,and Cost: Building Blocks for Supply Analysis
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Sample Questions
Q1) A change in one input price will cause the slope of the budget line to change.
A)True
B)False
Q2) Production technology determines the relationship of total cost to outputs.
A)True
B)False
Q3) In August 1988,the Los Angeles Kings hired Wayne Gretzky for $15 million in cash.The hockey team's decision must have been based on the expectation that
A)Gretzky's opportunity cost will exceed $15 million.
B)Gretzky's marginal revenue product will equal or exceed $15 million.
C)the team's total revenue will equal $15 million.
D)Gretzky's marginal revenue product will rise in the long run.
Q4) The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.
A)True
B)False
Q5) "Assuming the long-run average cost curve is U-shaped,a firm will always seek to operate at the lowest point on the long-run average cost curve."
Page 9
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Chapter 8: Output,Price,and Profit: The Importance of Marginal Analysis
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Sample Questions
Q1) Dunston Military Academy has an annual deficit of $250,000.Its 1,000 students pay tuition of $10,000 each per year.The economics faculty has recommended solving the problem by recruiting additional athletes with $5,000 scholarships.Each additional athlete will cost the school $2,500 (equipment,etc.).Assuming the academy agrees,how many athletes are needed to eliminate the deficit?
A)Zero, the deficit cannot be eliminated by giving more scholarships.
B)25
C)50
D)100
Q2) When a firm's fixed cost rises,its total profit curve shifts
A)up at every output level.
B)down at every output level.
C)left at every profit level.
D)right at every profit level.
Q3) The typical total profit graphical presentation is shown as A)a square.
B)a rectangle.
C)a hill, or mound.
D)an S curve.
Q4) Why is the total profit curve shaped like a hill?
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The Tail That Wags the Dog
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Sample Questions
Q1) The activities of speculators often reduce the risk borne by other stock market participants.
A)True
B)False
Q2) "Common stock" is the type sold to small investors.
A)True
B)False
Q3) Which of the following is true?
A)A bondholder owes money to a corporation.
B)A corporation owes money to a bondholder.
C)A bondholder owns part of a corporation.
D)A bondholder votes on company management.
Q4) Which of the following primarily serves large institutional customers such as banks and insurance companies?
A)NYSE
B)multiple regional exchanges
C)AMEX
D)NASAQ
Page 11
Q5) Explain how mutual funds are advantageous to small investors.
Q6) Why is diversification recommended for investors?
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Chapter 10: The Firm and the Industry Under Perfect Competition
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Sample Questions
Q1) If the market price of wangdoodles is $15 each,the profit-maximizing producer whose short-run cost curves are given in Exhibit 10-1 should produce ____ wangdoodles.
A)0
B)3
C)6
D)15
Q2) It is relatively easy for a firm to enter a perfectly competitive market.
A)True
B)False
Q3) In the long run,any firm may enter or leave a perfectly competitive market.
A)True
B)False
Q4) In Figure 10-3,the perfectly competitive firm is realizing a A)loss equal to ABCE.
B)profit equal to ABCE.
C)profit equal to ABDF. D)loss equal to ABDF.
Q5) Show what happens to the industry equilibrium when new firms enter a perfectly competitive market in the long run.
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Chapter 11: Monopoly
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Sample Questions
Q1) A 50 percent tax on the profits of a monopolist will
A)be totally shifted to the consumer.
B)raise price and lower quantity.
C)cause no change in profit-maximizing price and quantity.
D)change price but not quantity.
Q2) In Figure 11-5 are the cost and revenue curves of a monopolist in the theater market,Crown Theater,which is the only movie theater in the city.At its profit-maximizing quantity of tickets sold,movie goers will buy ____ tickets.
A)60
B)100
C)120
D)140
Q3) Pure monopoly markets are very common in the real world.
A)True
B)False
Q4) In Figure 11-9,which of the following is true?
A)MC = P
B)MC = MR
C)MU > MR
D)MU < MC
Page 14
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Chapter 12: Between Competition and Monopoly
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Sample Questions
Q1) Which of the following is not a requirement for the existence of monopolistic competition in a market?
A)numerous small sellers
B)full information about the market among buyers and sellers
C)product homogeneity
D)freedom of entry into the market
Q2) An oligopoly can be characterized by production of either identical goods or different goods.
A)True
B)False
Q3) Explain how short-run and long-run equilibrium in monopolistic competition differ.Use graphs to illustrate your answer.Be sure that your graphs are completely and correctly labeled.
Q4) An oligopoly is a market dominated by a few sellers.
A)True
B)False
Q5) How will price,output,and profit compare if firms maximize sales rather than profit?
Q6) Explain the prisoner's dilemma case in game theory and its relevance to the maximin criterion.
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Chapter 13: Limiting Market Power: Regulation and Antitrust
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) The main instrument of control of public monopolies is the regulatory agency.
A)True
B)False
Q2) Firm A's motive in filing an antitrust suit against Firm B may be
A)to seek court protection against genuinely unfair practices by Firm B.
B)to seek financial compensation for damages caused by Firm B.
C)to create an expensive nuisance for Firm B.
D)All of the above are correct.
Q3) Monopolies may be the only firms large enough to commercially produce a significantly innovative new product.
A)True
B)False
Q4) Explain why firms that enjoy economies of scale or scope are candidates for regulation.
Q5) Define the following terms and explain their importance to the study of economics: a.antitrust policy
b.economies of scale
c.economies of scope
Q6) Why is regulation necessary to achieve "universal service"?
Page 16
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Chapter 14: The Case for Free Markets I: the Price System
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Sample Questions
Q1) The metaphor used to describe the working of the price system to achieve efficiency in a free market is
A)Occam's razor.
B)the prisoner's dilemma.
C)the invisible hand.
D)the benefit principle.
Q2) For economic efficiency,which of the following conditions should be met?
A)Scarcer goods should have lower prices.
B)More abundant goods should have lower prices.
C)More abundant goods should have higher prices.
D)All goods should have equal prices.
Q3) An economy consists of two goods: beef and lamb.Of all the points on this economy's production possibilities frontier,which one is best in terms of efficiency?
Q4) Inefficient allocation of resources occurs when
A)no one can be made better off without having someone else give up something.
B)it is possible to make some people better off without making others worse off.
C)society is operating at a point high on the production possibilities frontier.
D)society is operating at a point low on the production possibilities frontier.
Q5) What makes production-planning a daunting task for central planners?
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Chapter 15: The Shortcomings of Free Markets
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Sample Questions
Q1) Which of the following observations is true?
A)A market produced with allocative efficiency if a monopoly exists.
B)A market can provide "public goods."
C)A market makes public and personal services inexpensive.
D)A market distributes income equally.
Q2) Explain why government,rather than private firms,is required for efficient mosquito eradication programs.
Q3) Private goods are not excludable.
A)True
B)False
Q4) Productivity growth tends to affect all industries to the same degree.
A)True
B)False
Q5) A monopoly price reflects a good's marginal utility.
A)True
B)False
Q6) Pleasure boaters enjoy the use of waterways,but sometimes run into problems and need rescue.Coast Guard boats,supported by tax revenue,are often used for rescue.Is it likely that there will be an efficient amount of boating and rescuing?
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Chapter 16: The Markets Prime Achievement: Innovation and Growth
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Sample Questions
Q1) Economists believe that the free market will tend to under-provide resources for acquisition of new technical knowledge.
A)True
B)False
Q2) Technology trading represents an attempt by firms to share the risks associated with innovation.
A)True
B)False
Q3) The ____ of an economy is the value of all goods and services produced there,divided by the total labor time devoted to the economy's productive activities.
A)earnings
B)efficiency
C)productivity
D)investment
Q4) The "new economy" refers to a world in which computer use is widespread,information is quickly transmitted,and technical change is rapid.
A)True
B)False
Page 19
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Chapter 17: Externalities, the Environment, and Natural Resources
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Sample Questions
Q1) Emissions permits are sometimes referred to as a "license to pollute."
A)True
B)False
Q2) Pollution is an example of a negative externality.
A)True
B)False
Q3) Which of the following would not lead to more conservation?
A)higher prices for a resource
B)increased interest rates on bonds
C)public awareness of increasing scarcity
D)higher taxes on goods produced using the resource
Q4) The use of tax penalties to control pollution represents a
A)price-based market approach to the pollution problem.
B)non-market approach to the pollution problem.
C)major source of current federal revenues.
D)pollution-rights solution to the pollution problem.
Q5) Voluntary programs,direct controls,and emissions taxes are all equally effective ways of controlling pollution.
A)True
B)False
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Chapter 18: Taxation and Resource Allocation
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Sample Questions
Q1) One major problem with Social Security is that it is a "pay as you go" system.
A)True
B)False
Q2) The benefits principle states that the users of a service should pay for that service.
A)True
B)False
Q3) The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?
Q4) When demand for a product is very inelastic,the burden of a tax falls mainly on A)producers.
B)consumers.
C)tax collectors.
D)people who drop out of the market.
Q5) Homeowners receive tax benefits that are not available to renters.
A)True
B)False
Q6) Why do many economists rate the income tax high in efficiency and equity terms?
Q7) Discuss the three principles of equity applied to taxation in the text.
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Chapter 19: Pricing the Factors of Production
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Sample Questions
Q1) MPP is the additional output that results from a one-unit increase in use of the input.
A)True
B)False
Q2) The basic principle that explains the demand for a factor of production is the
A)principle of marginal productivity.
B)Hotelling principle.
C)principle of opportunity cost.
D)Ramsey pricing principle.
Q3) Firms will borrow to finance capital expansion until the MRP of the investment equals the
A)MRP of labor.
B)marginal cost of the finished good.
C)marginal physical product of capital.
D)interest payment charged for borrowing.
Q4) The demand curve for any input is the downward-sloping portion of its marginal revenue product curve.
A)True
B)False
Q5) How can bonuses to exceptional employees be considered economic rents?
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Chapter 20: Labor and Entrepreneurship: The Human Inputs
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Sample Questions
Q1) The demand curve for labor slopes downward because A)few workers work at low wages.
B)capital has been substituted for labor in most industries.
C)of the diminishing marginal product of labor.
D)All of the above are true.
Q2) American unions came under increasing pressure in the 1950s because of stronger competition both at home and abroad.
A)True
B)False
Q3) The concept of economic rent would be more applicable to the earnings of A)a secretary.
B)Peyton Manning.
C)a doctor or a lawyer.
D)only a landowner.
Q4) College graduates now earn nearly twice as much as their high school-educated peers and that gap is increasing.
A)True
B)False
Q5) Give some explanations for the decline in union membership in the United States.
Page 23
Q6) Explain how the demand for labor is determined.
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Chapter 21: Poverty, Inequality, and Discrimination
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Sample Questions
Q1) A market system tends to create inequality.
A)True
B)False
Q2) The "War on Poverty" was declared by President Ronald Reagan in 1982.
A)True
B)False
Q3) In 2009,the poverty line for a family of four was approximately
A)$10,000.
B)$13,000.
C)$15,000.
D)$22,000.
Q4) The 1994 book by Murray and Herrnstein,The Bell Curve,was about A)government debt.
B)the intelligence factor.
C)capital growth.
D)military readiness.
Q5) Define discrimination.Why does discrimination occur and what evidence exists that it does occur?
Q6) Discuss the major programs to combat poverty and evaluate them on the basis of work incentives.
Page 24
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Chapter 22: International Trade and Comparative Advantage
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Sample Questions
Q1) A country that must inhibit imports should give preference to A)quotas over tariffs because quotas are less likely to distort trade patterns between nations.
B)tariffs over quotas because, unlike quotas, tariffs offer no special benefits to inefficient exporters.
C)export subsidies over quotas or tariffs because export subsidies can protect a nation's domestic producers.
D)an embargo wherever possible because an embargo can serve as a political weapon in addition to being a "trade stopper."
Q2) Quebec is capable of producing 10 pallets of wood shingles or 8 barrels of maple syrup with a unit of labor.Vermont is capable of producing 12 pallets of wood shingles or 12 barrels of maple syrup with a unit of labor.Assume that this is typical of the labor force as a whole.Which location has the absolute advantage and which has the comparative advantage,in the production of each good? Can these locations reap gains from trade?
Q3) A quota sets the maximum amount of a good that is permitted into a country.
A)True
B)False
Q4) Why is comparative advantage rather than absolute advantage the basis for trade?
Page 25
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