Economics for Social Sciences Study Guide
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Course Introduction
Economics for Social Sciences introduces students to the fundamental principles of economics and explores how these concepts apply to societal issues and human behavior. The course covers key topics such as supply and demand, market structures, public goods, externalities, and government intervention, while emphasizing their relevance in social science disciplines like sociology, political science, and public policy. Through real-world examples and case studies, students learn to analyze economic problems, understand resource allocation, and evaluate the impact of economic decisions on individuals and communities. The course equips students with analytical tools to critically assess social issues from an economic perspective, fostering a deeper understanding of the interconnectedness between economics and society.
Recommended Textbook
Foundations of Microeconomics 6th Edition by Robin Bade Michael Parkin
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Page 2
Chapter 1: Getting Started
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Sample Questions
Q1) A positive statement
Imakes a statement about how the world operates.
Iiis a true statement.
Iiican be tested against the facts.
A)i and ii
B)i and iii
C)ii and iii
D)i, ii and iii
E)i only
Answer: B
Q2) With y measured on the vertical axis and x measured on the horizontal axis, the slope of a straight line is defined as A)y/x.
B)x/y.
C)(change in y)/(change in x).
D)(change in x)/(change in y).
E)y - x.
Answer: C
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Page 3
Chapter 2: The Usand Global Economies
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Q1) In the circular flow model, the expenditures on goods and services flow in the
A)same direction as goods and services in all cases.
B)same direction as goods and services only if they both flow through the goods market.
C)same direction as goods and services only if they both flow through the factor market.
D)opposite direction as goods and services.
E)same direction as factor markets.
Answer: D
Q2) Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as
A)U.S. consumption goods and services.
B)foreign capital goods.
C)U.S. government goods and services.
D)U.S. exports of goods and services.
E)U.S. imports of goods and services.
Answer: D
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Chapter 3: The Economic Problem
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Sample Questions
Q1) In the table above, Jack's opportunity cost for 1 pound of food is ________ and his opportunity cost for 1 pound of clothing is ________.
A)1 pound of clothing; 4 pounds of food
B)1/2 of a pound of clothing; 2 pounds of food
C)1/3 of a pound of clothing; 3 pounds of food
D)2 pounds of clothing; 2 pounds of food
E)1 pound of food; 1 pound of clothing
Answer: B
Q2) Liz has a comparative advantage in ________ and an absolute advantage in
A)smoothies only; both goods
B)smoothies only; smoothies only
C)both goods; both goods
D)salads only; both goods
E)salads only; salads only
Answer: A
Q3) How can a combination of goods be unattainable?
Answer: A combination of goods can be unattainable if producing that combination requires more resources and technology than are available.
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Page 5
Chapter 4: Demand and Supply
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Sample Questions
Q1) The graph illustrates the supply of sweaters.Which of the following events will increase the quantity supplied of sweaters?
A)a rise in the price of a sweater
B)a rise in the wage rate paid to the workers who make sweaters
C)a rise in the expected future price of a sweater
D)an increase in the number of sellers of sweaters
E)a decrease in the number of sweater buyers
Q2) Researchers have found a hybrid of corn that is cheaper to grow.This technological breakthrough
A)increases the demand for corn.
B)increases the supply of corn.
C)decreases the supply of corn.
D)Both answers A and C are correct.
E)Both answers A and B are correct.
Q3) In early 2012 the price of computer hard disc drives rose.In a demand and supply model, shifts in what curve or curves could have brought about the higher price?
Q4) Soft drinks are a normal good.Draw a graph showing the effect of an increase in income on the demand for soft drinks.
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Page 6
Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) The data in the table above give two points on the demand curve for pizza.Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?
A)8.2 percent
B)15.5 percent
C)10.5 percent
D)5.0 percent
E)1.0 percent
Q2) Goods are ________ when the income elasticity of demand is less than zero.
A)substitutes
B)complements
C)inferior
D)elastic
E)normal
Q3) Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.
Q4) The table above gives the demand schedule for a good.What is the total revenue at point A? At point B? At point C? At point D? At point E?
Q5) Explain the total revenue test.
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) The chair of the Department of Economics at Colorado State University decided that office space is for tenured faculty and that graduate students are required to share cubicles.What method is used to allocate office space?
A)lottery
B)majority rule
C)command
D)first-come, first-served
E)sharing equally
Q2) If the government imposes a tax on a competitive market with no externalities, then Iresource use is not efficient.
Iithere is a deadweight loss.
Iiiconsumer surplus is at its maximum.
A)ii only
B)i and ii
C)iii only
D)i and iii
E)i, ii, and iii
Q3) Why does the marginal benefit curve have a negative slope?
Q4) Explain the difference between the words "value," "price," and "cost."
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Chapter 7: Government Actions in Markets
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Sample Questions
Q1) In the figure above, with the rent ceiling the quantity of housing supplied is ________ units, the quantity demanded is ________ units, and the quantity rented is ________ units.
A)3,000; 6,000; 3,000
B)3,000; 6,000; 6,000
C)3,000; 6,000; 4,000
D)3,000; 3,000; 3,000
E)4,000; 4,000; 4,000
Q2) The labor demand and labor supply schedules are given in the table above.If a minimum wage of $11 per hour is imposed,
A)a surplus of 300 workers occurs.
B)there is no shortage or surplus of workers.
C)900 workers are employed.
D)Both answers B and C are correct.
E)Both answers A and C are correct.
Q3) We know that the minimum wage causes unemployment.So, why does the government impose one?
Q4) What are the effects of a rent ceiling set below the equilibrium rent?
Q5) Discuss the inefficiencies created by a price floor.
Q6) Why do rent ceilings lead to shortages and black markets?
Page 9
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Chapter 8: Taxes
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Sample Questions
Q1) If the supply of capital is perfectly elastic, a tax on capital income results in
A)a deadweight loss and lenders pay all of the tax.
B)a deadweight loss and borrowers (firms)pay all of the tax.
C)no deadweight loss and borrowers (firms)and lenders split the tax.
D)no deadweight loss and lenders pay all of the tax.
E)no deadweight loss and borrowers (firms)pay all of the tax.
Q2) If a good has a tax levied on it, sellers respond to the price that excludes the tax and not the price with the tax because
A)the tax is handed over to the state directly by buyers.
B)sellers do not get to keep the tax revenue.
C)the demand for the good has decreased.
D)the quantity supplied of the good increases.
E)demanders pay none of the tax.
Q3) What is the marginal tax rate? Average tax rate? Can these rates ever differ?
Q4) "In the United States, more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?
Q5) Why are sales taxes, which require that everyone pay the same percentage tax, considered regressive taxes?
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Chapter 9: Global Markets in Action
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Sample Questions
Q1) The table above has the domestic supply and domestic demand schedules for a product.What is the equilibrium price with no trade? Over what range of prices will the country export the good? Over what range will it import the good? Suppose the world price is $20.What is the quantity demanded, the quantity supplied, and the amount of the good exported or imported?
Q2) Which of the following groups gain from international trade?
Iproducers of exported goods
Iidomestic consumers of imported goods
Iiiworkers in exporting firms
A)i only
B)ii only
C)iii only
D)i and iii
E)i, ii, and iii
Q3) Based on the figure above, as a result of international trade, producer surplus
A)increases by $15 billion.
B)decreases by $15 billion.
C)increases by $27.5 billion.
D)decreases by $12.5 billion.
E)remains unchanged.
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Chapter 10: Externalities
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Sample Questions
Q1) The figure above shows the costs and benefits associated with producing paper.What is the marginal external cost when output is 6 tons?
A)$1,600
B)$1,200
C)$1,000
D)$600
E)$400
Q2) Education has an external benefit.So to achieve the efficient level of education, an education voucher must equal the difference between the
A)marginal (private)cost and the marginal social benefit.
B)marginal (private)benefit and the marginal social benefit.
C)marginal social benefit and the marginal (private)cost.
D)dollar price and marginal (private)cost.
E)marginal (private)cost and the marginal social cost.
Q3) Burning coal to generate electricity can create pollution.If the market for generating electricity is competitive and is allowed to operate without any government intervention, is the equilibrium quantity of coal burned equal to, more than, or less than the efficient quantity?
Q4) Why is it not efficient to eliminate all pollution?
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) Inefficient overproduction of a public good by the government is
A)the only efficient method of producing public goods.
B)not likely to occur when voters choose rational ignorance.
C)the term used to describe a surplus of a public good.
D)one explanation of why government might be large.
E)not likely to occur if voters are rationally ignorant.
Q2) A good or resource is excludable if
A)only the government can produce them.
B)nobody can be excluded from enjoying the benefits of the good or resource.
C)when you pay for the good or resource, you are guaranteed to be the sole consumer.
D)when you consume a unit, that means there is one less for someone else.
E)it is a common resource.
Q3) Which of the following is the best example of a common resource?
A)national defense
B)a Ford Thunderbird
C)Yosemite National Park
D)a can of Mountain Dew
E)a cable television network
Q4) What are the differences between public goods and private goods?
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Chapter 12: Markets With Private Information
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Sample Questions
Q1) In the used car market with warranties, the equilibrium is a ________ and the lemons problem is ________.
A)pooling equilibrium; solved
B)pooling equilibrium; unresolved
C)separating equilibrium; unresolved
D)separating equilibrium; solved
E)pooling equilibrium; possibly solved and possibly unresolved, depending on whether good used cars sell for a higher price than do lemons
Q2) A safe drive is likely to prefer an auto insurance policy that has a ________ deductible and a ________ premium.
A)high; high
B)high; low
C)low; high
D)low; low
E)None of the above answers are correct because private information has no effect in the market for auto insurance.
Q3) What is the missing insurance market in health care? Why don't private markets provide this insurance?
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14
Chapter 13: Consumer Choice and Demand
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Sample Questions
Q1) In an indifference curve/budget line diagram, generally when the price of a good increases, the consumer purchases
A)less of the good and moves to a lower indifference curve.
B)less of the good and moves to a higher indifference curve.
C)more of the good and moves to a higher indifference curve.
D)more of the good and moves to a lower indifference curve.
E)the same amount of the good and moves to a higher indifference curve.
Q2) Suppose you have one point on a demand curve.To plot another point for this demand curve using a group of indifference curves,
A)transfer all points from the indifference curve to the corresponding demand curve.
B)horizontally sum the indifference curves.
C)change the price of a good, rotate the budget line, and find the new best affordable point. This new price and quantity is another point on the demand curve.
D)calculate the marginal rates of substitution from the indifference curve and transfer these values to the demand curve.
E)transfer the budget line so that it becomes the demand curve.
Q3) Explain the paradox of value.
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Page 15
Chapter 14: Production and Cost
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Sample Questions
Q1) Which of the following statements correctly describes a total product curve?
A)Points above the total produce curve are efficient.
B)The curve shows that output always increases as labor employed increases.
C)The curve separates attainable outputs from unattainable outputs.
D)The curve shows minimum levels of output.
E)The curve first falls, reaches a minimum, and then rises.
Q2) The vertical distance between total cost curve and total variable cost curve is equal to
A)average fixed cost.
B)total fixed cost.
C)average variable cost.
D)average total cost.
E)marginal cost.
Q3) In economics, a "normal profit" is the return to A)labor.
B)capital.
C)land.
D)entrepreneurship.
E)Answers B and D are correct.
Q4) What are economies of scale? What is the main source of economies of scale?
Page 16
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Chapter 15: Perfect Competition
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Sample Questions
Q1) The above figure shows a perfectly competitive firm.If the market price is $5, the firm A)might shut down but more information is needed about the AVC.
B)is making an economic profit.
C)is making zero economic profit.
D)will immediately shut down.
E)will not shut down.
Q2) Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run. A)rises; does not change; is equal to B)rises; increases; higher than C)rises; does not change; lower than D)falls; decreases; is equal to E)rises; increases; lower than
Q3) What is the shape of the demand curve faced by the perfectly competitive firm, and why?
Q4) Describe how economic losses are eliminated in a perfectly competitive industry.
Q5) In the long run, perfectly competitive firms cannot make an economic profit.Why?
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Chapter 16: Monopoly
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Sample
Questions
Q1) ________ natural monopolies is a commonly used, potential solution to the problems presented by natural monopolies.
A)Breaking up firms that are
B)Regulating
C)Outlawing price discrimination by
D)Refusing to grant patents to
E)Giving incentives to firms to become
Q2) Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive, the price of a pound of steak is
A)$4.
B)$8.
C)$12.
D)$20.
E)$2.
Q3) What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?
Q4) How does marginal revenue compare to price for a single-price monopoly?
Q5) Describe the three general types of barriers.
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Chapter 17: Monopolistic Competition
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Sample Questions
Q1) One of the major benefits to society of monopolistic competition is
A)high prices.
B)restricted output.
C)product differentiation.
D)the excess capacity.
E)the markup.
Q2) In an industry with a large number of firms,
A)each firm will produce a large quantity, relative to market demand.
B)one firm will dominate the market.
C)collusion is impossible.
D)competition is eliminated.
E)barriers to exit must exist.
Q3) In monopolistic competition there
A)are many firms and many buyers.
B)are several large firms.
C)is one large firm.
D)might be many, several, or one firm.
E)are many firms but only a few buyers.
Q4) How do product development and marketing affect a firm in monopolistic competition?
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Chapter 18: Oligopoly
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Sample Questions
Q1) For a duopoly, the highest price is charged when the duopoly achieves
A)the competitive outcome.
B)the monopoly outcome.
C)an outcome between the competitive outcome and the monopoly outcome.
D)its noncooperative Nash equilibrium.
E)Both answers A and D are correct because both refer to the same price.
Q2) The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.Which of the following statements is correct?
A)If the firms play this game repeatedly, one would end up charging $20 and the other $10.
B)If the firms cooperate, both could make $55,000 in economic profit.
C)The Nash equilibrium in this game is for both firms to set P = $20 because that maximizes their combined profit.
D)Firm B's strategy is to always set P = $20 because that gives Firm B the highest possible profit.
E)If Firm B sets P = $20, then Firm A will maximize its profit by setting its P = $20.
Q3) Describe the Department of Justice's claims against Microsoft.
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Chapter 19: Markets for Factors of Production
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Sample Questions
Q1) A surplus of workers occurs
A)when the wage rate exceeds the equilibrium wage rate.
B)when the wage rate is less than the equilibrium wage rate.
C)at the equilibrium wage rate.
D)whenever there is a shortage of goods.
E)whenever there is a surplus of goods.
Q2) Why do baseball players make so much money, while kindergarten teachers in private schools make so much less? In your answer, discuss the value of marginal product and the actions of profit-maximizing firms.
Q3) The equilibrium quantity of capital is
A)determined by only the supply of capital because the supply is perfectly inelastic.
B)determined by only the supply of capital because the supply is perfectly elastic.
C)expected to increase at the same rate as the interest rate.
D)determined by the supply of capital and the demand for capital.
E)the only factor of production whose quantity is not determined in a market.
Q4) How does a firm's demand for labor change if the price of the firm's product increases? Relate your answer to the value of marginal product.
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21
Chapter 20: Economic Inequality
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Sample Questions
Q1) Suppose a state charges an in-state student $2000 in tuition for a college education and charges an out-of -state student $10,000 in tuition.This differential
A)is a result of the state subsidizing education for its residents.
B)explains the difference between the demand curve for high-skilled and low-skilled labor.
C)explains the difference between the supply curve for high-skilled and low-skilled labor.
D)can be corrected via a negative income tax.
E)is an example of the positive theories of income redistribution.
Q2) In the figure above, the value of the marginal product of skill creates the difference between the ________ curves and ________.
A)SL and SH; is equal to $10 per hour
B)SL and SH; exceeds $10 per hour
C)DL and DH; is less than $10 per hour
D)DL and DH; is equal to $10 per hour
E)DL and DH; exceeds $10 per hour
Q3) What is a Lorenz curve?
Q4) Which is distributed more equally: income or wealth?
Q5) What is the difference between wealth and income?
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