Economics I Question Bank
Course Introduction
Economics I provides a comprehensive introduction to the foundational principles of microeconomics and macroeconomics. The course covers key topics such as supply and demand, market equilibrium, consumer behavior, production and costs, and the various market structures that shape economic outcomes. Students also explore the role of government intervention, the basics of national income accounting, and an overview of macroeconomic indicators. By combining theoretical frameworks with real-world applications, Economics I equips students with the analytical tools necessary to understand and analyze economic issues and policy decisions.
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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Page 2
Chapter 1: What Is Economics
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) How retail gasoline stations behave in a local market is an example of a macroeconomic issue.
A)True
B)False
Answer: False
Q2) Opportunity costs exist because
A)there is a price attached to virtually every good or service
B)technology is not fixed in the economy
C)people have different tastes and preferences
D)limited resources cannot satisfy all of the wants in society
E)the production possibilities frontier is bowed in with respect to the origin
Answer: D
Q3) Macroeconomic models focus on the behavior of
A)individual households,business firms,and government agencies
B)individual nations in the foreign trade sector
C)the entire economy
D)large industrial sectors,such as manufacturing
E)individual business firms and government agencies
Answer: C
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Page 3
Chapter 2: Scarcity, choice, and Economic Systems
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146 Flashcards
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Sample Questions
Q1) Under a socialist system,
A)most resources are owned by the state
B)most resources are shared with the whole community
C)market prices determine how resources are distributed
D)conflicts are usually resolved by consensus
E)most resources are privately owned
Answer: A
Q2) 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
Q3) An economy's production possibilities frontier is fixed in the long run.
A)True
B)False
Answer: False
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Chapter 3: Supply and Demand
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184 Flashcards
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Sample Questions
Q1) Orange juice and cranberry juice are substitute goods.An increase in the price of orange juice results in a(n)
A)increase in the demand for orange juice
B)increase in the supply of cranberry juice
C)increase in the quantity demanded of orange juice
D)increase in the demand for cranberry juice
E)decrease in the quantity demanded of cranberry juice
Answer: D
Q2) The law of demand states that the quantity demanded of a good and
A)the price of a substitute are positively related
B)its price are inversely related
C)its price are positively related if it is an inferior good
D)the wealth of buyers are positively related
E)its price are inversely related if it is a normal good
Answer: B
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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58 Flashcards
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Sample Questions
Q1) An excise tax on cigarettes
A)will cause both the market price and quantity to increase
B)will cause both the market price and quantity to fall
C)will cause the market price to rise and the market quantity to fall
D)will cause the market price to fall and the market quantity to rise
E)None of the above.
Q2) A government-imposed price ceiling set below the market's equilibrium price will create an excess demand for a product.As a result of the excess demand,either the demand curve will tend to shift to the left or the supply curve will shift to the right-or both.
A)True
B)False
Q3) Federal subsidies to higher education have the effect of
A)increasing the number of people seeking higher education and lowering tuition
B)increasing the number of people seeking higher education and raising tuition
C)decreasing the number of people seeking higher education and lowering tuition
D)decreasing the number of people seeking higher education and raising tuition
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Chapter 5: Elasticity
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Sample Questions
Q1) The income elasticity of demand measures
A)the relative certainty of future income
B)how elastic supply is compared to demand
C)the percent change in quantity demanded relative to the percent change in income
D)the percent change in income relative to the percent change in quantity demanded
E)how much income will stretch to make expected payments
Q2) 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
Q3) In Figure 5-3,the price elasticity of demand between points T and U is the same as between points V and W.
A)True
B)False
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Chapter 6: Consumer Choice
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143 Flashcards
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Sample Questions
Q1) Which panel in Figure 6-2 shows the combined effects of an increase in the price of oranges and a decrease in the price of apples?
A)panel a
B)panel b
C)panel c
D)panel d
E)none of these
Q2) Suppose that a consumer used to be at point R on budget line AA' in Figure 6-5,and is now at point S on line BB'.Which of the following is true if the consumer enjoys both goods?
A)The utility level at point S is higher than at point R.
B)Good X is an inferior good.
C)The consumer's income fell.
D)The price of X rose.
E)The utility level at point S is lower than at point R.
Q3) Inferior goods typically obey the law of demand because the substitution effect tends to dominate the income effect.
A)True
B)False
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Page 8
Chapter 7: Production and Cost
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127 Flashcards
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Sample Questions
Q1) If marginal cost is greater than average total cost then
A)profits are increasing
B)economies of scale are becoming greater
C)average total cost remains constant
D)average total cost is increasing
E)average total cost is decreasing
Q2) A firm's minimum efficient scale is defined as
A)the output level at which LRATC first reaches its minimum level
B)any output level at which LRATC is minimized
C)the highest output level at which LRATC takes on its minimum value
D)the output level at which the firm charges its highest price
E)the lowest output level at which the firm can charge a positive price
Q3) Total cost is
A)fixed cost plus variable cost
B)irrelevant to decision making
C)marginal cost plus fixed cost
D)total product minus total input
E)the additional cost associated with producing an additional unit
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Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) A firm will continue to produce if total revenue is greater than total variable cost even if total revenue is less than fixed cost.
A)True
B)False
Q2) When there are implicit costs of production,
A)accounting and economic profit are equal
B)opportunity costs of production are zero
C)explicit costs of production are small
D)accounting profit will exceed economic profit
E)economic profit will exceed accounting profit
Q3) Figure 8-11 indicates the prices at which Lorine's Hair Salon is able to sell various quantities of manicures.If the salon initially provides 4 manicures per day and then increases to 5 manicures per day,the increased sales will generate a marginal revenue equal to
A)$7
B)$11
C)$48
D)$55
E)$65
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Page 10
Chapter 9: Perfect Competition
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250 Verified Questions
250 Flashcards
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Sample Questions
Q1) In a competitive constant-cost industry,an increase in consumer demand leads to
A)a decrease in output
B)high interest rates
C)an increase in output
D)inflation
E)a decrease in resource employment
Q2) Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run.Which of the following statements is correct?
A)The innovating firm will earn above-normal profit in the long run.
B)All the competing firms will be forced to exit the market in the long run.
C)This is an example of a decreasing cost industry.
D)Competing firms will need to adopt the new technology in the long run in order to survive.
E)Only new firms entering the industry with new-technology plants will be able to compete with the innovating firm.
Q3) In a perfectly competitive market,the market demand curve is horizontal.
A)True
B)False
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Page 11
Chapter 10: B:Perfect Competition
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Sample Questions
Q1) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q2) 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.
Q3) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q4) One of the defining characteristics of a perfectly competitive market is
A)both buyers and sellers are well informed about the market
B)a small number of buyers
C)high barriers to entry
D)a small number of buyers but a large number of sellers
E)buyers are better informed about the market than sellers
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Chapter 11: Monopolistic Competition and Oligopoly
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192 Flashcards
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Sample Questions
Q1) If market structures are ranked from the one in which firm(s)face the flattest demand curve to the one where they face the steepest,the correct order is
A)monopoly,monopolistic competition,perfect competition
B)monopolistic competition,perfect competition,monopoly
C)monopolistic competition,monopoly,perfect competition
D)perfect competition,monopoly,monopolistic competition
E)perfect competition,monopolistic competition,monopoly
Q2) Cheating on a collusive agreement is more likely when
A)a price floor is in effect
B)firms are located in the same state
C)it is easy to observe the other firms' prices
D)there is a small number of firms
E)market demand is unstable
Q3) Which concept is best illustrated by the "prisoner's dilemma"?
A)product standardization
B)interaction
C)profit maximization
D)marginal analysis
E)average total cost
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Page 13
Chapter 11: Monopoly
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214 Flashcards
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Sample Questions
Q1) Marginal revenue is
A)the change in total revenue obtained by selling an additional unit of output
B)average revenue per unit of output
C)the change in total revenue per unit of cost
D)total revenue divided by average revenue
E)average revenue divided by marginal cost
Q2) As a price setter,a monopoly
A)can establish any price it wants for each output level
B)can sell any output level it wants for each price
C)is constrained by the market demand curve
D)can use its pricing policy to shift the market demand curve
E)faces an upward-sloping demand curve for its output
Q3) A market that will naturally end up with just one seller is a(n)
A)evolutionary monopoly.
B)natural monopoly.
C)competitive monopoly.
D)entry barrier monopoly.
Q4) For a monopolist,marginal revenue is lower than price.
A)True
B)False
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Chapter 12: Labor Markets
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) An increase in tuition rates for astronomy students would
A)decrease the wage rate for astronomers
B)cause the demand curve for astronomers to shift to the right
C)cause the demand curve for astronomers to shift to the left
D)lead to future reductions in the labor supply of astronomers
E)lead to a rise in the marginal revenue product of astronomers
Q2) All of the following,except one,would shift the demand curve for pizza makers to the right.Which is the exception?
A)a decrease in the wage rate of pizza makers
B)an increase in the demand for pizza
C)a decrease in the price of pizza ovens
D)an increase in the number of pizza parlors
E)an improvement in the technology of making pizza
Q3) The demand for labor curve depicts
A)a relationship between the price of a good and the quantity of labor necessary to produce different amounts of that good
B)a relationship between wages and profits in a firm
C)how the wage rate changes when the price of the good produced by labor changes
D)a relationship between the real wage rate and the quantity of labor demanded
E)how much labor will be hired at different profit levels
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Chapter 13: B: Labor Markets
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86 Flashcards
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Sample Questions
Q1) Which of the following could help explain why professional football players have high salaries?
A)There is little social status attached to the occupation.
B)Their marginal revenue products are typically very low.
C)They face a high chance of having their careers cut short.
D)Many college football players want to become professional football players.
E)The labor market is perfectly competitive due to the players' union.
Q2) Which of the following would most likely cause a job to command a compensating wage differential?
A)There are barriers to the entry of new workers into the job market.
B)The job is more dangerous than most other occupations.
C)Wage rigidity prevents the wage rate from falling to the equilibrium level.
D)There has been an increase in the price of another input that is substitutable for labor.
E)The job market is dominated by one large firm.
Q3) In the short run,those who are hurt by the minimum wage are
A)some workers who lose their jobs
B)employers who have to pay more
C)consumers who have to pay more for goods
D)all of these
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Page 16
Chapter 14: Capital and Financial Markets
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Sample Questions
Q1) What is the value of a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 7 percent (0.07)per year.
A)$0
B)$5,083.49
C)$10,000
D)$95,632.41
E)$100,000.00
Q2) A firm's choice about how much physical capital to employ differs from its choice of how much labor to employ because
A)the firm has to pay for its capital
B)the productivity of labor depends on the firm's production function
C)firm must compare the marginal costs and benefits of acquiring more capital
D)firms do not own the labor they employ,but they frequently purchase capital outright
E)labor is productive but capital is not
Q3) The supply curve for a particular bond is vertical.
A)True
B)False
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17
Chapter 15: Economic Efficiency and the Competitive Ideal
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80 Verified Questions
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Sample Questions
Q1) Suppose that a perfectly competitive market is in equilibrium,and then market supply decreases.Which of the following would happen?
A)both producer and consumer surplus would increase
B)both producer and consumer surplus would decrease
C)producer surplus would decrease and consumer surplus would increase
D)producer surplus would increase and consumer surplus would decrease
E)producer and consumer surplus would remain unchanged
Q2) Economic efficiency
A)is guaranteed in perfectly competitive and monopolistically competitive markets
B)is achieved in any market where firms are free to maximize profits
C)leads to a fair distribution of income
D)leads to a fair distribution of goods
E)is most likely to be achieved in perfectly competitive markets
Q3) A price ceiling in a perfectly competitive market
A)leads to the same result as if the market were monopolized
B)results in a welfare loss
C)is effective only if it is set above the equilibrium price
D)may result from collusion among the firms selling in that market
E)may result from collusion among the consumers buying in that market
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Page 18
Chapter 16: Governments Role in Economic Efficiency
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Sample Questions
Q1) One way in which antitrust law fosters economic efficiency is by
A)defining property rights for firms
B)encouraging voluntary trade
C)prohibiting firms from colluding to raise prices
D)enforcing contracts between firms
E)encouraging mergers that increase market power
Q2) A monopolist that price discriminates
A)produces too much output to be efficient
B)produces too little output to be efficient
C)produces the efficient level of output
D)charges a price equal to its marginal cost
E)faces an upward sloping demand curve
Q3) An economic benefit of contracts is that they
A)protect property rights
B)encourage involuntary exchanges
C)reduce the number of possible Pareto improvements
D)encourage market concentration
E)encourage specialization
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Chapter 17: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Assume that India has a comparative advantage in producing a computer game.The United States has an absolute advantage in producing the same game.Mutually advantageous trade will have India producing and exporting the game while the United States will specialize in producing something else.
A)True
B)False
Q2) Objections to free trade
A)often come from those who are harmed by trade
B)make no sense because everyone benefits from trade
C)usually arise outside of the United States
D)are not economically rational
E)reflect a lack of understanding of the benefits of international trade
Q3) One reason why there may be a bias against free trade is that
A)those harmed by trade have a powerful incentive to lobby against it
B)people prefer domestically-produced goods to foreign-produced goods
C)people prefer foreign-produced goods to domestically-produced goods
D)the terms of trade are too low
E)the exchange rate is too high
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