Economics I Test Bank
Course Introduction
Economics I provides a foundational introduction to the principles of microeconomics and macroeconomics. The course explores core concepts such as supply and demand, market equilibrium, consumer and producer behavior, elasticity, and the role of government in the economy. Students will also gain a preliminary understanding of national income, inflation, unemployment, and fiscal and monetary policy. Emphasis is placed on helping students develop analytical skills to interpret real-world economic issues and trends, formulating informed perspectives on economic interactions at individual, firm, and national levels.
Recommended Textbook
Microeconomics Brief Edition 2nd Edition by Campbell R. McConnell
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13 Chapters
1963 Verified Questions
1963 Flashcards
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Which is a factor of production?
A) Money
B) Interest
C) Rent
D) Capital Answer: D
Q2) The four factors of production are land,labor,capital,and government services.
A)True
B)False
Answer: False
Q3) The overallocation of resources by society to a product means that the:
A) marginal benefit is greater than the marginal cost.
B) marginal cost is greater than the marginal benefit.
C) entrepreneurs are making too much profit in the economy.
D) workers are not being paid adequate wages and salaries.
Answer: B
Q4) Macroeconomics is concerned with the whole economy or its major sectors.
A)True
B)False
Answer: True
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Chapter 2: The Market System and the Circular Flow
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133 Flashcards
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Sample Questions
Q1) The market system is an economic system that:
A) produces more consumer goods than capital goods.
B) produces more capital goods than consumer goods.
C) gives private individuals and institutions the right to own resources used in production.
D) gives the government the right to tax individuals and corporations for the production of capital goods.
Answer: C
Q2) The maximization of profit and the minimization of losses is the primary factor affecting the economic decision making of:
A) workers.
B) consumers.
C) public officials.
D) entrepreneurs.
Answer: D
Q3) In the U.S.economy,rents are the smallest source of household income.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) A binding price floor means that:
A) inflation is severe in this particular market.
B) sellers are artificially restricting supply to raise price.
C) government is imposing a maximum legal price that is typically below the equilibrium price.
D) government is imposing a minimum legal price that is typically above the equilibrium price.
Answer: D
Q2) If effective,a government-set price ceiling will lower equilibrium price and quantity in a market.
A)True
B)False
Answer: False
Q3) The demand curve shows the relationship between:
A) money income and quantity demanded.
B) price and production costs.
C) price and quantity demanded.
D) consumer tastes and the quantity demanded.
Answer: C
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Page 5
Chapter 4: Elasticity of Demand and Supply
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Sample Questions
Q1) Product demand is more elastic the longer the time period under consideration.
A)True
B)False
Q2) A firm produces and sells two goods,A and B.Good A is known to have many close substitutes;good B makes up a significant portion of most families' budgets.A price increase for each good would most likely cause total revenues for good A to:
A) increase,and total revenues for good B to decrease.
B) increase,and total revenues for good B to increase.
C) decrease,and total revenues for good B to increase.
D) decrease,and total revenues for good B to decrease.
Q3) In the price range where demand is inelastic,a decrease in price will result in a decrease in total revenue.
A)True
B)False
Q4) Which products are most likely to be most price elastic?
A) Sugar and eggs
B) Clothing and auto repair
C) China and glassware
D) Electricity and housing
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Chapter 5: Market Failures: Public Goods and Externalities
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) When the competitive market system does not allocate resources to economically desirable goods,economists say what has occurred?
A) Market failure
B) Government failure
C) Externalities
D) Productive inefficiency
Q2) A market for pollution rights can be expected to:
A) eliminate all pollution.
B) produce a shortage of pollution.
C) encourage potential polluters to increase emissions.
D) provide potential polluters with a monetary incentive to reduce emissions.
Q3) Assume that there is no way to prevent someone from using an interstate highway,regardless of whether or not she helps pay for it.This characteristic is associated with:
A) rival goods.
B) complementary goods.
C) public goods.
D) capital goods.
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7
Chapter 6: Businesses and Their Costs
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) The ability of Intel to spread product development costs over a larger number of units of output arises from:
A) economies of scale.
B) diseconomies of scale.
C) minimum efficient scale.
D) constant returns to scale.
Q2) The basic difference between the short run and the long run is that:
A) all costs are fixed in the short run,but all costs are variable in the long run.
B) the law of diminishing returns applies in the long run but not in the short run.
C) at least one resource is fixed in the short run,while all resources are variable in the long run.
D) economies of scale may be present in the short run but not in the long run.
Q3) Which of the following represents a long-run adjustment?
A) A farmer uses an extra dose of fertilizer on his corn crop.
B) Unable to meet foreign competition,a U.S.watch manufacturer sells one of its branch plants.
C) A steel manufacturer cuts back on its purchases of coke and iron ore.
D) A supermarket hires four additional clerks.
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Chapter 7: Pure Competition
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) The demand curves for firms in a purely competitive industry are perfectly elastic.
A)True
B)False
Q2) Which statement is correct? The long-run supply curve for a purely competitive:
A) decreasing-cost industry is upsloping.
B) increasing-cost industry is perfectly elastic.
C) increasing-cost industry is upsloping.
D) increasing-cost industry is less elastic than the industry's short-run supply curve.
Q3) Which is necessarily true for a purely competitive firm in short-run equilibrium?
A) Marginal revenue less marginal cost equals zero.
B) Price less average total cost equals zero.
C) Total revenue less total cost equals zero.
D) Marginal revenue is zero.
Q4) The long-run supply curve for a competitive,decreasing-cost industry is upsloping.
A)True
B)False
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Chapter 8: Pure Monopoly
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150 Flashcards
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Sample Questions
Q1) Which antitrust act provided that parties could sue for and,if successful,collect triple damages from monopolistic firms?
A) Wheeler-Lea Act
B) Clayton Act
C) Sherman Act
D) Celler-Kefauver Act
Q2) Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?
A) If product demand was price-elastic
B) If product demand was price-inelastic
C) If marginal revenue was greater than marginal cost
D) If marginal cost was greater than marginal revenue
Q3) A nondiscriminating monopolist will find that marginal revenue:
A) exceeds average revenue or price.
B) is identical to price.
C) is sometimes greater and sometimes less than price.
D) is less than average revenue or price.
Q4) A purely competitive firm is a price maker,but a monopolist is a price taker.
A)True
B)False
Page 10
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Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The principle underlying the kinked-demand curve model of oligopoly is that the demand curve facing one firm is more elastic when other firms in the industry:
A) match the firm's price changes.
B) hold price constant when the firm changes its prices.
C) hold quantities constant when the firm changes its prices.
D) change prices in the opposite direction when the firm changes its prices.
Q2) A monopolistically competitive firm is operating at a short-run level of output where price is $21,average total cost is $15,marginal cost is $13,and marginal revenue is $13.In the short run this firm should:
A) reduce product price.
B) increase the level of output.
C) decrease the level of output.
D) make no change in the level of output.
Q3) Which would be most characteristic of oligopoly?
A) Easy entry into the industry
B) Many large producers
C) Product standardization
D) Mutual interdependence
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11
Chapter 10: Wage Determination
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164 Flashcards
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Sample Questions
Q1) What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 12 percent?
A) 0.42
B) 1.60
C) 2.40
D) 6.00
Elasticity of resource demand is the absolute value of the percentage change in quantity of workers divided by the percentage change in resource price.In this case,elasticity is |-0.12/0.05| = 2.40.
Q2) Other things being equal,the demand for a factor of production will be less elastic if the demand for the final product it produces is:
A) elastic.
B) inelastic.
C) unitary elastic.
D) perfectly elastic.
Q3) The carpenters' union is an industrial union.
A)True
B)False
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Chapter 11: Income Inequality and Poverty
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) The eligibility basis for food stamps (SNAP)is:
A) age.
B) illness.
C) income.
D) disability.
Q2) The poverty rate increased dramatically during the 1960s but has been reduced significantly since then.
A)True
B)False
Q3) In the trade-off between equality and economic efficiency,an increase in equality will lead to a decrease in efficiency.
A)True
B)False
Q4) Public assistance programs provide benefits for those who are unable to earn income because of permanent disabilities,or have no or very low income and also have dependent children.
A)True
B)False
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Page 13
Chapter 12: Public Finance: Expenditures and Taxes
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) (Applying the Analysis)Payout rates for state lotteries:
A) are considerably lower than payout rates from casinos. B) are considerably higher than payout rates from casinos. C) are roughly equal to the payout rates from casinos.
D) cannot be compared with casino payout rates because states do not typically disclose their payout rates.
Q2) The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product,the supply equation is P = 3 + .4Q.Government's revenue from this tax is:
A) $750.
B) $1500.
C) $875.
D) $800.
Q3) About two-thirds of all federal spending is for national defense.
A)True B)False
Q4) The marginal tax rate is the tax rate that applies to additional income.
A)True B)False
Page 14
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Chapter 13: International Trade and Exchange Rates
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Nation Statum can produce either 800 units of chemicals or 1600 units of clothing.Nation Timin can produce either 200 units of chemicals or 800 units of clothing.
A) Nation Statum has a comparative advantage in producing clothing.
B) Nation Timin has a comparative advantage in producing chemicals.
C) Nation Statum has a comparative advantage in producing chemicals.
D) Nation Timin is the high-cost producer of clothing.
Statum has the comparative advantage in producing chemicals because its opportunity cost is 2,while the opportunity cost in Timin is 4.The country with the lower opportunity cost has the comparative advantage.
Q2) The terms of trade will favor a larger nation over a smaller nation.
A)True B)False
Q3) Net exports in the United States average about 1 to 2 percent of GDP. A)True
B)False
Q4) Import quotas produce the same amount of revenue for government as protective tariffs.
A)True
B)False
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