Fundamentals of Economics Practice Questions
Course Introduction
Fundamentals of Economics introduces students to the basic principles and concepts that underpin economic theory and practice. The course covers essential topics such as supply and demand, market equilibrium, elasticity, and the roles of consumers and producers. It examines how economies allocate resources, how prices are determined, and the impact of government intervention on markets. Students will also explore macroeconomic concepts including gross domestic product, inflation, unemployment, and fiscal and monetary policy. Through real-world examples and foundational analysis, the course provides a comprehensive understanding of how economic forces shape individual decisions and societal outcomes.
Recommended Textbook
Survey of Economics Principles Applications and Tools 7th Edition by Arthur OSullivan
Available Study Resources on Quizplus
18 Chapters
3640 Verified Questions
3640 Flashcards
Source URL: https://quizplus.com/study-set/2404 Page 2
Chapter 1: Introduction: What Is Economics
Available Study Resources on Quizplus for this Chatper
118 Verified Questions
118 Flashcards
Source URL: https://quizplus.com/quiz/47799
Sample Questions
Q1) One example of a microeconomic question is, "How will prices in the clothing industry change if the government bans imports from China?"
A)True
B)False
Answer: True
Q2) To think at the margin means to consider
A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.
Answer: B
Q3) An economic model is a detailed version of an economic environment.
A)True
B)False
Answer: False
Q4) One of the key economic questions is "where should products be produced?"
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Key Principles of Economics
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/47800
Sample Questions
Q1) Refer to the table above. The farmer began to experience diminishing returns after applying how many bags of fertilizer?
A) 1
B) 2
C) 3
D) 4
Answer: A
Q2) If real salaries decrease but nominal salaries do not, this means that
A) the purchasing power of money has increased.
B) prices have not changed.
C) prices have risen.
D) prices have fallen.
Answer: C
Q3) Diminishing returns occurs because
A) not enough people have jobs.
B) one of the inputs in the production process is fixed.
C) consumers don't buy enough of the products produced.
D) two people have not satisfied their self-interests.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
Available Study Resources on Quizplus for this Chatper
172 Verified Questions
172 Flashcards
Source URL: https://quizplus.com/quiz/47801
Sample Questions
Q1) Figure 3.3 illustrates the demand for tacos. A decrease in the demand for tacos is represented by the movement from
A) point a to point b.
B) point c to point b.
C) D to D .
D) D to D .
Answer: C
Q2) Draw a graph to illustrate the effect of an increase in demand on the price and quantity in a market.
Answer: 11ea6452_c5a7_41ae_9252_03bf6fc80a77_TB6799_00 As illustrated in the graph, an increase in demand causes the price and quantity sold of the product to increase.
Q3) According to this Application, between 2006 and 2009, Chinese demand for pecans increased by roughly ________ percent.
A) 79
B) 90
C) 456
D) 877
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Elasticity: A Measure of Responsiveness
Available Study Resources on Quizplus for this Chatper
267 Verified Questions
267 Flashcards
Source URL: https://quizplus.com/quiz/47802
Sample Questions
Q1) In the case of perfectly inelastic demand, the demand curve is
A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.
Q2) If the price elasticity of demand is 1.3, demand is
A) upward sloping.
B) inelastic.
C) unit elastic.
D) elastic.
Q3) Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to know what will happen to their revenue if they increase the price of each donut from $0.80 to $1. What concept do they need to apply to find out their expected revenue?
A) price elasticity of supply
B) price elasticity of demand
C) cross elasticity of demand
D) income elasticity of demand
Q4) Why do you think that the demand for coffee is less elastic than the demand for restaurant meals?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Production Technology and Cost
Available Study Resources on Quizplus for this Chatper
211 Verified Questions
211 Flashcards
Source URL: https://quizplus.com/quiz/47803
Sample Questions
Q1) In the short run, the marginal cost of the first unit of output is $20, the marginal cost of producing the second unit of output is $16, and the marginal cost of producing the third unit of output is $12. The firm's total variable cost of producing three units of output is
A) $12.
B) $16.
C) $20.
D) $48.
Q2) When marginal costs are increasing
A) a firm is experiencing diminishing returns.
B) average cost is always increasing.
C) average cost is always decreasing.
D) marginal costs are always greater than average costs.
Q3) Figure 5.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 100, the average fixed cost is
A) $30.
B) $40.
C) $50.
D) $60.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Perfect Competition
Available Study Resources on Quizplus for this Chatper
218 Verified Questions
218 Flashcards
Source URL: https://quizplus.com/quiz/47804
Sample Questions
Q1) Explain why a firm's shut-down decision does not incorporate the fixed costs of the production facility.
Q2) If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is
A) earning a positive economic profit.
B) earning a zero economic profit.
C) suffering an economic loss.
D) all of the above
Q3) What is marginal revenue?
Q4) In which of the following market structures do you find no barriers to entry?
A) monopoly
B) perfect competition
C) monopolistic competition
D) monopolistic competition and perfect competition
Q5) A firm should shut down in the short run if it s revenue is smaller than its variable costs.
A)True
B)False
Q6) What is a long-run supply curve?
Page 8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Monopoly and Price Discrimination
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/47805
Sample Questions
Q1) Firms who engage in price discrimination usually make the same amount of money as they would if they charged one price.
A)True
B)False
Q2) When a firm engages in price discrimination it sets marginal revenue equal to marginal cost for each separate set of consumers.
A)True
B)False
Q3) Figure 7.4 shows prices, demands, and cost data for the only restaurant in a small town. Compared to the profit under the single price policy, how much additional profit does the restaurant earn under the senior discount policy of a $7 senior price and a $10 non-senior price?
A) $920
B) $580
C) $300
D) $280
Q4) A monopolist picks the quantity of output at which price equals marginal cost.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter
8:
Market Entry, Monopolistic Competition, and Oligopoly
Available Study Resources on Quizplus for this Chatper
464 Verified Questions
464 Flashcards
Source URL: https://quizplus.com/quiz/47806
Sample Questions
Q1) Recall the Application. In 2013, the Federal Trade Commission (FTC) ________ the merger of Office Depot and Office Max by concluding that it would not ________ competition in the retail office-supply market.
A) approved; decrease
B) approved; increase
C) denied; decrease
D) denied; increase
Q2) A firm charges a price so low that it prevents other firms from entering the market. This is an example of
A) a tying contract.
B) limit pricing.
C) price discrimination.
D) predatory pricing.
Q3) After the U.S. government deregulated the trucking industry
A) profits rose.
B) freight prices rose.
C) freight prices fell.
D) the number of trucking companies decreased.
Q4) When was the Clayton Act passed, and what were the main practices that it outlawed?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Imperfect Information, External Benefits, and
External Costs
Available Study Resources on Quizplus for this Chatper
416 Verified Questions
416 Flashcards
Source URL: https://quizplus.com/quiz/47807
Sample Questions
Q1) In the market for pollution permits, the demand for permits comes from
A) firms that would prefer to use permits rather than incur abatement costs.
B) the Chicago Board of Trade.
C) firms with low abatement costs.
D) the Environmental Protection Agency.
Q2) What is moral hazard?
Q3) The pollution tax in Figure 9.10
A) reduces equilibrium output.
B) reduces equilibrium price.
C) increases supply.
D) all of the above
Q4) If a good is available only to those who pay for it, the good is A) excludable but not necessarily rival.
B) excludable and rival.
C) rival but not necessarily excludable.
D) nonrival and nonexcludable.
Q5) If you can consume a good without having to pay for it, the good must be a public good.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Labor Market and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
241 Verified Questions
241 Flashcards
Source URL: https://quizplus.com/quiz/47808
Sample Questions
Q1) What does Temporary Aid to Needy Families (TANF) require of recipients?
Q2) Which of the following explains the impact of technological advances on the wage gap between less skilled workers and highly skilled workers?
A) Advances in technology have increased the demand for higher education degrees and widened the wage gap between the two groups.
B) Advances in technology have increased the productivity of less skilled workers and thus narrowed the wage gap between the two groups.
C) Advances in technology have increased the demand for less skilled workers and highly skilled workers alike, and thus the wage gap between the two groups remains unchanged.
D) none of the above
Q3) Refer to Table 10.1. The marginal product of the fourth unit of labor is A) 40.
B) 50.
C) 52.5.
D) 210.
Q4) Why is the demand for labor downward sloping in the short run?
Q5) What is the input-substitution effect?
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Measuring a Nations Production and Income
Available Study Resources on Quizplus for this Chatper
152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/47809
Sample Questions
Q1) The period of time in which the level of output moves from a trough to a peak is called a
A) recovery or expansion.
B) depression.
C) contraction or recession.
D) plateau.
Q2) According to this Application, why is the value of Wal-Mart's 2014 sales NOT an accurate measurement of its actual sales impact on the U.S. economy?
A) The sales figure did not account for chain-weighted inflation measurements.
B) The sales figure includes the value of purchases from other firms.
C) The sales figure did not take into account the recession of 2008.
D) The sales figure was in nominal, not real, dollars.
Q3) From 1948 to 2010, the United States has experienced only 4 recessions.
A)True
B)False
Q4) In the study of macroeconomics, production leads to income, and income leads to production in a continuing cycle.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/47810
Sample Questions
Q1) Suppose that the CPI in Egypt was 111 in 2015 and 122 in 2016. The inflation rate between those two years was approximately
A) 4.8 percent.
B) 5.5 percent.
C) 9.9 percent.
D) 11 percent.
Q2) Name the three types of unemployment.
Q3) Auto workers laid off from Hot-Rod Autoworks as the result of a recession are considered
A) structurally unemployed.
B) cyclically unemployed.
C) frictionally unemployed.
D) seasonally unemployed.
Q4) In periods when GDP fails to grow at its normal rate, the actual unemployment rate will be ________ than the natural rate of unemployment.
A) lower
B) higher
C) the same
D) falling faster
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Why Do Economies Grow
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/47811
Sample Questions
Q1) The point of diminishing returns means that output will decrease at an increasing rate.
A)True
B)False
Q2) If the government ________ taxes to pay for spending on infrastructure, the result will most likely be a(n) ________ in capital deepening.
A) increases; increase B) decreases; increase C) increases; decrease D) eliminates; elimination
Q3) Gross investment minus net investment is equal to A) depreciation.
B) nominal investment.
C) real investment.
D) consumption.
Q4) Explain the connection between property rights and economic growth.
Q5) Technological progress can be another mechanism which affects economic growth. A)True B)False
Page 15
Q6) Explain the impact of capital deepening on workers.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/47812
Sample Questions
Q1) What are the two types of prices in an economy?
Q2) Assuming a long-run aggregate supply curve, a decrease in consumer confidence results in ________ in output and ________ in price level.
A) a decrease; no change
B) no change; a decrease
C) a decrease; a decrease
D) an increase; no change
Q3) Decreases in taxes shift the aggregate demand curve to the right.
A)True
B)False
Q4) As the price level ________, the purchasing power of money ________.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; stays the same
Q5) What are some reasons why coordination of economic affairs through the price system may not work perfectly?
Q6) What are the four components of aggregate demand?
Q7) Explain how the wealth effect can affect aggregate demand.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/47813
Sample Questions
Q1) Name two actions that a government could take if it wants to implement an expansionary fiscal policy.
Q2) The Clinton administration inherited a budget deficit from its predecessor. President Clinton instituted major tax increases that A) increased the budget deficit during his entire term. B) brought the budget into balance and eventually into a surplus. C) reduced the budget deficit but increased the federal debt. D) reduced the size of the deficit but could not eliminate it.
Q3) What is meant by the term "outside lags"?
Q4) The federal budget has three components. Name them.
Q5) Discretionary funds are typically used by the Executive Branch and Congress for activist fiscal policies.
A)True
B)False
Q6) Using expansionary policies to combat a recession would A) increase a budget deficit.
B) increase a budget surplus.
C) decrease discretionary spending. D) increase federal revenue.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Money and the Banking System
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/47814
Sample Questions
Q1) Traveler's checks are included in
A) M1 only.
B) M2 only.
C) both M1 and M2.
D) neither M1 nor M2.
Q2) What are the four components of M1?
Q3) M1
A) is the sum of currency plus traveler's checks.
B) is the narrowest definition of the money supply.
C) includes small time deposits.
D) includes credit cards.
Q4) Which of the following is NOT included in M1 or M2?
A) checking account balances
B) currency in circulation outside of commercial banks
C) traveler's checks
D) credit card balances
Q5) Headquartered in Washington, D.C., the Board of Governors of the Federal Reserve determines monetary policies and strategies based on the state of the economy.
A)True
B)False
18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Monetary Policy and Inflation
Available Study Resources on Quizplus for this Chatper
141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/47815
Sample Questions
Q1) What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?
A) print more money
B) buy back government bonds on the open market
C) sell more government bonds
D) encourage the stock market
Q2) The supply of money is determined by the Federal Reserve and is dependent on the demand for money.
A)True
B)False
Q3) Explain why real and nominal rates of interest will differ when the public expects inflation.
Q4) When the expected rate of inflation is added to the real interest rate, the result is called the
A) preferred rate.
B) nominal interest rate.
C) adjustment rate.
D) differential rate.
Q5) How would the Fed's changing the discount rate affect the money supply?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: International Trade and Finance
Available Study Resources on Quizplus for this Chatper
210 Verified Questions
210 Flashcards
Source URL: https://quizplus.com/quiz/47816
Sample Questions
Q1) Referring to Figure 18.2, U.S. goods will become more expensive in Mexico if the exchange rate goes from ________ to ________ pesos to the dollar.
A) 12; 11
B) 12; 13
C) 13; 11
D) 14; 10
Q2) If the U.S. government enters the foreign exchange market and sells dollars to maintain a specific exchange rate with the yen, the dollar will ________ and the yen will ________.
A) depreciate; depreciate
B) depreciate; appreciate
C) appreciate; depreciate
D) appreciate; appreciate
Q3) An individual or country that has a comparative advantage in the production of one good
A) must have an absolute advantage in the good's production.
B) must not have an absolute advantage in the good's production.
C) may or may not have an absolute advantage in the good's production.
D) must not have an absolute advantage in the production of the other good.
To view all questions and flashcards with answers, click on the resource link above.
Page 20