Fundamentals of Economics Solved Exam Questions
Course Introduction
Fundamentals of Economics introduces students to the core principles and concepts that underpin the study of economics. The course covers both microeconomics and macroeconomics, examining topics such as supply and demand, market structures, consumer and producer behavior, and the role of government in the economy. Students will also explore concepts like economic growth, inflation, unemployment, and international trade. Through real-world examples and analytical tools, the course equips students with a foundational understanding of how economic decisions are made at both individual and societal levels.
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) Macroeconomics involves the study of the decision-making of individual firms or individuals.
A)True
B)False
Answer: False
Q2) Because resources are limited
A) only the very wealthy can get everything they want.
B) firms will be forced out of business.
C) the availability of goods will be limited but the availability of services will not.
D) people must make choices.
Answer: D
Q3) Macroeconomics is best described as the study of
A) very large issues.
B) the choices made by individual households, firms, and governments.
C) the nation's economy as a whole.
D) the relationship between inflation and wage inequality.
Answer: C
Q4) What is meant by the term "marginal change"?
Answer: A marginal change is a small, one unit change in value.
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) The face value of money or income is called its ________ value.
A) real
B) marginal
C) nominal
D) external
Answer: C
Q2) You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)?
Answer: It is likely that as you add workers, you will get incrementally less output out of each additional worker. Holding constant your materials, such as trucks, lawnmowers, etc., you'll almost surely be able to maintain more yards per day. But as you hire more workers, there might be waits for use of the tools, or for transportation to the next job. This is the prediction of the principle of diminishing returns.
Q3) If your salary increases at a lower rate than prices are increasing, what would happen to your buying power?
Answer: Your money would have less buying power.
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) A decrease in demand will cause the equilibrium price and quantity of a good to fall, ceteris paribus.
A)True
B)False
Answer: True
Q2) Suppose that consumers expect that the price of a product will increase in the future. The result is that
A) the current demand for the product increases.
B) the current demand for the product decreases.
C) the current supply of the product increases.
D) the current supply of the product decreases.
Answer: A
Q3) If the equilibrium price of a good increases and the equilibrium quantity of the good decreases, we can conclude that
A) demand increased.
B) demand decreased.
C) supply increased.
D) supply decreased.
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) A bumper crop would be bad news for farmers if their crop has an inelastic demand because their total revenue would
A) rise along with price.
B) rise as price falls.
C) fall as price rises.
D) fall along with price.
Q2) The cross-price elasticity of demand between spaghetti and spaghetti sauce is most likely
A) positive.
B) negative.
C) zero.
D) More information is needed to determine.
Q3) On a linear demand curve, demand is ________ at large quantities than it is at the middle of the demand curve.
A) more elastic
B) less elastic
C) equally elastic
D) impossible to tell
Q4) Can you think of an example of a good whose demand could be perfectly inelastic?
Q5) What is total revenue for a firm?
6
To view all questions and flashcards with answers, click on the resource link above.
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) Assuming that labor is the only variable input with a fixed production facility, explain the relationship between the marginal product of labor and the marginal production cost.
Q2) In the short run
A) firms have the ability to enter or exit the industry.
B) firms are able to alter some, but not all, of their factors of production.
C) firms are unable to adjust their output choices.
D) None of the above are correct.
Q3) Which of the following is a short-run adjustment?
A) Three new firms enter the computer chip industry.
B) A firm hires six new workers.
C) The number of farms in Kansas increases by 10%.
D) A firm opens two new plants.
Q4) Accountants include ________ costs as part of a firm's costs, while economists include ________ costs.
A) explicit; no explicit
B) implicit; no implicit
C) explicit and implicit; implicit
D) explicit; explicit and implicit
Q5) Explain the difference between the short run and the long run.
Page 7
To view all questions and flashcards with answers, click on the resource link above.
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) One reason for increasing costs industries is that as an industry grows, it drives up the prices of inputs.
A)True
B)False
Q2) Toby sells wheat in a perfectly competitive market. The demand curve for Toby's wheat is
A) horizontal.
B) vertical.
C) downward sloping.
D) U-shaped.
Q3) What characterizes a constant cost industry and what causes it to be a constant cost industry?
Q4) If the demand for a product in an increasing cost perfectly competitive industry decreases, we would expect that price in the long run would ________ and the number of firms in the market would ________.
A) decrease; decrease
B) increase; increase
C) decrease; increase
D) increase; decrease
To view all questions and flashcards with answers, click on the resource link above. Page 8
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) A firm switching from a single price to a price discrimination scheme will ________ the price for the group of consumers with a relatively elastic demand and ________ the price for the group of consumers with a relatively inelastic demand.
A) decrease; increase
B) decrease; decrease
C) increase; increase
D) increase; decrease
Q2) If a monopolist charges the same price for all of the units of the good that it sells, then beyond the first unit sold
A) P = MR because the firm maximizes profit.
B) P = MR because the monopolist holds price constant.
C) P < MR because the monopolist must decrease price on all units in order to sell another unit.
D) P > MR because the monopolist must decrease price on all units in order to sell another unit.
Q3) All patent protected products would not have been developed without patent protection.
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) In Washington, D.C., there are many coffee shops, each offering nearly identical coffee but each shop is located in a different place around the city. It is likely a coffee shop in Washington, D.C., operates in a
A) perfectly competitive market.
B) monopolistically competitive market.
C) monopoly market.
D) oligopoly market.
Q2) Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the left due to a recession
A) the number of firms in the market decreases in the short run.
B) some firms may earn negative profits in the short run.
C) firms' average costs of production decreases as they decrease output levels in the short run.
D) none of the above.
Q3) How might other firms in an oligopoly interpret your drop in price?
Q4) Give five examples of industries that are monopolistically competitive.
Q5) What entices a second firm to enter a market that was previously a single price monopoly?
Q6) What are the effects on a market when there is entry?
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 Table 9.2, Market 3 would be in equilibrium if buyers believed plums account for
A) 30% of the market.
B) 40% of the market.
C) 50% of the market.
D) 60% of the market.
Q2) Which of the following is the least likely example of asymmetric information?
A) an insurance company and a client who just obtained a driver license
B) a seller of used cars and a prospective customer
C) a seller of fresh fruit and a buyer
D) a retailer of music CDs and a buyer
Q3) Table 9.2 represents 3 markets for used guitars. Which of the markets in Table 9.2 are NOT in equilibrium?
A) 1 only
B) 2 only
C) 3 only
D) 2 and 3
Q4) What is moral hazard?
Q5) Explain intuitively why the market for a nonexcludable good fails to provide an efficient quantity.
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 is the input-substitution effect?
Q2) Figure 10.1 depicts a firm's marginal revenue product curve. If the prevailing hourly wage decreases
A) the marginal revenue product curve shifts upward.
B) the marginal revenue product curve shifts downward.
C) the marginal revenue product curve does not shift but there is a movement upward along the curve.
D) the marginal revenue product curve does not shift but there is a movement downward along the curve.
Q3) Refer to Table 10.1. If the price of output is $2 per unit, the marginal revenue product of the fourth unit of labor is
A) $50.
B) $52.50.
C) $100.
D) $105.
Q4) The wage for a particular occupation will be relatively low if supply is small relative to demand.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
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) When real GDP falls for two consecutive quarters the economy is in a
A) depression.
B) recession.
C) peak.
D) trough.
Q2) Macroeconomics is the study of individual economic markets.
A)True
B)False
Q3) Which of the following is NOT a macroeconomic statement?
A) Aggregate worker productivity decreased by three percent in 2016.
B) The price of cell phones decreased by 18 percent last year.
C) Gross domestic product in Peru increased 4 percent from 2015 to 2016.
D) The U.S. inflation rate was two percent in 2016.
Q4) When considering imports and exports, economists include the ________ as a component of the GDP.
A) total imports
B) total exports
C) net exports
D) gross exports
Q5) List and describe the four components of GDP.
Page 13
To view all questions and flashcards with answers, click on the resource link above.
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) Which one of the following statements is NOT correct?
A) The natural rate of unemployment is estimated to be between 5 percent and 6.5 percent in the U.S.
B) The term "full employment" means that 100 percent of the labor force is employed.
C) The line between frictional and structural unemployment is sometimes hard to draw.
D) Unemployment can occur even when an economy is growing.
Q2) Seasonally adjusted unemployment rates
A) adjust for the predictable summer increase in the unemployment rate for teenagers.
B) adjust for the predictable summer decrease in the unemployment rate for teenagers.
C) are the same as the unadjusted rates in periods of bad weather.
D) are not calculated for the U.S. economy.
Q3) The real-nominal principle can be stated as
A) production generates income.
B) only final goods and services should be counted in GDP.
C) what matters to people is the purchasing power of money or income.
D) only the manufacture of real goods is production.
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) According to this Application, economist Daron Acemoglu categorizes which of the following as authoritarian institutions?
A) democracies, monarchies, and dictatorships
B) constitutionally limited monarchies and democracies
C) monarchies, dictatorships, and tightly controlled oligarchies
D) tightly controlled oligarchies, democracies, and constitutionally limited monarchies
Q2) The idea that investment in comprehensive education in developing countries leads to permanent increases in the rate of technological progress is an example of A) increasing economic inequality.
B) capital deepening.
C) new growth theory.
D) a trade-off between human capital and technology.
Q3) In a simple economy without government or the foreign sector, saving must equal investment because output is divided into consumption and investment, and income is either consumed or saved.
A)True
B)False
Q4) In what two ways can education contribute to economic growth?
To view all questions and flashcards with answers, click on the resource link above.
15
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) The long-run aggregate supply curve is
A) downward sloping.
B) upward sloping.
C) a vertical line at potential output.
D) a horizontal line at the current price level.
Q2) What are some reasons why coordination of economic affairs through the price system may not work perfectly?
Q3) Refer to Figure 14.2. A movement from point d to point b could be caused by a(n)
A) increase in government spending.
B) increase in the price of oil.
C) increase in taxes.
D) decrease in short-run aggregate supply.
Q4) One reason the aggregate demand curve is downward sloping is because of the A) interest rate effect.
B) welfare effect.
C) price effect.
D) tariff effect.
Q5) Explain how the interest rate effect can increase aggregate demand.
Q6) What are the two types of prices in an economy?
Q7) Define the "consumption function."
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) Why are transfer payments not included in GDP?
A) The amount is too low to have any effect.
B) Unemployment varies and can't be tracked.
C) They do not represent payments to those who contributed resources to currently produced goods or services.
D) Money companies receive from the government isn't reported.
Q2) An increased federal budget deficit resulting from a recession can actually help stabilize an economy, because corporate profits tend to fall in a recession which, in turn, results in ________ corporate taxes and ________.
A) higher; more tax revenue for the government
B) higher; larger profits for businesses
C) lower; fewer spending cuts for businesses
D) lower; increases in the price level
Q3) When the government conducts activist fiscal policy, what type of spending does it usually use?
A) entitlement and mandatory spending
B) net interest spending
C) discretionary spending
D) strategic spending
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) In practice, the Board of Governors and the chairperson of the Federal Reserve have the real control over monetary policy.
A)True
B)False
Q2) According to this Application, a bank will be required to develop an analytical model to determine what would happen if there was a ________ change in economic conditions, such as a large ________ in unemployment.
A) positive; increase
B) positive; decrease
C) negative; increase
D) negative; decrease
Q3) Members of the Federal Reserve Board of Governors
A) are appointed to 4 year terms.
B) are confirmed by the House of Representatives.
C) frequently need to deal with political pressures.
D) are members of the Federal Open Market Committee.
Q4) U.S. banks are required by law to keep most of their assets as reserves.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
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) A decrease in the discount rate will
A) decrease the money supply.
B) not affect the money supply.
C) increase the money supply.
D) have an unclear effect on the money supply.
Q2) An open market sale of bonds by the Federal Reserve will lead to an increase of reserves in banks.
A)True
B)False
Q3) The Federal Reserve influences the level of interest rates in the short run by changing the
A) demand for money through open market operations.
B) demand for money through changes in reserve requirements.
C) supply of money through open market operations.
D) supply of money through changes in stock market operations.
Q4) Both increases in the price level and increases in real GDP will decrease the demand for money.
A)True B)False
Q5) Explain the three different types of money demand.
Page 19
To view all questions and flashcards with answers, click on the resource link above.
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 18.3, the effect of a decrease in U.S. interest rates is represented by a movement from point
A) d to a.
B) c to b.
C) c to d.
D) b to c.
Q2) If a country's currency depreciates, the country will experience a ________ in exports and a ________ in imports.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
Q3) Refer to Figure 18.1. With an import ban, how many gloves are produced domestically in Duckland?
A) 100
B) 80
C) 60
D) 0
Q4) What are GATT and the WTO?
To view all questions and flashcards with answers, click on the resource link above. Page 20