Introduction to Economics Exam Practice Tests
Course Introduction
Introduction to Economics offers a foundational understanding of economic principles and concepts that underpin the functioning of modern economies. The course explores the basic ideas of supply and demand, market structures, consumer behavior, production, and the role of government in the economy. Students will examine how resources are allocated, how markets operate efficiently or fail, and the impact of various policies on economic outcomes. Emphasis is placed on both microeconomic and macroeconomic perspectives, providing a comprehensive overview of how individual choices and institutional decisions shape economic systems locally and globally.
Recommended Textbook
Fundamentals of Economics 6th Edition by William Boyes
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18 Chapters
2262 Verified Questions
2262 Flashcards
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Page 2
Chapter 1: Economics and the World Around You
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Suppose that points A and B in Figure 1.1 represent pre-trade positions. If each country specializes according to comparative advantage, what are the potential gains to trade?
A) 6 cars
B) 6 cars and 6 units of food
C) 6 units of food
D) 4 units of food
E) 12 cars
Answer: A
Q2) According to Scenario 1.1, the opportunity cost for Brian to produce 1 softball is
A) 4 baseballs.
B) less than the opportunity cost for Alan to produce 1 softball.
C) 1/4 baseball.
D) 2 1/2 baseballs.
E) 2/5 baseball.
Answer: A
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Chapter 2: Markets and the Market Process
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Which of the following examples deals with price, with the allocation of goods and services, and also with demand and supply?
A) Lodging in Phoenix may cost twice as much in the winter as in the summer.
B) Lodging in Colorado may cost much more in the winter than in the summer.
C) People will pay scalpers many times the face value of a ticket to a popular show.
D) Customers in a crowded restaurant may slip the headwaiter some money in order to be seated more quickly.
E) All of these
Answer: E
Q2) Consider the market described by the schedule in Table 2.4. Which of the following is true?
A) The law of demand is violated.
B) The law of supply is violated.
C) There is no equilibrium.
D) At $5 per unit, people will purchase 400 units.
E) At $2 per unit, people will purchase 1000 units.
Answer: D
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Chapter 3: Applications of Demand and Supply
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Sample Questions
Q1) To earn more than what the free competitive market would allow, a business has to acquire
A) a permit from government
B) some way to limit the competition they face
C) and update daily, its Facebook and Twitter accounts
D) backing of politicians
E) a factory in a developing country.
Answer: B
Q2) In Figure 3.5, if the change in demand occurred before the change in supply, then starting from the initial equilibrium,
A) firms would experience a fall in profits and then a gradual increase in profits after the change in supply occurred.
B) there would be an immediate shortage until the price reached P<sub>2</sub>.
C) price would change from P<sub>1</sub> to P<sub>2</sub> after the change in demand and would change again from P<sub>3</sub> to P<sub>4</sub> after the change in supply.
D) there would be a surplus until the price reached P<sub>4</sub>.
E) none of these would occur.
Answer: B
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Page 5
Chapter 4: The Firm and the Consumer
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122 Flashcards
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Sample Questions
Q1) Which of the following statements best describes how a business determines whether to increase or decrease the price of the product it sells in order to increase revenues?
A) If the price elasticity of demand is greater than 1, total revenue and price changes move in opposite directions.
B) If the price elasticity of demand is greater than 1, total revenue and price changes move in the same direction.
C) If the price elasticity of demand is less than 1, total revenue and price changes move in opposite directions.
D) The price elasticity of demand has little to do with total revenue, and a firm must focus solely on its cost structure to increase revenues.
E) It will depend on how many firms are competing in the market.
Q2) Elasticity is a measure of
A) how quickly a particular market reaches equilibrium.
B) the change in income associated with increased education.
C) the responsiveness of one variable to a change in another variable.
D) the effect of an increase in the number of consumers in a particular market.
E) how quickly expansion can take place in an economy.
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Chapter 5: Costs and Profit Maximization
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119 Flashcards
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Sample Questions
Q1) Assume that marginal revenue equals rising marginal cost at 100 units of output. At this output level, a profit-maximizing firm's total fixed cost is $600 and its total variable cost is $400. If the price of the product is $8 per unit and the firm produces the profit-maximizing level of output, the firm will earn an economic profit of A) -$200.
B) zero.
C) $100.
D) $200.
E) $800.
Q2) When a firm's marginal revenue exceeds its marginal cost, it is producing
A) too much, and should cut back on production to maximize profit/minimize losses.
B) too little, and should increase production to maximize profit/minimize losses.
C) the right amount, as revenue exceeds cost.
D) too much and its machines and employees are overworked.
E) Not enough information is provided to determine what the firm should do.
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Chapter 6: Competition
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152 Flashcards
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Sample Questions
Q1) Consumers are willing to pay a higher price for a brand-name product as opposed to a generic product because
A) a brand name provides a signal about a product's quality and reliability.
B) they are willing to pay more for the privilege of watching the firm's commercials.
C) a brand-name product itself is always of higher quality.
D) consumers maximize utility by purchasing the most expensive products.
E) consumers are irrational.
Q2) Over time, the only way firms can continue to earn positive economic profits is
A) with government control over price.
B) hire top entrepreneurs.
C) if other firms cannot copy the unique aspects of the firm's product or service.
D) by reducing diseconomies of scale.
E) through increased competition.
Q3) Monopolistic competition is a market structure characterized by product differentiation and ease of entry.
A)True
B)False
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8
Chapter 7: Business, Society, and the Government
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) According to the survey reported in the text, most people believe that health-related goods and services should be allocated by the ____ allocation mechanism.
A) price
B) first-come, first-served
C) government
D) random
E) private
Q2) An externality is a cost or benefit created by a transaction that
A) is outside the firm's ability to control.
B) is a result of regulatory market failure.
C) reduces antitrust concerns.
D) substitutes most-favored-customer prices for cost-plus markups.
E) is not paid for or enjoyed by those involved directly in the transaction.
Q3) One reason that government intervenes in markets is the attitude of the general public about market allocation.
A)True
B)False
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Chapter 8: Government Intervention Versus Free Markets
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Sample Questions
Q1) Which of the following statements best describes the government's role in health care?
A) The government has no role in health care.
B) Health care spending varies tremendously, and it is too difficult to determine what percentage of the spending comes from the government.
C) Government spending on health care constitutes about 45 percent of the total.
D) While Medicare and Medicaid are government programs that provide health care for many who could not otherwise afford it, the amount spent is less than 20 percent of the total spent on health care.
E) Private sources account for more than 95 percent of the total spent on health care.
Q2) All of the following are reasons that the supply of medical care has decreased except
A) increased usage of expensive, high-tech medical equipment and procedures.
B) that the demand for medical services has increased.
C) a decrease in the number of hospital beds.
D) that physicians are charging higher fees.
E) advertising restrictions imposed by the American Medical Association (AMA).
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Page 10
Chapter 9: An Overview of the National and International Economies
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) According to Scenario 9.1, country C has net exports of A) zero.
B) $13 million.
C) $21 million.
D) $6 million.
E) -$6 million.
Q2) An unmarried couple living together and holding joint title to their condominium would characterize a household.
A)True
B)False
Q3) A household may consist of
A) Related family members occupying a unit of housing
B) Unrelated individuals occupying a unit of housing
C) Two college students sharing an apartment
D) A family of three living in a two bedroom house
E) All of these
Q4) The major sectors that make up any national economy are households, businesses, and world trade.
A)True B)False
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Chapter 10: Macroeconomic Measures
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111 Flashcards
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Sample Questions
Q1) Real GDP is a measure of the quantity of final goods and services produced, and it is obtained by eliminating the influence of price changes from the nominal GDP statistics.
A)True
B)False
Q2) What is a consumer price index?
A) A measure of the price at which consumers sell their resources
B) A measure of the average price level of goods and services purchased by consumers
C) A measure of the average prices received by producers
D) A measure of the average price at which consumers sell their resources
E) A measure of the prices of goods and services included in the gross domestic product
Q3) If the exchange rate moves from $.08 = 1 peso to $.12 = 1 peso, then
A) the peso has depreciated.
B) 1 dollar will buy more Mexican pesos than before.
C) the U.S. dollar has appreciated.
D) the prices of U.S. imports from Mexico are more expensive.
E) Mexicans will demand fewer U.S. products, other things being equal.
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Page 12
Chapter 11: Unemployment, Inflation, and Business Cycles
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Structural unemployment will decline if
A) more seasonal work becomes available.
B) the government increases taxes to support more welfare programs.
C) consumer spending on new technology decreases.
D) computerized job-search systems are improved.
E) retrained workers can move to areas where new jobs are available.
Q2) The effect of discouraged workers and underemployment is an unemployment rate that understates actual employment.
A)True
B)False
Q3) Business cycles are
A) variations in the economy that are all equal in intensity.
B) seasonal variations in the economy that occur every year.
C) fluctuations in economic output that show a declining growth pattern over time.
D) periodic but irregular variations in economic activity.
E) exactly alike in the amount of time that passes from peak to peak.
Q4) The unemployment rate is the percentage of the population that is not working.
A)True
B)False
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Chapter 12: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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Sample Questions
Q1) Which of the following is not a nonprice determinant of demand?
A) Foreign income
B) Foreign prices
C) Increased government spending
D) Relative prices in the same country
E) Lower taxes
Q2) The change in aggregate expenditures resulting from a change in the domestic price level that changes the price of domestic goods in relation to foreign goods is known as a(n)
A) international trade effect.
B) international deficit effect.
C) international exchange rate effect.
D) multilateral equilibrium condition.
E) international pricing effect.
Q3) The main reason the short-run aggregate supply curve is upward sloping is that input costs decline as more goods and services are produced.
A)True
B)False
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Chapter 13: Fiscal Policy
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141 Flashcards
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Sample Questions
Q1) Which of the following statements is false?
A) Increased government borrowing raises interest rates.
B) Higher interest rates can depress investment.
C) Lower investment means fewer capital goods in the future.
D) Government deficits can have no effect on international trade.
E) Government deficits can lower the level of output in the economy.
Q2) The national debt is the
A) current budget deficit.
B) product of past budget deficits.
C) product of past budget deficits plus the interest outstanding.
D) current budget deficit plus the interest outstanding.
E) stock of government bonds outstanding.
Q3) Higher taxes affect real GDP indirectly through both consumption and output supply.
A)True
B)False
Q4) The ratio of government expenditures to GDP was higher in the 1980s and 1990s than in any other decade in the twentieth century.
A)True
B)False
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Chapter 14: Money and Banking
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Sample Questions
Q1) Scarcity and durability characterize the medium-of-exchange property of money.
A)True
B)False
Q2) Economists who view money primarily as a store of value use M1 as the definition of the money supply.
A)True
B)False
Q3) A person from San Francisco can easily withdraw cash from an automated teller machine (ATM) while on vacation in Beijing.
A)True
B)False
Q4) M2 includes all of the following except
A) demand deposits.
B) U.S. government securities.
C) savings deposits.
D) money market deposits.
E) certificates of deposit.
Q5) Travelers' checks issued by bank are included in demand deposits.
A)True
B)False
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Chapter 15: Monetary Policy
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125 Verified Questions
125 Flashcards
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Sample
Questions
Q1) Which of the following would most likely be a supplier of U.S. dollars in the foreign exchange market?
A) A Swedish resident who is traveling to the United States
B) A French investor who intends to buy U.S. government bonds
C) A resident of Belgium who is traveling to Australia
D) A U.S. company that is importing oranges from Israel
E) A French importer of U.S. beef
Q2) The demand for money consists of transactions demand, speculative demand, and precautionary demand.
A)True
B)False
Q3) During the Christmas holiday season, the Fed increases the supply of currency to A) ensure that checks are cleared quickly.
B) meet the demand for cash withdrawals from banks.
C) stabilize the value of the dollar against other currencies.
D) decrease the value of bonds.
E) control inflation.
Q4) The ultimate goal of monetary policy is stability of interest rates.
A)True
B)False
Page 17
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Chapter 16: Macroeconomic Policy, Business Cycles, and Growth
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Sample Questions
Q1) Unexpected inflation can affect the unemployment rate in all of the following ways except:
A) wage expectations.
B) inventory fluctuations.
C) wage contracts.
D) federal funds rate changes.
E) none - all of these affect the unemployment rate.
Q2) The change in the money supply equals
A) the government deficit minus government borrowing.
B) the change in high-powered money plus the change in tax revenues.
C) government borrowing plus government spending.
D) the change in excess reserves divided by the deposit expansion multiplier.
E) the change in the government budget deficit.
Q3) If workers realize that an increase in nominal wage rates also constitutes a rise in real wages, then we would expect an increase in employment and an upward movement along the short-run Phillips curve.
A)True
B)False
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Chapter 17: Issues in International Trade and Finance
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Sample Questions
Q1) In the table in Scenario 17.1, the United States has a comparative advantage in A) neither wheat nor beef.
B) wheat only.
C) both wheat and beef.
D) beef only.
E) wheat and an absolute advantage in beef.
Q2) Refer to Table 17.1. In the United States, producing an additional unit of machinery would require shifting ____ hour(s) of labor from food production.
A) 1
B) 2
C) 4
D) 6
E) 10
Q3) We benefit from trade if we can obtain a good from a foreign country by A) military force.
B) giving up less than we would have to give up to obtain the good at home.
C) giving up more than we would have to give up to obtain the good at home.
D) diplomatic initiatives.
E) eliminating domestic surpluses of other goods.
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Page 19
Chapter 18: Globalization
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Sample Questions
Q1) Globalization is characterized by increased trade in A) goods.
B) services.
C) financial assets.
D) technology.
E) all of these.
Q2) Businesses lose during financial crises if they have borrowed in currencies other than the domestic currency.
A)True
B)False
Q3) A country can always avoid financial crises by not globalizing, keeping its domestic markets closed to foreigners.
A)True
B)False
Q4) Stories about sweat shops in developing countries producing goods for consumers in industrialized countries contribute to the criticism that globalization encourages harmful labor practices.
A)True
B)False
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