Introduction to Economics Exam Solutions
Course Introduction
Introduction to Economics provides students with a foundational understanding of economic principles that govern the behavior of individuals, businesses, and governments. The course explores key concepts such as supply and demand, market structures, opportunity cost, and the role of incentives. It examines how resources are allocated, how markets function, and the impact of economic policies on society. Through real-world examples and critical analysis, students develop the ability to interpret economic data, understand the factors influencing economic decisions, and apply basic economic reasoning to everyday issues. This course prepares students for further study in economics and related fields.
Recommended Textbook
Understanding Economics 7th Edition by Mark Lovewell
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15 Chapters
935 Verified Questions
935 Flashcards
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Page 2
Chapter 1: The Economic Problem
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) The problem of economic scarcity forces every country to determine:
A)the shape of its production possibilities curve
B)the amount of economic resources that can be employed in production
C)what, how, and for whom to produce
D)the ways that individuals can pursue their own self-interest
E)how to plan to overcome scarcity
Answer: C
Q2) The basic purpose of the ceteris paribus assumption is to:
A)isolate the relationship between two variables by assuming all other factors remain constant
B)allow one to focus upon micro variables by ignoring macro variables
C)allow one to focus upon macro variables by ignoring micro variables
D)determine whether x causes y or vice versa
E)determine whether two variables are directly or inversely related
Answer: A
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3
Chapter 2: Demand and Supply
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) If the price in this market were $4:
A)farmers would keep on increasing the number of hectares allocated to the growing of the product
B)buyers would want to purchase more of the product than is currently being supplied
C)farmers would not be able to sell all of the product
D)there would be a shortage of the product
E)the price of the product would be forced higher
Answer: C
Q2) One might explain a shift to the right in the demand curve for normal product A by saying that:
A)incomes have declined, and consumers now want to buy less of A at every price
B)the price of A has increased and, as a result, consumers want to buy less of it
C)preferences have changed in favour of A, so consumers now want to buy more at every price
D)the price of A has declined and, as a result, consumers want to buy more of it
E)product A is now more plentiful than before
Answer: C
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Page 4
Chapter 3: Elasticity
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) A product's price rises from $4 to $6,causing consumption to fall from 2 million to 1 million units.The numerical value of price elasticity of demand is therefore:
A)1.50
B)1.67
C)2.00
D)3.00
E)1.00
Answer: B
Q2) A drop in a town's average monthly incomes from $2000 to $1000 causes sales of canned meat to rise from 10 000 to 15 000 cans.The numerical value of the income elasticity of this item is:
A)-1.0
B)1.0
C)-0.6
D)0.6
E)1.67
Answer: C
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Page 5
Chapter 4: Costs of Production
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59 Verified Questions
59 Flashcards
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Sample Questions
Q1) Refer to the above diagram.To produce output 0x,in the long run the firm should choose a plant of size:
A)#1
B)#4
C)#5
D)#3
E)#2
Q2) In the long run:
A)very few inputs can be adjusted
B)the law of diminishing marginal returns no longer has the same importance as in the short run
C)more variable inputs become fixed
D)business decisions become less efficient
E)output cannot be adjusted
Q3) Marginal product:
A)diminishes at all levels of production
B)may initially increase, then diminishes, but never becomes negative
C)may initially increase, then diminishes, and ultimately becomes negative
D)is always less than average product
E)is always greater than average product
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Chapter 5: Perfect Competition
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) If the business is hiring workers under perfectly competitive conditions at a wage rate of $22,it will choose to employ:
A)1 worker
B)2 workers
C)3 workers
D)4 workers
E)5 workers
Q2) Assume the XYZ Corporation is producing 20 units of output.It is selling this output in a perfectly competitive market at $10 per unit.Its fixed costs are $100 and its average variable cost is $3 at 20 units of output.On the basis of this information we can say that the corporation:
A)should close down in the short run
B)is maximizing its profits
C)is realizing an economic loss of $60
D)is realizing an economic profit of $40
E)is realizing an economic profit of $60
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Chapter 6: Monopoly and Imperfect Competition
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78 Flashcards
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Sample Questions
Q1) Because of mutual interdependence,oligopolists must:
A)co-operate with their rivals
B)operate as rivals
C)ignore the actions of their competitors
D)take into account the potential reactions of competitors to actions they may take
E)act as if they were perfectly competitive
Q2) The kinked demand curve of an oligopoly assumes a business's rivals will:
A)ignore a price cut but match a price increase
B)ignore a price increase but match a price cut
C)match any price change
D)ignore any price change
E)sell their product for free
Q3) If both prisoners are allowed to confer before being questioned and decide to cooperate,they:
A)each remain silent and receive a sentence of one year
B)each confess and receive a sentence of one year
C)each confess and receive a sentence of 4 years
D)each remain silent and receive a sentence of 4 years
E)both confess and are both set free
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Page 8
Chapter 7: Economic Welfare and Income Distribution
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92 Verified Questions
92 Flashcards
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Sample Questions
Q1) Craft unions are:
A)inclusive of all workers in a given industry
B)commonly found in skilled trades
C)created to ensure that apprenticeship programs remain in demand
D)most common in sectors employing semi-skilled labour
E)most common in sectors employing unskilled workers
Q2) A positive effect of on-the-job training is that it:
A)guarantees rising average incomes over a person's entire life
B)leads to seniority rights that allow workers to move from one employer to another without the loss of special privileges
C)shifts the supply curve rightward and raises wage rates for such trained labour
D)increases a worker's productivity.
E)raises the demand for skilled workers
Q3) The most important determinant of labour income is:
A)education
B)experience
C)job segregation
D)working conditions
E)productivity
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Page 9
Chapter 8: Measures of Economic Activity
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) If depreciation exceeds gross investment,it can be concluded that:
A)GDP is rising, but GNI is declining
B)net investment is negative
C)the economy is importing more than it is exporting
D)the economy's capital stock is expanding
E)GNI is declining, but GDP is rising
Q2) Suppose that the total market value of all final goods and services produced in a particular country in a given year is $500 billion,and the total market value of final goods and services sold is $450 billion.We can conclude that:
A)inventories have increased by $50 billion
B)GDP is $450 billion
C)GNI is $450 billion
D)inventories have fallen by $50 billion
E)GDP is $50 billion
Q3) When an economy's capital stock is expanding:
A)GNI, but not necessarily GDP, is rising
B)net exports is a positive amount
C)GNI exceeds GDP
D)GDP exceeds GNI
E)gross investment exceeds depreciation
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Chapter 9: Inflation and Unemployment
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49 Flashcards
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Sample Questions
Q1) Assuming that the total population is 100 million,the labour force is 50 million,and 3 million workers in the labour force are unemployed,the unemployment rate:
A)is 3 percent
B)is 6 percent
C)is 9 percent
D)is 12 percent
E)cannot be determined from the information given
Q2) The economic cost of unemployment can be measured by the:
A)amount by which actual real output exceeds potential output
B)amount by which potential output exceeds actual real output
C)excess of real output over nominal output
D)excess of nominal output over real output
E)amount by which the unemployment rate exceeds the inflation rate
Q3) The rate of inflation:
A)is 110 percent
B)is 10 percent
C)is 0 percent
D)is 5 percent
E)cannot be determined by the data given
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Chapter 10: Economic Fluctuations
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) If aggregate demand increases and aggregate supply decreases,the price level:
A)will decrease, but real output may either increase or decrease
B)will increase, but real output may either increase or decrease
C)and real output will both increase
D)and real output will both decrease
E)will decrease, but real output will necessarily stay the same
Q2) The recent switch of labour from manufacturing to the service sector has:
A)been inflationary
B)had no effect upon labour productivity
C)increased the growth of labour productivity
D)dampened the growth of labour productivity
E)increased the value of the Canadian dollar
Q3) An inflationary gap can best be described as the amount by which:
A)equilibrium output exceeds potential output
B)real expenditures exceed any given level of real output
C)withdrawals exceed injections at the level of potential output
D)real expenditures fall short of potential output
E)withdrawals exceed injections at all levels of potential output
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Chapter 11: Fiscal Policy
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) If Parliament adjusted our tax system so that the rate of taxation increased,the:
A)economy would become more inflation-prone
B)economy would tend to become less stable
C)stability of the economy would be unaffected
D)economy would tend to become more stable
E)the distribution of income would become more unequal
Q2) In a given year,the federal government's revenues are $315 billion,its expenditures are $300 billion and Canada's GDP is $1500 billion.As a result there is a budget:
A)surplus equal to 0.1 percent of GDP
B)deficit equal to 0.1 percent of GDP
C)deficit equal to 1 percent of GDP
D)surplus equal to 1 percent of GDP
E)deficit equal to 0.01 percent of GDP
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13
Chapter 12: Money
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61 Verified Questions
61 Flashcards
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Sample Questions
Q1) If you are estimating your total expenses for school next year,you are using money as:
A)a means of exchange
B)a store of purchasing power
C)a measure of value
D)an income-earning asset
E)a standard of deferred payments
Q2) The equilibrium interest rate is:
A)2 percent
B)4 percent
C)6 percent
D)8 percent
E)10 percent
Q3) At equilibrium in the money market,the total quantity of money demanded is:
A)$520
B)$500
C)$480
D)$460
E)$440
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Page 14
Chapter 13: Monetary Policy
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) If there were an inflationary gap,the proper government policies would involve a government:
A)deficit, the purchase of bonds in the open market, and a higher target overnight rate
B)deficit, the sale of bonds in the open market, and a higher target overnight rate
C)surplus, the sale of bonds in the open market, and a higher target overnight rate
D)surplus, the purchase of bonds in the open market, and a lower target overnight rate
E)balanced budget and lower target overnight rate
Q2) The basic problem portrayed by the traditional Phillips curve is:
A)that an increase in aggregate demand sufficiently large to result in full employment may also cause inflation
B)that changes in the composition of total labour demand tend to cause deflation
C)that unemployment tends to increase at the same time that the general price level is rising
D)the possibility that automation will increase the level of structural unemployment
E)that changes in the composition of total labour demand tend to cause inflation
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Chapter 14: The Foreign Sector
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) Zabella's capital account and financial account balance shows a:
A)deficit of $10 billion
B)surplus of $5 billion
C)deficit of $28 billion
D)surplus of $28 billion
E)surplus of $10 billion
Q2) A recession in Canada would most likely:
A)reduce a Canadian trade deficit
B)increase a Canadian trade deficit
C)increase the economic growth of our trading partners
D)increase domestic interest rates
E)cause a federal budget surplus
Q3) Canada had a current account:
A)surplus of $3 billion
B)surplus of $7 billion
C)deficit of $7 billion
D)surplus of $11 billion
E)deficit of $11 billion
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16
Chapter 15: Foreign Trade
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63 Verified Questions
63 Flashcards
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Sample Questions
Q1) If this nation were entirely closed to international trade,the equilibrium price and quantity would be:
A)$5 and 2 units
B)$1 and 1 unit
C)$4 and 4 units
D)$3 and 7 units
E)$2 and 11 units
Q2) The size of the import quota:
A)is vz
B)is vy
C)is 0y
D)is wx
E)is wy
Q3) On the basis of this information,we can say that:
A)Gamma should export both tea and pots to Sigma
B)Sigma should export tea to Gamma and Gamma should export pots to Sigma
C)Gamma should export tea to Sigma and Sigma should export pots to Gamma
D)Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots
E)Sigma should export both tea and pots to Gamma
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