Introduction to Economics Final
Exam
Course Introduction
Introduction to Economics provides students with a foundational understanding of economic principles, concepts, and methodologies. The course explores both microeconomics the study of individual consumers and firms and macroeconomics, which examines overall economic activity and policy at the national and international level. Topics include supply and demand, market structures, resource allocation, the role of government, economic growth, inflation, unemployment, and international trade. By combining theoretical frameworks with real-world examples, this course equips students to analyze current economic issues and make informed decisions as future consumers, workers, and citizens.
Recommended Textbook
Survey of Economics Principles Applications and Tools 7th Edition by Arthur OSullivan
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18 Chapters
3640 Verified Questions
3640 Flashcards
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Chapter 1: Introduction: What Is Economics
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Sample Questions
Q1) In the 1980s and 1990s, average per capita income increased by a greater percentage in sub-Saharan Africa than it did in the rest of the world.
A)True
B)False
Answer: False
Q2) Which of the following is a question answered with positive economic analysis?
A) Should the college reduce tuition for out-of-state residents?
B) Should the college charge higher tuition for part-time students?
C) If the college increased its eligibility requirements for enrollment, will class sizes decline?
D) Should the college eliminate its athletic program to cut its costs?
Answer: C
Q3) According to the Application, in 1960 the Cuban government
A) confiscated most housing in the country.
B) did not allow people to sell or rent their homes.
C) caused a large shortage of housing as a result of its policies.
D) all of the above
Answer: D
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3
Chapter 2: The Key Principles of Economics
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Sample Questions
Q1) When deciding whether to engage in an activity or how much to do, people should follow
A) the principle of microeconomics.
B) the principle of macroeconomics.
C) the marginal principle.
D) the law of supply and demand.
Answer: C
Q2) Refer to the table above. After applying the second bag of fertilizer, the farmer experienced
A) increasing returns.
B) diminishing returns.
C) constant returns.
D) negative returns.
Answer: B
Q3) The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) Suppose that a market for a product is in equilibrium at a price of $5 per unit. At any price above $5 per unit
A) there will be an excess demand for the product.
B) there will be an excess supply of the product.
C) the quantity supplied of the product will be less than the quantity demanded of that product.
D) there will be a shortage of that product.
Answer: B
Q2) According to this Application, after the government deceased cigarette taxes in several Canadian provinces in 1994, the decrease in the price of cigarettes in these provinces
A) more than doubled the smoking rate.
B) created no noticeable change in the smoking rate.
C) increased the smoking rate by roughly 17 percent
D) was accompanied by a slight decrease in the rate of smoking.
Answer: C
Q3) A change in the price of a product will change the supply of that product.
A)True
B)False
Answer: False
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Chapter 4: Elasticity: A Measure of Responsiveness
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Sample Questions
Q1) The price elasticity of demand for color printers is 1.6 and you would like to see the quantity demanded for color printers to increase by 32%. Then the percentage change in price should be
A) 10%.
B) 15%.
C) 20%.
D) 25%.
Q2) In Figure 4.2 at quantities larger than Q demand is
A) inferior.
B) elastic.
C) inelastic.
D) unit elastic.
Q3) If, regardless of price, the quantity demanded is a constant amount, then the demand curve is
A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.
Q4) How do you interpret the value of income elasticity?
Q5) How do you interpret the value of cross-price elasticity?
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Chapter 5: Production Technology and Cost
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Sample Questions
Q1) Refer to Table 5.5. The total variable cost of producing five units of output is
A) $8.60.
B) $43.
C) $48.
D) $58.
Q2) Recall the Application. If a fake killer whale to be used to scare sea lions away from steelhead and other threatened and commercially valuable species cost $11,000 for the mold and $5,000 for materials for each fake killer whale made, then the average or per unit cost of producing five fake killer whales would be
A) $5,000.
B) $7,200.
C) $11,000.
D) $16,000.
Q3) Refer to Table 5.1, which gives a firm's production function. Assume that all non-labor inputs are fixed. Marginal product is maximized when the firm hires
A) 2 workers.
B) 3 workers.
C) 4 workers.
D) 5 workers.
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Page 7
Chapter 6: Perfect Competition
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Sample Questions
Q1) Suppose your firm is operating in a perfectly competitive market, and that the minimum average variable cost of producing your good is $30. If the price of the good is $32, your firm should
A) not produce anything since the price is above the minimum of average variable cost.
B) not consider price when determining the amount to sell.
C) supply the amount of the good where the marginal cost of production is equal to $32.
D) supply the amount of the good where the marginal cost of production is $30.
Q2) You sell your good in a perfectly competitive market where the market price is $7.00. When you sell 100 units your total revenue is $700. When you sell 101 units
A) total revenue increases by less than $7.
B) total revenue increases by exactly $7.
C) total revenue increases by more than $7.
D) total revenue may increase or decrease.
Q3) What are the characteristics of perfect competition?
Q4) What characterizes a constant cost industry and what causes it to be a constant cost industry?
Q5) What are the characteristics of monopolistic competition?
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Page 8
Chapter 7: Monopoly and Price Discrimination
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Sample Questions
Q1) Table 7.2 contains price, demand, and cost data for the Capri Theater, the only first-run movie theater in a small town. Should the firm adopt the single price policy or the student discount policy?
A) the single price policy because the firm does not meet the three conditions necessary to engage in price discrimination
B) the single price policy because price discrimination would not be legal for this firm
C) the single price policy because it is more profitable than price discrimination for this firm
D) the student discount policy because it is more profitable than the single price policy
Q2) Which of the following is NOT a characteristic of a monopoly?
A) A monopolist faces a downward-sloping demand curve.
B) There are no close substitutes for a monopolist's product.
C) After the first unit, the monopolist's marginal revenue is always less than its price.
D) A monopolist is a price taker.
Q3) What is a patent?
Q4) Why is a monopolist's marginal revenue less than the price?
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Page 9
Chapter 8: Market Entry, Monopolistic Competition, and Oligopoly
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Sample Questions
Q1) If the government limits the number of firms in a market by issuing a limited number of licenses, the market structure is most likely to be
A) a perfectly competitive market.
B) a monopoly.
C) a monopolistically competitive market.
D) an oligopoly.
Q2) The Herfindahl-Hirschman Index measures
A) the degree of concentration in a market.
B) the percentage of market share held by the four largest firms in a market.
C) the percentage of market share held by the largest firm in a market.
D) the market share held by the largest firm in a market divided by the market share held by all other firms in the market.
Q3) Monopolistically competitive industries have only a single firm and there is a barrier to entry.
A)True
B)False
Q4) Producers of close substitutes have little or no incentive to merge.
A)True
B)False
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Chapter 9: Imperfect Information, External Benefits, and
External Costs
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416 Flashcards
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Sample Questions
Q1) Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that all of the used refrigerators in the market are lemons (low quality), what number of used refrigerators sold will actually be lemons (low quality)?
A) 50
B) 125
C) 175
D) 250
Q2) Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), how many plums (high quality) will be supplied by sellers?
A) 10
B) 15
C) 20
D) 25
Q3) Recall the Application. Why were there so many "lemon" kiwifruit in the U.S. market?
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Chapter 10: The Labor Market and the Distribution of Income
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Sample Questions
Q1) The relationship between the wage and the quantity of labor that all workers are willing to provide is called
A) individual labor demand.
B) market labor demand.
C) individual labor supply.
D) market labor supply.
Q2) A means tested government program is one that
A) is pilot tested to see if it works.
B) provides assistance to those below a certain income level.
C) is temporary and ends after a short period of time.
D) all of the above
Q3) An increase in the minimum wage will have a large effect on the number of workers employed in minimum wage occupations if
A) demand for workers is elastic.
B) demand for workers is inelastic.
C) supply of workers is elastic.
D) supply of workers is inelastic.
Q4) The individual labor supply curve is positively sloped in the short run.
A)True B)False
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Chapter 11: Measuring a Nations Production and Income
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Sample Questions
Q1) "Final goods and services" are those that are
A) produced outside the United States.
B) used in the production of other goods and services.
C) double counted in the calculation of GDP.
D) sold to ultimate or final purchasers.
Q2) The largest component of GDP is
A) government spending.
B) consumption expenditures.
C) private investment expenditures.
D) net exports.
Q3) The data presented in the text shows that in the period from 1947-2013, real GDP in the United States has
A) increased substantially.
B) decreased in every year since 1947.
C) decreased only in recent years.
D) generally remained the same.
Q4) GDP measures underestimate the value of output produced by an economy because they include services not transferred through markets.
A)True
B)False
Page 13
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Chapter 12: Unemployment and Inflation
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Sample Questions
Q1) Suppose that the chain-weighted index for GDP in Gambia was 275 in 2015 and 350 in 2016. The inflation rate between those two years was approximately A) 20.2 percent.
B) 27.3 percent.
C) 37.5 percent.
D) 75 percent.
Q2) To operate efficiently, an economy generally "needs" ________ unemployment. A) cyclical B) frictional C) structural
D) seasonal
Q3) Using the information in Table 12.2, the Astro Consumer Price Index for 2014 is A) 24.
B) 100.
C) 124.
D) 189.
Q4) Anticipated inflation is associated with cost increases which are fully expected. A)True B)False
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Chapter 13: Why Do Economies Grow
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Sample Questions
Q1) Technological innovations are not necessarily major scientific breakthroughs.
A)True
B)False
Q2) Explain the connection between property rights and economic growth.
Q3) In developing countries, economists have found ________ correlation between a person's height and the wages he can earn in the farming sector.
A) a weak
B) a strong
C) an inverse
D) no
Q4) In developing countries, the highest returns are from investing in A) transportation systems.
B) sanitation systems.
C) education.
D) defense.
Q5) Which of the following is NOT an example of technological progress?
A) an increase in the labor supply as the result of population growth
B) the development of laser eye surgery
C) the invention of the microwave oven
D) the development of smart phones
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Chapter 14: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Define the "consumption function."
Q2) Identify three key factors that can cause a shift in the aggregate demand curve.
Q3) Changes in demand will often be met with changes in output rather than changes in prices because of formal and informal contracts.
A)True
B)False
Q4) Aggregate demand and aggregate supply must be combined to determine the price level and the "real" GDP.
A)True
B)False
Q5) Prices that adjust nearly on a daily basis are A) custom prices.
B) auction prices.
C) sticky prices.
D) heavy prices.
Q6) Aggregate demand is the total demand for intermediate goods and services in an entire economy.
A)True
B)False
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Chapter 15: Fiscal Policy
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Sample Questions
Q1) Income taxes are taxes paid on wages and investment income.
A)True
B)False
Q2) Because the government has so much money, and can print more, it does not need to borrow and therefore rarely pays net interest on debt.
A)True
B)False
Q3) Stabilization policies are actions taken to bring the economy closer to full employment.
A)True
B)False
Q4) A federal budget ________ occurs when the federal government spends more than it collects in taxes.
A) surplus
B) deficit
C) equilibrium
D) ceiling
Q5) Briefly explain how a change in the personal income tax rate affects aggregate demand.
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Chapter 16: Money and the Banking System
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Sample Questions
Q1) What is a commodity money system?
Q2) The purpose of having the members of the Board of Governors of the Federal Reserve serve fourteen-year terms is to
A) ensure that the governors become well-experienced at policymaking.
B) insulate the governors' policy decisions from the influence of presidential elections and politics.
C) promote unity of opinion from shared time together.
D) establish long-standing ties with high-level officials of other nations' central banks.
Q3) The smallest single component of M1 is
A) demand deposits.
B) savings account balances.
C) other checkable deposits.
D) traveler's checks.
Q4) What is a gold standard?
Q5) The group responsible for deciding on monetary policy is the A) Federal Open Market Committee.
B) Board of Governors only.
C) Federal Advisory Council.
D) group of 12 Federal Reserve Bank presidents only.
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Chapter 17: Monetary Policy and Inflation
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Sample Questions
Q1) The quantity of money demanded will increase as interest rates increase.
A)True
B)False
Q2) A decrease in the price level in the economy leads to
A) a leftward shift in the demand for money curve.
B) a rightward shift in the demand for money curve.
C) a leftward movement along the demand for money curve.
D) a rightward movement along the demand for money curve.
Q3) According to this Application, some economists noticed that the U.S. dollar ________ largely because monetary policy in the United States had driven interest rates ________.
A) depreciated; down
B) depreciated; up
C) appreciated; down
D) appreciated; up
Q4) Which action could the Fed use to decrease the money supply?
A) an open market purchase
B) an increase in the required reserve ratio
C) a tax increase
D) a decrease in the discount rate
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Chapter 18: International Trade and Finance
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Sample Questions
Q1) Which of the following situations will arise in the domestic market following the imposition of an import ban?
A) imports increase, domestic production increases, prices increase
B) imports increase, domestic production decreases, prices decrease
C) imports decrease, domestic production increases, prices increase
D) imports decrease, domestic production increases, prices decrease
Q2) Outsourcing allows a company to take advantage of the ________ of other countries, and in doing so it can produce its products at a lower cost.
A) comparative advantages
B) diminishing returns
C) trade imbalances
D) market failures
Q3) Referring to Figure 18.3, an appreciation of the dollar is represented by a movement from point
A) a to d.
B) c to d.
C) a to c.
D) b to c.
Q4) What are GATT and the WTO?
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