Introduction to Economics Final
Exam
Course Introduction
Introduction to Economics provides a comprehensive overview of the basic principles and concepts that underpin both microeconomics and macroeconomics. The course explores fundamental topics such as supply and demand, market structures, consumer and producer behavior, the role of government in the economy, and the determinants of national income, unemployment, inflation, and economic growth. Students will also examine real-world economic issues and learn how economic theories can be applied to analyze and interpret market outcomes, public policy, and global economic trends, fostering critical thinking and informed decision-making in personal, professional, and public contexts.
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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Sample Questions
Q1) If a society is currently producing 9 bicycles and 4 computers,the decision to increase computer output to 6 costs:
A)4 bicycles
B)2 bicycles
C)5 bicycles
D)zero because unemployed resources are available
E)irrelevant because this decision is inconsistent with consumer preferences
Answer: A
Q2) The economic problem stems from the fact that:
A)the production possibilities curve bows out to the right
B)resources are scarce relative to people's demand for goods and services
C)people act to maximize their own welfare
D)historically the production possibilities curve has been shifting down toward the origin
E)the production possibilities curve bows in to the left
Answer: B
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Chapter 2: Demand and Supply
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Sample Questions
Q1) Given a downward-sloping demand curve and an upward-sloping supply curve for a product,an increase in consumer incomes will:
A)increase equilibrium price and quantity if the product is a normal product
B)decrease equilibrium price and quantity if the product is a normal product
C)have no effect on equilibrium price and quantity
D)reduce the quantity demanded, but not shift the demand curve
E)increase equilibrium price and decrease equilibrium quantity if the product is an inferior product
Answer: A
Q2) A decrease in the price of cigarettes leads to a(n):
A)change in the supply of cigarettes
B)decrease in the quantity demanded of cigarettes
C)increase in the supply of apples as tobacco farmers switch to the production of apples
D)increase in the quantity supplied of cigarettes
E)a change in the demand of cigarettes
Answer: C
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Chapter 3: Elasticity
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Sample Questions
Q1) If the quantity supplied of tomatoes rises from 7 million to 9 million kilograms when the price rises from $3.50 to $4.50 per kilogram,then the numerical value of the price elasticity of supply is:
A)1.0
B)1.3
C)0.8
D)2.0
E)0.5
Answer: A
Q2) If a business can sell 20 000 units of a product at $2 per unit and 10 000 units at $4 per unit,its demand is:
A)unit-elastic
B)inelastic
C)perfectly inelastic
D)elastic
E)perfectly elastic
Answer: A
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Chapter 4: Costs of Production
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Sample Questions
Q1) The separation of ownership and control in a corporation results in:
A)co-operative decision-making by management and owners
B)decisions by management that represent the best interests of the corporation's owners
C)the removal of any threats of takeover
D)the possibility that management actions will go against the interests of owners
E)decision-making power resting in the hands of owners and not managers
Q2) At output level <sub>0</sub>Q,average fixed cost:
A)is equal to EF
B)is equal to QE
C)is equal to QF
D)is equal to QD
E)must be increasing
Q3) Marginal product is the:
A)increase in average product attributable to the employment of one more worker
B)increase in total revenue attributable to the employment of one more worker
C)increase in total cost attributable to the employment of one more worker
D)total product divided by the number of the workers employed
E)increase in total output attributable to the employment of one more worker
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Page 6
Chapter 5: Perfect Competition
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Sample Questions
Q1) The type of market in which businesses possess the least market power is a(n):
A)monopoly, as it has no competitors
B)oligopoly, as each business's size is large relative to the industry
C)monopolistically competitive market, as each business differentiates its products
D)perfectly competitive market, as each business is a price-taker
E)competitive monopoly, because it combines both competition and monopoly
Q2) If the business is hiring workers under perfectly competitive conditions at a wage rate of $10,it will choose to employ:
A)1 worker
B)2 workers
C)3 workers
D)5 workers
E)6 workers
Q3) The profit-maximizing output rule applies:
A)only to monopolistically competitive businesses
B)only when the business is a "price-taker"
C)only to monopolies
D)only to perfectly competitive businesses
E)to businesses in all types of industries
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Page 7
Chapter 6: Monopoly and Imperfect Competition
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Sample Questions
Q1) Product differentiation and advertising are used by imperfectly competitive businesses to achieve the two goals of:
A)increased demand and demand elasticity
B)decreased demand elasticity and increased opportunity to engage in successful price fixing
C)the provision of consumer information and the promotion of consumer preferences
D)increased demand and decreased demand elasticity
E)decreased demand and increased demand elasticity
Q2) Government regulation of natural monopolies is:
A)a complex task, as it requires estimating consumer desires
B)needed to ensure the operation of natural monopolies in the long run
C)needed to ensure that the cost savings resulting from increasing returns to scale are passed on to the consumer
D)totally unnecessary, as free markets operate efficiently and equitably
E)no longer used in Canada
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8
Chapter 7: Economic Welfare and Income Distribution
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Sample Questions
Q1) A price floor means that:
A)inflation is severe in this particular market
B)some sellers are artificially restricting supply in order to raise prices
C)the government is imposing a legal price that is below the equilibrium price
D)the government is imposing a legal price that is above the equilibrium price
E)there will be shortage
Q2) According to Statistics Canada,the distribution of income to each fifth of households shows:
A)a sharp movement toward greater equality since the 1950s
B)a sharp movement toward greater inequality since the 1950s
C)considerable stability in the distribution of income since the 1950s
D)a marked decline in the relative importance of the "upper class"
E)a marked increase in the relative importance of the "middle class"
Q3) A given country's income is most unequally distributed among households in: A)E B)D C)A
D)A and E
E)B
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Page 9
Chapter 8: Measures of Economic Activity
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Sample Questions
Q1) In 1933,net investment was -$5.8 billion.This meant that:
A)gross investment exceeded depreciation by $5.8 billion
B)the economy's capital stock was expanding that year
C)the production of 1933's GDP used up more capital goods than were produced in that year
D)the economy produced no capital goods at all in 1933
E)the economy produced a negative amount of capital goods in 1933
Q2) "Value added" refers to:
A)any increase in GDP that has been adjusted for negative environmental effects
B)the excess of a country's exports over its imports
C)the excess of gross investment over net investment
D)the difference between GDP and GNI
E)the difference between the value of a business's output and the value of the resources that it has purchased from others
Q3) In the treatment of Canadian exports and imports,national income accountants:
A)subtract exports, but add imports, in calculating GDP
B)subtract both exports and imports in calculating GDP
C)add both exports and imports in calculating GDP
D)add exports and ignore imports in calculating GDP
E)add exports, but subtract imports, in calculating GDP
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Chapter 9: Inflation and Unemployment
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Sample
Questions
Q1) Suppose that a person's nominal income rises by 5 percent and the consumer price index rises from 125 to 130.The person's real income will:
A)fall by about 1 percent
B)remain constant
C)rise by about 4 percent
D)fall by about 4 percent
E)rise by about 1 percent
Q2) Although economists disagree as to the level of the natural unemployment rate,most agree that full employment means an unemployment rate of about:
A)12 percent to 15 percent
B)10 percent
C)8 percent to 9 percent
D)2 percent to 3 percent
E)6 percent to 7 percent
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Chapter 10: Economic Fluctuations
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Sample Questions
Q1) The long-run trend of potential output refers to:
A)the long-run increase in the relative importance of durable goods in the Canadian economy
B)the long-run expansion or contraction of economic activity which occurs over a series of business cycles
C)fluctuations in economic activity that average 40 months in duration
D)fluctuations in economic activity that occur around holiday seasons
E)fluctuations in economic activity that average 8 or 9 years in duration
Q2) The per-unit cost of production in this economy is:
A)$0.05
B)$0.10
C)$0.50
D)$1.00
E)$10.00
Q3) If equilibrium real output is Q<sub>2</sub>,then:
A)aggregate demand is AD<sub>1</sub>
B)the equilibrium price level is P<sub>1</sub>
C)producers will supply output level Q<sub>1</sub>
D)the equilibrium price level is P<sub>2</sub>
E)there would be positive unplanned investment at P<sub>1</sub>
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) If the federal government attempts to eliminate a budget deficit during a depression,these efforts will:
A)shift the investment demand curve to the right
B)raise exports
C)contribute to inflation
D)reduce the severity of the depression
E)intensify the depression
Q2) Assume that the economy is operating below its potential output.Under these conditions,government fiscal policy should be directed toward a(n):
A)decrease in both government purchases and taxes
B)decrease in government purchases and/or tax increases
C)increase in government purchases and/or tax cuts
D)increase in both government purchases and taxes
E)change in neither government purchases nor taxes
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13
Chapter 12: Money
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Sample Questions
Q1) If the money supply is reduced,we would expect:
A)the money demand curve to shift rightward
B)the interest rate to fall
C)bond prices to fall
D)the money demand curve to shift leftward
E)the money supply curve to shift to the right
Q2) Purchasing common stock by writing a cheque best exemplifies money serving as a(n):
A)store of purchasing power
B)measure of value
C)means of exchange
D)index of satisfaction
E)standard of deferred payments
Q3) When the reserve ratio increases:
A)desired reserves are changed into excess reserves
B)the excess reserves of banks are increased
C)a single bank can no longer lend dollar-for-dollar with its excess reserves
D)excess reserves are turned into desired reserves
E)the money supply increases
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Page 14
Chapter 13: Monetary Policy
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Sample Questions
Q1) A leftward shift of the traditional Phillips curve suggests that:
A)the productivity of labour has decreased
B)a lower rate of inflation is now associated with each rate of unemployment than previously
C)cost-push inflation is present
D)a higher rate of inflation is now associated with each rate of unemployment than previously
E)demand-pull inflation is present
Q2) When the Bank of Canada engages in an easy money policy,the interest rate received on bonds tends to:
A)fall
B)rise
C)remain constant
D)move in the same direction as the bonds' price
E)move in a random fashion
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15
Chapter 14: The Foreign Sector
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Sample Questions
Q1) Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Ceteris paribus,under a system of flexible exchange rates,we can expect the British demand for Canadian dollars to:
A)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to appreciate vis-a-vis the pound
B)decrease, the supply of Canadian dollars for pounds to decrease, and the dollar to either appreciate or depreciate vis-a-vis the pound
C)decrease, the supply of Canadian dollars for pounds to increase, and the dollar to depreciate vis-a-vis the pound
D)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to depreciate vis-a-vis the pound
E)increase, the supply of Canadian dollars for pounds to decrease, and a Canadian balance of payments surplus to develop
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Chapter 15: Foreign Trade
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Sample Questions
Q1) Trade based upon comparative advantage is economically beneficial because:
A)it promotes an efficient allocation of world resources
B)it gives consumers a narrower range of products to choose from
C)it gives governments the chance to charge high tariffs on imports
D)it allows government policy makers to choose the products the economy will specialize in
E)it gives domestic businesses the chance to reduce the number of competitors they face in product markets
Q2) When compared with the case of free trade,the imposition of a quota of wy will:
A)lower domestic price and increase domestic consumption
B)increase the revenues of domestic producers by areas E + F + K
C)increase the revenues of domestic producers by areas G + H
D)increase the revenues of domestic producers by areas E + F + G + H + J
E)lower the revenues of domestic producers by areas E + F + G + H + J
Q3) A protective tariff will:
A)increase the sales revenues of foreign producers
B)increase the sales revenues of domestic producers
C)result in a transfer of income from government to domestic consumers
D)result in a transfer of income from government to domestic producers
E)result in a transfer of income from government to foreign producers
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