Introduction to Economics
Mock Exam
Course Introduction
Introduction to Economics provides students with a foundational understanding of the core principles that govern economic systems, both at the individual and societal levels. This course explores key concepts such as supply and demand, opportunity cost, market structures, and the roles of consumers and producers. Students will examine how economies allocate resources, the impact of government policies on markets, and the distinction between microeconomics and macroeconomics. Through real-world examples and analytical frameworks, the course equips students with the tools needed to interpret economic trends and make informed decisions as citizens and future professionals.
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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Page 2
Chapter 1: Introduction: What Is Economics
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Sample Questions
Q1) The knowledge and skills acquired by a worker through education and experience is a description of which factor of production?
A) physical capital
B) human capital
C) labor
D) entrepreneurship
Answer: B
Q2) Positive relationships are also referred to as inverse relationships.
A)True
B)False
Answer: False
Q3) Normative economic analysis answers what question?
Answer: Normative economic analysis answers the question "what ought to be."
Q4) Microeconomics is the study of aggregate behavior in the economy.
A)True
B)False
Answer: False
Q5) Give an example of something that is scarce in your life and explain the choices you've made because of scarcity.
Answer: Responses are numerous and will vary by students.
Page 3
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Chapter 2: The Key Principles of Economics
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Sample Questions
Q1) According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker
A) increases total output by the same amount as previous workers.
B) increases total output by more than the amount of previous workers.
C) increases total output by less than the amount of previous workers.
D) decreases total output.
Answer: C
Q2) According to the principle of diminishing returns, an additional worker decreases total output.
A)True
B)False
Answer: False
Q3) The current income you would sacrifice to start your own lawn-cutting business is part of the
A) opportunity cost of invested funds.
B) opportunity cost of starting a business.
C) cost of doing business.
D) present value of your initial investment.
Answer: B
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Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) If consumer preference for a product increases, this will cause the equilibrium price of the product to go down, and the equilibrium quantity of the product to go up.
A)True
B)False
Answer: False
Q2) Figure 3.5 illustrates a set of supply and demand curves for hamburgers. An increase in demand and an increase in quantity supplied are represented by a movement from A) point b to point a.
B) point c to point d.
C) point d to point a.
D) point b to point d.
Answer: C
Q3) Governments sometime create an excess supply of a product by setting a minimum price that is greater than the equilibrium price, resulting in a permanent excess supply of the product. This is known as a price ceiling.
A)True
B)False
Answer: False
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5
Chapter 4: Elasticity: A Measure of Responsiveness
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Sample Questions
Q1) Demand for items people do not really need for their survival, such as cars, is generally ________ than demand for items such as water.
A) higher
B) lower
C) more elastic
D) less elastic
Q2) Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?
Q3) The quantity supplied of bagels is 100 at the unit price $1. Suppose the price elasticity of supply by the initial value method is 1.5, and you would like to induce sellers to increase the quantity of bagels supplied to 130. Then the new price for bagels must be A) $11.
B) $10.20.
C) $1.20.
D) $1.10.
Q4) What is total revenue for a firm?
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Chapter 5: Production Technology and Cost
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Sample Questions
Q1) Under which conditions might diseconomies of scale result?
A) hampered coordination brought about by bureaucracy
B) decreasing costs of inputs
C) increasing output prices
D) usage of a large amount of indivisible inputs by the firm
Q2) Figure 5.3 shows a firm's marginal cost, average total cost, and average variable cost curves. For an output level greater than Q = 100, the average total cost curve is upward-sloping because
A) decreasing average fixed cost outweighs increasing average variable cost.
B) diminishing returns are not severe enough to outweigh decreasing average fixed cost.
C) increasing average variable cost outweighs decreasing average fixed cost.
D) marginal cost is increasing.
Q3) If the first copy cost of a music video is $223,000 and the marginal cost is $0, then how many copies should the firm sell in order to break even if the price was $10 each?
A) zero
B) 2,230
C) 22,300
D) 223,000
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Chapter 6: Perfect Competition
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Sample Questions
Q1) Figure 6.3 shows the cost structure of a firm in a perfectly competitive market. The firm will stay in the market in the long run only if the market price is greater than or equal to
A) $4.50.
B) $6.
C) $10.
D) $15.
Q2) The supply curve for a perfectly competitive market
A) is the summation of all the average cost curves of each firm in a market.
B) is the summation of all the marginal cost curves, above the minimum of the average variable cost curve, from all the individual firms in the market.
C) is not related to the supply curves of individual firms.
D) is independent of price.
Q3) If marginal revenue is $8 and marginal costs is $10, the firm should increase its output.
A)True
B)False
Q4) Figure 6.4 represents a perfectly competitive firm's costs. Illustrate the firm's short-run supply curve on the graph. Explain.
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Chapter 7: Monopoly and Price Discrimination
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Sample Questions
Q1) When governments grant patents
A) producers earn profits that are substantially higher than would occur in a competitive market.
B) consumers pay a higher price than they would in a competitive market.
C) consumers are likely to pay lower prices than they would in a competitive market.
D) Both A and B are correct.
Q2) Table 7.2 contains price, demand, and cost data for the Capri Theater, the only first-run movie theater in a small town. What is its total profit under the student discount policy?
A) $450
B) $550
C) $600
D) $650
Q3) In which of the following situations can a firm or individual apply for a patent?
A) A firm develops a new tool that makes cutting grass much easier.
B) An author publishes a new novel.
C) Nicki Minaj, a recording artist, releases a new CD in the market.
D) All of the above are activities that can be patented.
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Chapter 8: Market Entry, Monopolistic Competition, and Oligopoly
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Sample Questions
Q1) Monopolistically competitive markets are different from perfectly competitive markets because in monopolistically competitive markets firms
A) have some control over price, while in perfectly competitive markets firms have no control over price.
B) face substantial barriers to entry, while in perfectly competitive markets firms face no significant barriers to entry.
C) have no control over price, while in perfectly competitive markets firms have some control over price.
D) sell a standardized product, while in perfectly competitive markets firms sell a differentiated product.
Q2) Consider an unregulated monopoly in Figure 8.13. If a second firm enters the market, the demand curve facing the first firm will
A) shift to the right.
B) shift to the left.
C) remain the same.
D) There is insufficient information.
Q3) What are the main features of the Clayton Act?
Q4) What are the key characteristics of an oligopoly?
Page 10
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Chapter 9: Imperfect Information, External Benefits, and External Costs
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Sample Questions
Q1) Suppose buyers in the used car market are willing to pay $8,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 20% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
A) $7,000
B) $6,000
C) $5,000
D) $4,000
Q2) Recall the Application. Explain the effect of mandatory car insurance laws on the number of traffic accidents and fatalities.
Q3) Recall the Application. Why is there adverse selection in the baseball pitcher free agent market?
Q4) An example of a good that is nonexcludable is
A) cable TV.
B) a computer.
C) a published scientific discovery.
D) a concert.
Q5) What is the purpose of a pollution tax?
Q6) Health insurance leads to what types of moral hazards?
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Chapter 10: The Labor Market and the Distribution of Income
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Sample Questions
Q1) The input-substitution effect associated with an increase in the wage implies that as the wage increases, a firm will substitute other inputs for the relatively expensive labor.
A)True
B)False
Q2) The difference in wages between college graduates and high school graduates
A) has increased in recent years.
B) is smaller than in the past.
C) is nonexistent when labor markets are in equilibrium. D) has been stable for several decades.
Q3) Figure 10.1 depicts a firm's marginal revenue product curve. If the product price is $2, what is the marginal product of the 30th hour of labor?
A) 5 units
B) 6 units
C) 7 units
D) 8 units
Q4) Lawyers are required to pass a comprehensive bar exam to be licensed to practice law. What effect should this have on the number of lawyers, the wages they receive, and the price people have to pay to receive legal services?
Page 12
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Chapter 11: Measuring a Nations Production and Income
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Sample Questions
Q1) GDP calculations tend to exclude all of the following EXCEPT
A) illegal transactions.
B) environmental quality.
C) work that people do for themselves in their own homes.
D) salaries paid to government employees.
Q2) Define GDP.
Q3) Based on the information in Scenario 1, real GDP in 2016 (in 2015 dollars) in this economy was
A) $830.
B) $1,025.
C) $1,090.
D) $1,345.
Q4) The largest component of GDP is
A) government spending.
B) consumption expenditures.
C) private investment expenditures.
D) net exports.
Q5) In a business cycle, the date at which a recession starts is called a trough.
A)True
B)False
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Chapter 12: Unemployment and Inflation
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Sample Questions
Q1) According to this Application, becoming unemployed caused ________ in perceived well-being for men if those in their peer group were also unemployed.
A) a larger decrease
B) a smaller decrease
C) no change
D) an large increase
Q2) The percentage rate of change in the price level is called the A) chain-weighted price index.
B) Consumer Price Index.
C) rate of inflation.
D) rate of absorption.
Q3) Unemployment and recessions are sometimes necessary to curb high inflation.
A)True
B)False
Q4) Unemployment insurance tends to lead to the unemployed worker spending less time unemployed.
A)True
B)False
Q5) What is meant by the term "the natural rate of unemployment"?
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Chapter 13: Why Do Economies Grow
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Sample Questions
Q1) When comparing the measure of goods and services of one country to that of another, economists generally compare
A) the real GDP.
B) the real GDP per capita.
C) the real GDP and net exports.
D) the real GDP and the labor force.
Q2) Trade deficits always lead to future decreases in consumption if the trade deficits
A) support current investment.
B) support current consumption.
C) support either current investment or current consumption.
D) require borrowing from abroad.
Q3) In making accurate comparisons of GDP across countries, it is important to take differences in ________ into account.
A) population size
B) the average age of the population
C) family size
D) all of the above
Q4) Will increased imports of supercomputers for industry promote economic growth?
Q5) Why does depreciation decrease the stock of capital?
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Chapter 14: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) In the long run
A) price and output levels are mutually dependent.
B) the level of output depends on the price level.
C) the level of output is independent of the price level.
D) the price level depends on the level of output.
Q2) When consumers spend and buy things regardless of their level of income, this is known as
A) bad financial management.
B) living the good life.
C) autonomous consumption spending.
D) using credit to its maximum.
Q3) According to this Application, the recessions in 1973 and 1979 were caused by A) supply shocks.
B) deflation.
C) foreign monetary developments.
D) arbitrage losses in the foreign exchange market.
Q4) Define the "consumption function."
Q5) Aggregate demand determines output in the short run if prices are flexible.
A)True
B)False
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Chapter 15: Fiscal Policy
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Sample Questions
Q1) According to supply-side economics, a(n) ________ in the tax rate tends to increase the labor supply and ________ aggregate output.
A) decrease; increase
B) increase; decrease
C) decrease; decrease
D) increase; increase
Q2) Explain how automatic stabilizers work.
Q3) The government strives to operate at neither a deficit nor surplus budget in order to keep the federal budget
A) balanced.
B) equal to inflation.
C) in line with the stock market.
D) equal to that of other countries.
Q4) Contractionary policies are government policies that
A) increase aggregate supply.
B) decrease aggregate supply.
C) decrease aggregate demand.
D) increase aggregate demand.
Q5) What is meant by the term "outside lags"?
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Chapter 16: Money and the Banking System
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Sample Questions
Q1) Define "money."
Q2) According to this Application, residents of Greece in 2015 ________ withdrawals of funds from their banks in order to hold ________ cash.
A) increased; less
B) increased; more
C) decreased; less D) decreased; more
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) Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of
A) $250,000.
B) $125,000.
C) $62,500.
D) $0.
Q5) List four of the Federal Reserve's key functions.
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Chapter 17: Monetary Policy and Inflation
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Sample Questions
Q1) Recall the Application. The experiment conducted by Blinder showed that the actual process of having committee meetings and discussions
A) tended to polarize the group into two distinct factions.
B) improved the group's overall performance.
C) magnified the individual group member's differences.
D) related to the average performance of the individual group members.
Q2) Interest rates will increase if the Fed conducts an open market purchase. A)True
B)False
Q3) The transaction demand for money comes mostly from the fact that A) money is a store of value.
B) money is a medium of exchange.
C) money is a unit of account.
D) money has low opportunity cost.
Q4) An open market purchase by the Fed
A) increases investment and increases output.
B) increases investment and decreases output.
C) decreases investment and increases output.
D) decreases investment and decreases output.
Q5) What three factors affect the demand for money?
Page 19
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Chapter 18: International Trade and Finance
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Sample Questions
Q1) Import bans, import quotas, voluntary export restraints, and tariffs on goods all
A) increase imports and raise prices for consumers.
B) reduce imports and prices for consumers.
C) reduce imports and raise prices for consumers.
D) increase imports and reduce prices for consumers.
Q2) If the value of the U.S. dollar changes from 1.4 euros to 1.2 euros, we would expect that the United States would experience a ________ in exports and a ________ in imports.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
Q3) Which of the following groups of countries are members of NAFTA?
A) Japan, Canada, and Mexico
B) the United States, Japan, and Mexico
C) the United States, France, and Germany
D) the United States, Canada, and Mexico
Q4) Would consumers benefit more from a tariff or a quota on imports?
Q5) List four protectionist policies.
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