Principles of Economics
Solved Exam Questions
Course Introduction
Principles of Economics is an introductory course that explores the fundamental concepts, theories, and tools used to analyze how individuals, businesses, and governments make choices about allocating scarce resources. The course covers both microeconomic topics, such as supply and demand, market structures, consumer behavior, and production costs, as well as macroeconomic issues like national income, inflation, unemployment, and fiscal and monetary policy. Emphasis is placed on understanding how economic principles impact real-world issues and the decision-making processes in everyday life, providing a solid foundation for further study in economics and related disciplines.
Recommended Textbook
Economics of Social Issues 20th Edition by Ansel Sharp
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15 Chapters
1882 Verified Questions
1882 Flashcards
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Chapter 1: Alleviating Human Misery: The Role of Economic
Reasoning
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) If the MSC of an additional hour of an activity is greater than the MSB,you should
A)Do more of the activity
B)Do less of the activity
C)Not change your level of the activity
D)Do less of another activity
E)Do more of the activity if you like doing it
Answer: B
Q2) The quantity of goods and services per year that an economic system can produce is limiteD.
A)True
B)False Answer: True
Q3) Mineral deposits found in the ground are not considered true resources.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Economic Systems, Resource Allocation, and
Social Well-Being: Lessons From Chinas Transition
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) If the market is in equilibrium,the price and quantity will be
A)P<sub>1</sub> and X<sub>1</sub>
B)P and X<sub>1</sub>
C)P<sub>1</sub> and X
D)P and X
E)P and X<sub>2</sub>
Answer: D
Q2) The demand curve for an inferior good is upward sloping,like a typical supply curve
A)True
B)False
Answer: False
Q3) While the superiority of the market orientation seems clear,it is equally clear that the transition from a command to a market economy is very difficult
A)True
B)False
Answer: True
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4
Chapter 3: Government Control of Prices in Mixed Systems:
Who Are the Winners and Losers
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) A 10% increase in the minimum wage is estimated to increase teenage unemployment by 15%.
A)True
B)False
Answer: False
Q2) If the supply of labor curve is positively sloped,the substitution effect is dominating.
A)True
B)False
Answer: True
Q3) Firms can offset increased wage costs due to an increase in the minimum wage by increasing efficiency.
126.Evidence indicates the minimum wage has little effect on the income distribution.
A)True
B)False
Answer: True
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Chapter 4: Pollution Problems: Must We Foul Our Own Nests
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) Given that the firm's demand and supply curves are D and S,respectively,which curve is the MSC curve for the polluting firm's product?
A)D
B)S
C)X<sub>1</sub>
D)X<sub>2</sub>
E)None of the above
Q2) Which of the following could explain a shift in the production possibilities curve from TT<sub>1</sub> to TT<sub>2</sub>?
A)Over-utilization of pollution control activities
B)Better techniques of pollution control
C)Higher prices for other goods and services
D)Increased benefits from pollution control
E)Better technology for producing other goods and services
Q3) Pollution is an example of a negative externality in consumption.
A)True
B)False
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Chapter 5: Economics of Crime and Its Prevention: How
Much Is Too Much
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Laws prohibiting abortions rest on moral grounds rather than economic grounds. A)True
B)False
Q2) If you are willing to take a pay cut to live near a ski resort,the ski resort provides you with
A)Free ski lessons
B)Psychic benefits
C)Opportunities for advancement
D)Marginal social benefits
E)Marginal social costs
Q3) If the police department gets an additional allocation of $40,000,how should the money be allocated between police officers and patrol cars?
A)2 police officers; 0 patrol cars
B)2 police officers; 1 patrol car
C)1 police officer; 1 patrol car
D)1 police officer; 2 patrol cars
E)0 police officers; 4 patrol cars
Q4) Crime prevention is a public good and is subject to the free-rider problem.
A)True B)False
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Chapter 6: The Economics of Education: Crisis and Reform
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) What is this family's willingness to pay for a first year of education?
A)$0
B)$4,000
C)$6,000
D)$8,000
E)$10,000
Q2) A family's demand for education comes from its marginal private benefits.
93.The demand curve for education has a positive slopE.
A)True
B)False
Q3) A significant positive externality of education would support the argument against public education.
A)True
B)False
Q4) The length of the school year in the United States is longer than in most other developed countries.
A)True
B)False
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Chapter 7: Poverty Problems and Discrimination: Why Are
so Many Still so Poor
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Why might an individual's labor resource holdings differ?
A)Mental talents are not equally distributed among people
B)Physical talents are not equally distributed among people
C)People have different
Q2) Skill levels vary among individuals because of
A)Differences in location
B)Differences in education and training
C)The industry the person works in
D)The capital labor ratio in the economy
E)All of the above
Q3) If a family earns $3,000 income,their disposable income is
A)$3,000
B)$4,000
C)$5,000
D)$6,000
E)$8,000
Q4) The welfare reform measures of the mid-1990s eliminated the time limits for receipt of food stamps by poor families.
A)True
B)False
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Chapter 8: The Economics of Monopoly Power: Can Markets
Be Controlled
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) When firms earn profits,
A)They will likely expand
B)New firms will have an incentive to enter the market
C)They are providing a good or service that consumers want more of
D)The market is signaling more firms to enter
E)All of the above
Q2) Which of the following is true of a firm's total costs? They
A)Do not include opportunity costs
B)Become lower as more is produced
C)Are greater than total revenue when the firm is earning a profit
D)Are equal to the cost per unit times the number of units produced
E)All of the above
Q3) Increasing output beyond Q<sub>0</sub> will cause the firm to experience
A)Economies of scale
B)Diseconomies of scale
C)Constant returns to scale
D)Network economies
E)Decreasing total costs
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Chapter 9: The Economics of Professional Sports: What Is the Real Score
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) If a firm's workers add $1,000 to the firm's receipts and total wages equal $500,then monopsonistic profit equals
A)$500
B)$1,000
C)$1,500
D)$500,000
E)A number unable to be determined with the information given
Q2) From an economic perspective,all professional athletes are overpaiD.
A)True
B)False
Q3) Which of the following is NOT necessary for a successful cartel? Members must
A)Produce most of the industry's output
B)Produce a homogeneous output
C)Produce heterogeneous outputs
D)Be able to divide the market
E)Have a way to prevent cheating
Q4) If a cartel's marginal revenue is greater than its marginal cost,it should produce morE.
A)True B)False
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Chapter 10: Competition in the Global Market-Place: Should
We Protect Ourselves From International Trade
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) If D and S are the relevant demand and supply curves,pegging the exchange rate at r<sup>1</sup>
A)Imposes a price floor
B)Results in a balance of payments problem
C)Will increase British demand for U.S.exports
D)Will increase U.S.demand for British imports
E)Will do all of the above
Q2) In the short-run,common market treaties such as NAFTA both create and destroy jobs in member nations.
A)True
B)False
Q3) The largest part of the U.S.supply of foreign currency arises from
A)Investments made by foreigners in the U.S
B)Exports of merchandise
C)Net investment income
D)Gifts that persons abroad send persons in the U.S
E)None of the above
Q4) Most tariffs have been outlawed by the World Trade Organization (WTO).
A)True
B)False
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Chapter 11: Economic Growth: Why Is the Economic Road so
Bumpy
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Joseph Schumpeter theorized that business cycles were determined primarily by long-run waves of innovation.
A)True
B)False
Q2) Relative to the past,business cycles in the U.S.are becoming
A)Shorter in duration
B)More severe
C)Longer in duration
D)(a)and (b)
E)Non-existent
Q3) An erratic short-run fluctuation in economic activity around the long-run trend is called a business cyclE.
A)True
B)False
Q4) Productivity is not influenced by the law of diminishing returns.
A)True
B)False
Q5) Strong economic expansions are sometimes
A)True
B)False
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Chapter 12: Money,Banking and the Financial System: Old
Problems With New Twists
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Suppose that the Fed has increased the money supply.This is shown in the diagram by
A)q<sub>1</sub> to q<sub>0</sub>
B)q<sub>0</sub> to q1
C)MS<sup>1</sup>
D)MS<sup>2</sup>
E)None of the above
Q2) Monetary policyrefers to control of the money supply by the Federal Reserve authorities.
A)True
B)False
Q3) Assets that are "marked to market" will be priced at
A)Their original purchase price
B)Their original purchase price less the depreciation of the asset
C)A price that is equal to the original purchase price plus the rate of inflation
D)A price that is based upon the asset's current market value
E)A price determined in the stock market
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Page 14
Chapter 13: Unemployment and Inflation:
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119 Flashcards
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Sample Questions
Q1) Cyclical unemployment occurs because workers have no marketable job skills. A)True
B)False
Q2) Suppose a family spends $20,000 on a basket of goods in 2011.Suppose the same basket costs $22,000 in 2012.Using 2011 as the base year,the price index for 2012 is A)105
B)102
C)111
D)110
E)None of the above
Q3) The circular flow of economic activity developed in the text is a model of the A)Flow of goods,resources,payments and expenditures between the sectors of the economy
B)Influence of government on business behavior
C)Influence of business on consumers
D)Role of unions and government in the economy
E)Interaction among taxes,prices,and profits
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Page 15
Chapter 14: Government Spending,Taxation,and the
National Debt: Who Wins and Who Loses
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125 Flashcards
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Sample Questions
Q1) The 1986 Tax Reform Act ________ the number of tax brackets and _______ the highest tax bracket.
A)Increased; increased
B)Increased; decreased C)Decreased; increased
D)Decreased; decreased E)Decreased; did not change
Q2) Which of the following shifts represents the effect of an output tax levied on this good?
A)D to D<sub>1</sub>
B)D<sub>1</sub> to D
C)S to S<sub>1</sub>
D)S<sub>1</sub> to S
E)None of the above
Q3) If an output tax is levied on a product that has a perfectly elastic demand,the tax will be shifted completely to the consumer in the form of higher prices.
A)True
B)False
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Chapter 15: Social Security and Medicare: How Secure Is Our
Safety Net for the Elderly
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The most important factor explaining the growth in personal health care expenditures on hospital and physician services is higher prices for these services.
A)True
B)False
Q2) The Medicare program could be secured by increasing premiums,deductibles and co payments.
A)True
B)False
Q3) If your deductible is $400 and you have co-insurance of 25%,how much will you have to pay for a $5,000 hospital stay?
A)$400
B)$1,150
C)$1,250
D)$1,550
E)$1,650
Q4) Social Security benefits are adjusted each year for inflation using the Consumer Price Index (CPI).
A)True
B)False
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