Social Science Economics Exam Review
Course Introduction
Social Science Economics introduces students to the fundamental theories, concepts, and methods used to analyze economic behavior within a broader social context. The course explores how economic systems operate, interact with societal institutions, and respond to policy interventions. Students will examine topics such as supply and demand, market structures, government regulation, income distribution, and globalization, while considering how cultural, political, and historical factors shape economic outcomes. Through case studies and empirical research, the course emphasizes critical thinking and the application of economic reasoning to real-world social issues.
Recommended Textbook
Microeconomics Today The Macro View 17th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: The Nature of Economics
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Sample Questions
Q1) In the above graphs a direct relationship is shown by
A)Graph A.
B)Graph B.
C)Graph C.
D)Graph D.
Answer: B
Q2) Wants are
A)another term for needs.
B)the things people would consume if they had unlimited incomes.
C)the things people consume with their income.
D)all the things people really need in order to live comfortably.
Answer: B
Q3) When constructing economic models,economists are more concerned with
A)what people say than what they do.
B)what people think than what they say.
C)what people do than what they say.
D)what people say than what they do or think.
Answer: C
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3
Chapter 2: Scarcity and the World of Trade-Offs
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Sample Questions
Q1) Economic goods are defined as
A)tangible items only.
B)services only.
C)anything from which an individual derives satisfaction.
D)any item which is available in sufficient quantity at zero price.
Answer: C
Q2) Production refers to
A)physically producing material goods only.
B)any activity carried on by a firm,whether a corporation,partnership,or sole proprietorship.
C)any activity that results in the conversion of resources into goods and services that can be consumed.
D)any activity that causes a material conversion of manufactured goods.
Answer: C
Q3) A straight-line production possibilities curve has
A)an increasing opportunity cost between the two goods.
B)a decreasing opportunity cost between the two goods.
C)a constant opportunity cost between the two goods.
D)no opportunity cost between the two goods.
Answer: C
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Chapter 3: Demand and Supply
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Sample Questions
Q1) John increases his consumption of Good X and Good Y when his income increases.For John
A)Good X and Good Y are substitute goods.
B)Good X and Good Y are complement goods.
C)Good X is an inferior good.
D)Good X and Y are normal goods
Answer: D
Q2) The fact that when the price of a good goes up,people buy less of it is known as the A)law of supply.
B)law of demand.
C)concept of market equilibrium.
D)need for inferior goods.
Answer: B
Q3) Refer to the above figure.A movement from point A to point B indicates A)an increase in demand.
B)a decrease in demand.
C)an increase in quantity demanded.
D)a decrease in quantity demanded.
Answer: C
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Page 5
Chapter 3: Extensions of Demand and Supply Analysis
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Sample Questions
Q1) Why does a sports car cost more than a mountain bike?
A)because sports car manufacturers are greedier than mountain bike manufacturers
B)because sports cars are priced higher in order to make them attractive as status symbols
C)because more scarce resources are required to produce a sports car than to produce a mountain bike
D)because mountain bike manufacturers know that their customers have relatively low incomes
Q2) An unexpected import restriction imposed on mangoes by the USDA
A)will reduce the price of mangoes in the United States.
B)will increase the price of mangoes in the United States.
C)will discourage American producers of mangoes.
D)will reduce the price of mango juice in the United States.
Q3) Some oil refineries were damaged by Hurricane Ike of 2008,leading to
A)a decrease in supply of gasoline.
B)a decrease in quantity supplied of gasoline.
C)a decrease in demand for gasoline.
D)a decrease in quantity demanded for gasoline.
Q4) What are the terms of exchange and how are these terms related to the price?
Q5) Who gains and who loses from rent controls?
Page 6
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Chapter 4: Public Spending and Public Choice
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Sample Questions
Q1) The current Medicare system is designed so that it actually encourages A)cost reductions.
B)higher costs of medical services.
C)higher costs only for surgeries.
D)lower drug costs for recipients.
Q2) When the price system fails to generate an efficient allocation of resources,
A)the market will always correct it.
B)consumers will spend less.
C)business will produce more.
D)too few or too many goods will be produced.
Q3) Government-sponsored goods are those goods
A)that society views desirable through the political process.
B)that companies give away as promotional prizes.
C)that have lower than average negative externality.
D)that only low-income individuals consume.
Q4) The largest spending category for state governments is A)welfare.
B)health care.
C)education.
D)highway construction.
Page 7
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Chapter 5: Funding the Public Sector
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Sample Questions
Q1) Using the above figure,which of the lines in the above diagram represents a proportional tax?
A)A
B)B
C)C
D)none of them
Q2) The value of goods,services,incomes or wealth subject to taxation is
A)the tax base.
B)a sales tax.
C)the collected tax revenue.
D)a unit tax.
Q3) If a tax system is progressive,then
A)the average and the marginal tax rates are equal.
B)the marginal tax rate is greater than the average tax rate as income rises.
C)the marginal tax rate is lower than the average tax rate as income rises.
D)the average tax rate is constant,but the dollar amount paid in taxes increases as income increases.
Q4) In what way is corporate income subject to double taxation?
Q5) Explain how corporate profits are taxed twice.
Q6) Explain why an increase in the tax rate can result in lower tax revenues.
Page 8
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Chapter 6: Demand and Supply Elasticity
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Sample Questions
Q1) If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week,the absolute value of price elasticity of demand in that price range is approximately
A)0.23.
B)4.35.
C)0.93.
D)2.34.
Q2) An inelastic demand indicates that
A)quantity demanded does not vary with changes in the price.
B)relatively small changes in price lead to relatively large changes in quantity demanded.
C)relatively large changes in price are required to obtain a relatively small change in quantity demanded.
D)relatively large changes in quantity demanded lead to relatively large changes in price.
Q3) Why can cross price elasticity of demand be positive or negative,unlike the price elasticity of demand with respect to the item's own price?
Q4) Explain the three possible ranges for price elasticity of demand.
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Chapter 7: Consumer Choice
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Sample Questions
Q1) Suppose a family purchases 10,000 gallons of water a year at 20 cents a gallon and one diamond ring at a price of $1000.Can we conclude that the diamond ring provides more utility to the family than water? Explain.
Q2) How does an increase in the price of an individual good or service affect a consumer optimum,and how does this help explain the law of demand?
Q3) Suppose the price of pizza falls to $1 per slice.Assuming that Tom's preferences continue to be those shown in the above table,and assuming that MU/P = 3 is still the point at which his consumer optimum is reached,how many slices will Tom now buy?
A)1 slice
B)2 slices
C)3 slices
D)4 slices
Q4) A rational consumer will NEVER purchase a product when its
A)marginal utility is negative.
B)total utility is increasing at a decreasing rate.
C)marginal utility is decreasing.
D)total utility is decreasing at an increasing rate.
Q5) What is the principle of diminishing marginal utility?
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Chapter 8: Rents, profits, and the Financial Environment of Business
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Sample Questions
Q1) If the supply curve for land was a vertical line,then any payment made for land would be considered
A)as economic rent.
B)as economic lease.
C)as economic interest.
D)as an opportunity lease payment.
Q2) Often single-owner proprietorships seem more profitable than they really are.The reason for this is that
A)they receive special tax benefits compared to corporations.
B)they use different accounting procedures.
C)they often fail to consider the opportunity cost of the labor provided by the owner.
D)they are not allowed to deduct depreciation expense.
Q3) An important problem with corporations is
A)the inability of the government to control and tax the firms.
B)the possibility of large liabilities for the owners.
C)the separation of ownership and control.
D)the difficulties with raising financial capital.
Q4) How is inflation related to interest rates?
Q5) What are the two meanings of interest in economics?
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Chapter 9: The Firm: Cost and Output Determination
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Sample Questions
Q1) A horizontal long-run average cost curve indicates
A)constant returns to scale.
B)diseconomies of scale.
C)constant marginal physical product.
D)economies of scale.
Q2) For an industry in which average costs continue to decline as output rises,what would you expect the minimum efficient scale to be? Explain your answer.
Q3) The change in total variable cost which accompanies one extra unit of output is
A)the average total cost.
B)the average variable cost.
C)the average fixed cost.
D)marginal cost.
Q4) Diseconomies to scale are illustrated by
A)a downward sloping long-run average cost curve.
B)a horizontal long-run average cost curve.
C)an upward sloping long-run average cost curve.
D)a long-run average cost curve that is shaped like an upside down U.
Q5) What is the law of diminishing marginal product?
Q6) What is minimum efficient scale? Why is it important?
Q7) Explain how the long-run average cost curve is constructed graphically.
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Chapter 10: Perfect Competition
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Sample Questions
Q1) The total amount received from the sale of output is
A)average revenue.
B)marginal revenue.
C)total revenue.
D)price revenue.
Q2) Suppose a perfectly competitive industry is in long-run equilibrium.If a decrease in demand leads to a higher long-run price,we know that
A)this is a decreasing-cost industry.
B)this is an increasing-cost industry.
C)some firms will be losing money in the long run.
D)after further adjustments,price will fall to its original level.
Q3) Marginal revenue
A)cannot be used to determine the profit-maximizing rate of production.
B)is the change in total revenues resulting from a change in output.
C)is a change in revenue that is immeasurable and non-quantifiable.
D)cannot be effectively utilized when analyzing the perfect competitor.
Q4) What is marginal cost pricing? Why is marginal cost pricing important?
Q5) How is the market clearing price established in a perfectly competitive industry?
Q6) What are the main characteristics of a perfectly competitive market?
Page 13
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Chapter 11: Monopoly
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Sample Questions
Q1) What is deadweight loss? Whose loss is it? Explain.
Q2) In equilibrium,which of the following conditions is common to both unregulated monopoly and pure competition?
A)P = MR
B)AR = ATC
C)MR = MC
D)MC = P
Q3) If a monopolist wants to increase the amount it sells,it
A)will keep the price the same.
B)must lower the price on all units.
C)must accept lower profits.
D)must lower the cost of production.
Q4) Economic inefficiency of a monopoly is indicated by
A)P = \(\mathrm { ATC } _ { \text {min } }\) .
B)P > MR.
C)P > MC.
D)MR = MC.
Q5) "Unlike a perfect competitor,a profit-maximizing monopolist produces at an output rate at which marginal revenue exceeds marginal cost." Do you agree or disagree? Why
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Chapter 12: Monopolistic Competition
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Sample Questions
Q1) The monopolistically competitive firm maximizes profit by producing to the point at which
A)ATC = AVC.
B)MC = MR.
C)MR = AR.
D)MC = AR.
Q2) The goal of advertising is to
A)pay for public broadcasting.
B)differentiate a firm's product.
C)overwhelm the buyer so they buy a firm's product.
D)minimize cost curves for the firm.
Q3) How does the short-run equilibrium of a monopolistic competitor differ from a monopolist? How does it differ from a perfect competitor?
Q4) Out of all advertising spending,the largest share goes to
A)television ads.
B)magazine ads.
C)direct marketing.
D)newspaper ads.
Q5) Explain how advertising can act as a signal.
Q6) How does an information product differ from a product such as a desk?
Page 15
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Chapter 13: Oligopoly and Strategic Behavior
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Sample Questions
Q1) When a falloff in usage of a product by some consumers causes others to stop purchasing the item there is
A)price leadership.
B)negative-sum game.
C)positive market feedback.
D)negative market feedback.
Q2) How do economies of scale contribute to the development of an oligopoly?
A)Economies of scale make it legally difficult for new firms to enter.
B)Economies of scale make small-scale producers inefficient.
C)Economies of scale are based on control of a key resource,without which other firms cannot enter an industry.
D)Economies of scale are guaranteed when a patent is granted.
Q3) Which of the following is an example of a horizontal merger?
A)Northeastern Illinois University merging with McDonald's.
B)Northeastern Illinois University merging with a training academy for new professors.
C)Northeastern Illinois University merging with Roosevelt University.
D)Northeastern Illinois University going from a public to a private university.
Q4) What is oligopoly? How does oligopoly differ from the other kinds of market structure?
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Chapter 14: Regulation and Antitrust Policy in a Globalized Economy
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Sample Questions
Q1) The United States as a whole would be inappropriate as the relevant geographic market when an antitrust case involved
A)ABC and NBC.
B)two auto producers.
C)two steel producers.
D)two concrete producers.
Q2) One of the agencies responsible for enforcement of antitrust policy is
A)the Trust Division of Congress.
B)the Federal Trade Commission.
C)the World Trade Organization.
D)the Food and Drug Administration.
Q3) If a natural monopolist is unregulated,then
A)the monopoly will produce efficiently from society's point of view.
B)the monopoly will produce inefficiently from society's point of view.
C)the monopolist will be earning just a normal rate of return on investment.
D)the monopolist will determine the profit maximizing quantity by equating marginal cost to the demand curve.
Q4) Explain the capture hypothesis.
Q6) What is the lemons problem? How do firms try to address this problem? Page 17
Q5) What is the main difference between economic regulation and social regulation?
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Page 18
Chapter 15: The Labor Market: Demand, supply and Outsourcing
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Sample Questions
Q1) A profit-maximizing firm in a competitive market will continue to hire more workers when
A)the marginal factor cost exceeds the marginal revenue product of the additional workers.
B)the marginal factor cost equals the marginal revenue product of the additional workers.
C)the marginal factor cost is less than the marginal revenue product of the additional workers.
D)the marginal factor cost is less than zero.
Q2) Refer to the above table.How do we know that this is not a competitive firm?
A)The marginal physical product decreases as the amount of labor hired increases.
B)The marginal revenue changes as output changes.
C)The marginal revenue product decreases as the amount of labor increases.
D)Marginal physical product cannot be computed for competitive firms.
Q3) Which of the following would cause the labor demand curve to shift to the right?
A)A decrease in demand for the product the labor is used to produce
B)An increase in labor productivity
C)A decrease in the price of a complimentary resource
D)All of the above
Page 19
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Chapter 16: Unions and Labor Market Monopoly Power
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Sample Questions
Q1) The Taft-Hartley Act made all of the following illegal EXCEPT
A)jurisdictional disputes.
B)the Congress of Industrial Organizations.
C)make-to-work laws.
D)closed shops.
Q2) A jurisdictional dispute means that
A)members of a union disagree on the outcome of union elections.
B)a higher court reversed the decision of a lower court in a case brought by a union.
C)a union leadership and membership cannot agree on an issue.
D)two unions disagree on which should represent workers in a particular industry.
Q3) Refer to the above figure.Under monopsony,the wage rate will be
A) \(\mathrm { W } _ { 1 }\) .
B) \(\mathrm { W } _ { 2 }\) .
C) \(\mathrm { W } _ { 3 }\) .
D) \(\mathrm { W } _ { 5 }\) .
Q4) Distinguish between craft unions and industrial unions.
Q5) A union could raise wages without causing unemployment of union members if it can increase demand for union labor.How might this goal be achieved?
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Chapter 17: Income, poverty, and Health Care
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Sample Questions
Q1) Relative poverty
A)has been eliminated in the United States.
B)will always be with us.
C)has never existed in the United States.
D)can be eliminated in the next 20 years.
Q2) The official definition of poverty is
A)exactly the 12 percent of U.S.residents with the lowest incomes.
B)exactly the 20 percent of U.S.residents with the lowest incomes.
C)an absolute measure.
D)a relative measure.
Q3) A Lorenz curve that represents an unequal income distribution is
A)a straight line starting at the origin.
B)a straight line starting at 100%
C)a bowed curved.
D)a line that has a kink in the middle of it.
Q4) A Lorenz curve measures the ________ on the vertical axis.
A)cumulative percentage of money income
B)cumulative percentage of family wealth
C)cumulative percentage of families
D)demand of families on welfare
Page 21
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Chapter 18: Environmental Economics
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Sample Questions
Q1) An individual who pays for personal auto repair has incurred a
A)social cost.
B)private cost.
C)negative externality.
D)positive externality.
Q2) When a person can pass some of her costs of using a resource on to someone else,
A)the use of the resource is not affected by her actions.
B)the internal costs of using the resource exceed the private costs.
C)she uses too much of the resource.
D)she uses too little of the resource.
Q3) Which of the following is NOT a possible solution to the problem of pollution?
A)Subsidizing the costs of production of activities that generate pollution
B)Converting a resource that is communally owned into a privately owned resource
C)Regulating the quantity of pollution that can be generated
D)Imposing a pollution tax on producers
Q4) Which of the following is not a private cost?
A)The health insurance costs a firm must pay for its employees.
B)The pollution caused by a firm dumping its wastes into the river.
C)The coffee pot that Jan dropped and broke this morning.
D)The amount that a firm must pay for raw materials to make its product.
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Chapter 19: Comparative Advantage and the Open Economy
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Sample Questions
Q1) Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day.Ethel can produce a maximum of eight pies or two cakes in a day.Fred has an comparative advantage in the production of A)cakes. B)pies.
C)both cakes and pies. D)neither cakes nor pies.
Q2) The basic proposition in international trade is that A)trade is determined by absolute advantage.
B)in the long run,imports are paid for by exports.
C)everyone is made better off by free trade.
D)fair trade is more important than free trade.
Q3) Mary can clean 20 windows per hour or type 30 pages of paper per hour.Tom can clean 18 windows per hour or he can type 25 pages of paper per hour.Based on this
A)Mary has comparative advantages in activities.
B)Tom has comparative advantages in both activities.
C)Tom has a comparative advantage in cleaning windows.
D)Mary has a comparative advantage in cleaning windows.
Q4) What are the effects of a tariff on a good?
Page 23
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Chapter 20: Exchange Rates and the Balance of Payments
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Q1) A key objective of the gold standard was to
A)create a flexible exchange rate system between countries.
B)create a fixed exchange rate system between countries.
C)allow nations to maintain their gold reserves.
D)allow nations to tax its citizens in gold.
Q2) If there is a negative sign in front of unilateral transfers for the United States,then
A)the United States imported more services than it exported.
B)the value of U.S.gifts to foreigners exceeded foreign gifts to U.S.residents.
C)the United States imported more commercial financial assets than it exported.
D)the United States had a negative balance of trade.
Q3) Explain how the gold standard operated.
Q4) In the balance of payments,all of the following are deficit items EXCEPT
A)imports of merchandise.
B)funds placed in foreign depository institutions.
C)sales of dollars to foreigners.
D)tourism expenditures abroad.
Q5) What brought about the end of the Bretton Woods Agreement?
Q6) Why does the demand curve for Japanese yen slope down?
Q7) How are deficit and surplus items determined in the balance of payments?
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