Social Science Seminar: Economics Study Guide Questions
Course Introduction
This Social Science Seminar provides students with a comprehensive exploration of foundational and contemporary topics in economics, focusing on how individuals and societies allocate scarce resources. Through engaging discussions, case studies, and collaborative projects, students analyze economic theories, market structures, policy debates, and their real-world applications. Emphasis is placed on critical thinking and the interpretation of data to understand issues such as supply and demand, economic growth, income distribution, globalization, and government intervention. The seminar encourages interdisciplinary connections and equips students with analytical tools to evaluate economic challenges in a rapidly changing world.
Recommended Textbook
Economics USA 8th Edition Edition by Nariman Behravesh
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Page 2
Chapter 1: What is Economics
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Q1) Measurement is necessary in economics to
A) construct diagrams depicting economic models.
B) evaluate the predictions of economic models.
C) help distinguish positive from normative statements.
D) identify the tasks an economy must perform.
E) construct mathematical models of the economy.
Answer: B
Q2) A movement from an output combination inside the production possibilities curve to a combination on the curve
A) requires an increase in resources or an improvement in technology.
B) leads to an increase in inequality in the distribution of income.
C) is possible only if the production possibilities curve shifts inward to the left.
D) enables society to increase the output of one good without reducing the output of another good.
E) leads to a decline in per capita output.
Answer: D
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3
Chapter 2: Markets and Prices
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Q1) If the supply curve for peaches slopes upward,a decrease in the demand for peaches causes the equilibrium price
A) to rise and quantity to fall.
B) to fall and quantity to rise.
C) and quantity both to fall.
D) and quantity both to rise.
E) and quantity both to remain unchanged.
Answer: C
Q2) The price system determines the level and composition of output because it relies on firms' acting in accord with
A) altruistic concerns.
B) government mandates.
C) the profit motive.
D) the market supply curve.
E) the predictions of economists.
Answer: C
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4
Chapter 3: The Business Firm: Organization,motivation,and
Optimal Input Decisions
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Q1) A production technique is essentially a A) level of output.
B) given combination of inputs.
C) type of market structure.
D) form of public regulation.
E) length of time.
Answer: B
Q2) Under diminishing marginal returns,as the amount of a variable input is reduced,the marginal product of a dollar's worth of the input will
A) exceed total product.
B) exceed average cost.
C) rise.
D) fall.
E) remain the same, but total input cost will rise.
Answer: C
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Page 5
Chapter 4: Getting Behind the Demand and Supply Curves
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Q1) Approximately what percentage of their income do U.S.households spend on taxes?
A) 8 percent
B) 11 percent
C) 23 percent
D) 32 percent
E) 46 percent
Q2) A rising marginal cost curve reflects a falling ________ curve.
A) total product
B) marginal product
C) average fixed cost
D) total cost
E) long-run average cost
Q3) In a market economy,consumer purchases depend on their
A) costs and what they can charge.
B) production decisions.
C) income, tastes, and market prices.
D) expenses, supply, and levels of activity.
E) past outlook and state of technology.
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Chapter 5: Market Demand and Price Elasticity
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Q1) The Turnpike Commission estimates that the price elasticity of demand for travel on the highway is
A) 0.17.
B) 0.30.
C) 0.50.
D) 1.
E) 6.
Q2) A rightward shift in the demand curve for a commodity necessarily means that A) consumers' incomes have fallen.
B) supply conditions are more favorable.
C) equilibrium price decreases.
D) consumers are willing to buy more of the good at each price than previously.
E) the price of complementary goods increased.
Q3) If a 1 percent increase in price causes a firm's sales to decline by one-half of 1 percent,the price elasticity of demand is
A) 0.005.
B) 0.05.
C) 0.5.
D) 2.0.
E) 5.
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Chapter 6: Economic Efficiency,market Supply,and Perfect Competition
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Q1) Which set of characteristics best identifies a monopolistically competitive market?
A) many firms, homogeneous product, significant barriers to entry, significant nonprice competition, and considerable power over price
B) few firms, differentiated product, no barriers to entry, the absence of nonprice competition, and considerable advertising
C) one firm producing a product with no close substitutes, significant barriers to entry, and considerable power over price
D) many firms, differentiated product, few barriers to entry, and nonprice competition
E) few firms, differentiated product, significant barriers to entry, and significant amounts of nonprice competition
Q2) If the price is $5 per unit,the profit-maximizing level of output is A) zero.
B) 0Q1.
C) 0Q2.
D) 0Q3.
E) 0Q4.
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Chapter 7: Monopoly and Its Regulation
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Q1) The natural monopoly characteristics of the telecommunication industry disappeared in the last few decades,largely because of
A) the emergence of significant economies of scale in the industry.
B) increased government regulation.
C) increased foreign competition.
D) widespread losses leaving firms financially weak.
E) rapid changes in technology.
Q2) Which of the following conditions would be LEAST likely to lead to a monopolistic market structure?
A) possession of patent rights for basic production processes
B) control over the entire supply of a basic input
C) the need to be a price taker in order to sell in the market
D) significant economies of scale leading to declining average cost until the entire market demand is satisfied
E) exclusive rights to sell in a particular geographic market
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9
Chapter 8: Monopolistic Competition,oligopoly,and Antitrust Policy
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Q1) The presence of a price leader in an oligopolistic industry
A) implies that one firm can consistently charge the highest price.
B) allows firms to coordinate their behavior short of outright collusion.
C) decreases the profits of all other firms.
D) is illegal according to the Sherman Antitrust Act.
E) leads naturally to cost-plus pricing by other firms in the industry.
Q2) An oligopolistic market is one with A) firms having no power over price.
B) few sellers.
C) few buyers.
D) several monopolists operating simultaneously.
E) product groups.
Q3) An industry that contains a large number of firms selling goods that are similar but not identical and into which entry of new sellers is relatively easy would be an example of
A) perfect competition.
B) pure monopoly.
C) regulated monopoly.
D) oligopoly.
E) monopolistic competition.
Page 10
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Chapter 9: Pollution and the Environment
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Q1) A principal source of air pollution in the United States is
A) motor vehicles.
B) fertilizers, pesticides, and detergents.
C) the steel industry.
D) nuclear reactors.
E) discharges from municipal sewage plants.
Q2) An external diseconomy results in a socially nonoptimal use of a resource because A) the private costs exceed the social costs.
B) it prohibits economic growth.
C) the resource user does not bear the full cost of his or her actions.
D) firms will not maximize their profits.
E) too little of the resource will be used.
Q3) A mandatory neighborhood recycling program is an example of dealing with an environmental pollution problem by using A) the price system.
B) tax incentives.
C) effluent fees.
D) direct regulation.
E) dumping duties.
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Page 11
Chapter 10: The Supply and Demand for Labor
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Q1) One function of the National Labor Relations Board is to
A) sanction strikes.
B) set wages and working conditions.
C) control the composition of the AFL-CIO.
D) hold elections to determine which, if any, union would represent various groups of employees.
E) enforce compliance with the so-called American Labor Plan.
Q2) Under perfect competition,the supply curve of labor or other inputs to an individual firm is
A) horizontal.
B) backward bending.
C) downward sloping.
D) vertical.
E) identical with the market supply curve of the input.
Q3) If the actual wage is $5,there will be
A) downward pressure on the wage because of the excess supply of labor.
B) no tendency toward change because $5 is the equilibrium wage.
C) upward pressure on the wage because the labor supply function is horizontal.
D) upward pressure on the wage because of the excess demand for labor.
E) a reduction in the supply of labor.
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Chapter 11: Interest,rent,and Profit
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Q1) Which of the above diagrams,illustrating changes in demand,best demonstrates the concept of economic rent?
A) A
B) B
C) C
D) D
E) E
Q2) The pure rate of interest is the
A) rate of interest charged for large, as compared to small, loans.
B) interest rate minus any administrative costs, such as bookkeeping and collection.
C) difference between the interest rate charged on a loan with no risk and one with a measurable degree of risk.
D) prime rate of interest.
E) interest rate on a riskless loan.
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13
Chapter 12: Poverty,income Inequality,and Discrimination
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Sample Questions
Q1) Social Security and payroll taxes are typically considered to be
A) invisible.
B) indirect.
C) regressive.
D) redundant.
E) equitable.
Q2) Economists criticize wage rates set on the basis of comparable worth because they
A) promote efficiency at the expense of equity.
B) ignore the effect of such important job characteristics as accountability, knowledge and skills, mental demands, and working conditions.
C) generate surplus value that accrues to the owner rather than the employed.
D) establish wage rates that do not reflect market demand and supply conditions.
E) relate only to government employees and not all workers.
Q3) Those at the lowest end of the income distribution are typically those who A) have large amounts of inherited wealth.
B) are disabled, single, or lacking in employable skills.
C) hold jobs requiring extensive training.
D) have unique abilities or skills.
E) manage to obtain monopoly power.
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Page 14
Chapter 13: Economic Growth
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Q1) The firm or individual that first applies a new technology is called a(n)
A) consumer.
B) monopolist.
C) Keynesian.
D) innovator.
E) financier.
Q2) In an economy with a GDP of $3,000 billion and a capital-output ratio of three,an increase in this year's full-employment GDP of $30 billion means that last year's intended investment must have increased by ________ billion.
A) $10
B) $30
C) $90
D) $100
E) $1,000
Q3) The major determinant of the rapidity with which an innovation spreads is its
A) durability.
B) complexity.
C) sex appeal.
D) exclusiveness.
E) profitability.
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Chapter 14: Public Goods and the Role of the Government
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Q1) The biggest financial winners from the passage of Proposition 13 in California were
A) renters.
B) homeowners.
C) business and agriculture.
D) tourists.
E) local governments.
Q2) If external diseconomies exist in an industry,the
A) market price is too high and should be reduced.
B) industry is producing a public good.
C) socially optimal output level is below the equilibrium output level.
D) industry is perfectly competitive.
E) industry demand curve should be increased and the industry should be subsidized.
Q3) Tax incidence refers to
A) whether the sales tax is collected by sellers or buyers.
B) who bears the ultimate burden of the tax.
C) the principle of taxation used, either benefit or ability-to-pay.
D) the classification of a particular act as tax evasion or tax avoidance.
E) the separation of taxation from expenditure as in revenue sharing.
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16
Chapter 15: National Income and Product
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Q1) Gross domestic product is
A) a measure of the value of all goods and services produced in a given year.
B) a measure of the value of all goods and services produced by the private sector in a given year.
C) measured, when possible, using the prices of goods and services as a measure of value.
D) equal to the total wage bill.
E) a measure of the total value of all market transactions in a given year.
Q2) The concept of value added
A) is not applicable to intermediate goods.
B) represents a firm's or industry's contribution to production.
C) is the same as a firm's profits.
D) refers to the nonmarketed goods and services not included in GDP.
E) helps distinguish between current dollar GDP and real GDP.
Q3) The best example of an indirect business tax is
A) an excise tax on alcoholic beverages.
B) the personal income tax.
C) depreciation.
D) the corporate income tax.
E) retained earnings.
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Chapter 16: Business Fluctuations and Unemployment
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Q1) At full employment,the short-run aggregate supply curve
A) slopes downward.
B) becomes vertical.
C)shifts to the right.
D) causes the aggregate demand curve to fluctuate.
E) reflects declining costs of production.
Q2) Frictional unemployment
A) exists when jobs are available for qualified workers but the unemployed lack the required qualifications.
B) refers to the social frictions caused by unemployment.
C) results from the entrance of new workers into the labor market and the voluntary movement of workers between positions.
D) was the major component of unemployment during the Great Depression.
E) can and should be completely eliminated.
Q3) If the money supply is fixed,increases in the price level reduce
A) interest rates.
B) imports.
C) the rate of inflation.
D) total real output purchased.
E) the average money cost of each transaction.
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Chapter 17: The Determination of National Output and the Keynesian Multiplier
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Q1) A 3-percentage-point increase in the interest rate might result in canceling the decision to undertake project
A) A.
B) B.
C) C.
D) D.
E) E.
Q2) An upward shift in the saving function
A) will cause GDP to rise.
B) will have the same effect on GDP as an upward movement along the saving function.
C) means that, at any given level of income, people want to save less.
D) will cause GDP to fall by an amount equal to the shift divided by the marginal propensity to save.
E) means that the marginal propensity to save must have fallen.
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Chapter 18: Fiscal Policy and National Output
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Q1) The Council of Economic Advisers
A) was established to help the president carry out the objectives of the Employment Act of 1946.
B) was established by President Kennedy to promote fiscal policy.
C) is directly responsible to the House Ways and Means Committee.
D) was made an integral part of the policy-making process under the leadership of John Maynard Keynes.
E) has consistently urged balanced budgets.
Q2) The existence of an inflationary gap implies that
A) the aggregate demand curve intersects the aggregate supply curve above potential output.
B)fiscal policy should be used to push the aggregate demand curve to the right.
C)equilibrium GDP is below full-employment GDP.
D)the aggregate demand curve must be raised to promote a full-employment GDP.
E)government spending should be raised and taxes lowered to help the economy deal with inflation.
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Chapter 19: Inflation
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Q1) Demand-side inflation results in a downward-sloping Phillips curve when the A) aggregate demand curve slopes downward.
B) aggregate supply curve shifts to the left.
C) aggregate demand curve does not shift to the right or the left.
D) aggregate supply curve slopes upward.
E) price level is constant.
Q2) Why were Johnson's 10 percent surtax and Nixon's price-control program ineffective in controlling the inflationary pressures they were designed to stop?
A) Both programs were based on the assumption that the aggregate supply was horizontal.
B) Both presidents misread the economic signs of the times that clearly pointed to no inflationary pressures.
C) Both were temporary in nature and so did little to deal with strong inflationary expectations.
D) These measures never received the approval or support of the Council of Economic Advisers.
E) The inflationary pressures had subsided by the time these programs were enacted.
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21
Chapter 20: Money and the Banking System
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Q1) Bank X has legal reserve requirements of
A) $3,000,000.
B) $2,000,000.
C) $1,667,000.
D) $1,000,000.
E) $0.
Q2) After this process has worked its way through the banking system,the initial excess reserves in bank A will have led to an additional increase in the money supply of
A) $8,750.
B) $10,000.
C) $17,500.
D) $70,000.
E) $80,000.
Q3) Banks make their profits mainly by
A) charging customers for their services.
B) earning more interest on loans than they pay out on deposits.
C) investing in the stock market.
D) foreclosing on mortgages and other overdue loans.
E) creating money to lend to households and businesses.
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Page 22
Chapter 21: The Federal Reserve and Monetary Policy
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Q1) Which of the following is an example of a government security?
A) treasury bills
B) Federal Reserve notes
C) gold certificates
D) treasury deposits
E) member bank reserves
Q2) The Federal Reserve influences the money supply by managing
A) personal and corporate tax rates.
B) government spending programs.
C) the foreign trade balance.
D) the reserves of the banking system.
E) the number of financial intermediaries.
Q3) The Fed can decrease the money supply by
A) selling government securities.
B) raising taxes.
C) lowering reserve requirements.
D) lowering discount rates.
E) decreasing government spending.
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Chapter 22: Supply Shocks and Inflation
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Q1) It is frequently difficult to separate supply-side from demand-side inflation because A) they are ultimately caused by the same forces.
B) resource price increases may be responsible for the initial price level increase, but further price level increases result from the Fed's efforts to reduce the resulting unemployment.
C) in cases where there is too much aggregate spending, the economy has excess capacity and therefore has a horizontal aggregate supply curve.
D) both kinds of inflation lead to a rapidly increasing total real output.
E) the resulting price level effects of each offset one another.
Q2) The term stagflation refers to
A) periods of falling prices.
B) a period of high unemployment coupled with rising prices.
C) techniques of policy the government can use to promote economic stability.
D) a combination of high rates of employment coupled with rising purchasing power of the currency.
E) periods of rising labor productivity leading to unemployment.
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Chapter 23: Productivity,growth,and Technology Policy
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Q1) Which of the following would be conducive to developing and commercializing a new technology?
A) keeping personal tax rates low to encourage consumption
B) using monetary policy to keep interest rates high
C) policies to encourage investment in plant and equipment
D) eliminating tax provisions that allow firms to depreciate their plant and equipment
E) providing more funds for low-income families
Q2) Advocates of supply-side tax reductions,such as a reduction in the capital gains tax,argue that these taxes currently have marginal tax rates that are
A) 0.
B) to the left of 0a.
C) between 0a and 0b.
D) to the right of 0b.
E) greater than 0e.
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25
Chapter 24: Surpluses,deficits,public Debt,and the Federal Budget
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Q1) During the Clinton administration,fiscal policy was
A) successful in keeping the unemployment rate at about 4 percent.
B) the primary policy tool used to combat inflation.
C) exercised through the monetary authorities.
D) focused on reducing both tax rates and government spending.
E) dominated by a desire to reduce budget deficits.
Q2) About what percentage of national output does the United States' current national debt represent?
A) between 10 and 25 percent
B) between 25 and 40 percent
C) between 40 and 55 percent
D) between 55 and 70 percent
E) over 70 percent
Q3) The budget policy that sets the government's budget to attain a socially optimal combination of unemployment and inflation is likely to
A) be balanced each and every year.
B) cause continual growth in the public debt.
C) have a cyclically adjusted surplus.
D) run surpluses even when unemployment is high.
Page 26
E) be balanced over the course of the business cycle.
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Chapter 25: Monetary Policy,interest Rates,and Economic Activity
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Q1) Most economists tend to agree that
A) Milton Friedman's models are best.
B) changes in the money supply merely influence the velocity of circulation.
C) the money supply should be decreased when the economy is in a serious depression.
D) inflation is rarely a serious problem.
E) increases in the money supply result in increases in nominal GDP.
Q2) Before deciding on a course of action,the Fed is faced with the problem of
A) forecasting the economy's short-term movements.
B) obtaining approval from Congress.
C) clearing its actions with the member banks.
D) getting the consent of Wall Street.
E) consulting with Milton Friedman.
Q3) If the velocity of circulation is seven and the money supply declines by 10 percent,nominal GDP declines by ________ percent.
A) 0
B) 3
C) 7
D) 10
E) 70
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Chapter 26: Controversies Over Stabilization Policy
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Q1) The view that business cycles are the natural (indeed efficient)response of the economy to changes in technology and the availability of resources is associated with the
A) new Keynesians.
B) traditional Keynesians.
C) monetarists.
D) adaptive demand siders.
E) real business cycle theorists.
Q2) The phrase "You can't push on a string" is
A) a line from a 1930s song.
B) used to suggest that monetary policy can make money available but cannot ensure it will be spent.
C) an analogy used by monetarists to describe the ineffectiveness of fiscal policy.
D) used by rational expectations theorists in their criticisms of supply-side economics.
E) a reference to the fact that Congress is in control of the government's purse strings and determines spending without regard to economic impact.
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Chapter 27: International Trade
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Q1) Which of the following best describes the effect of the Trigger Price Mechanisms (TPM)on the U.S.steel industry?
A) The TPM virtually eradicated foreign competition.
B) It gave the U.S. industry a decided international competitive edge.
C) Although sales of imported steel continued to rise, the TPM gave the U.S. industry a chance to adjust.
D) As a result of the TPM, U.S. steel producers could no longer compete successfully against European markets.
E) It ensured that U.S. steel firms could count on a fixed share of the U.S. steel market.
Q2) Excluded from among the important bases for specialization is the existence of
A) perfect resource homogeneity and mobility.
B) differences in the quality of resources.
C) relative differences in the quantities of human and nonhuman resources.
D) comparative advantage.
E) differences in technology.
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Chapter 28: Exchange Rates and the Balance of Payments
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Q1) Under which of the following systems will an imbalance in trade be most likely to cause changes in a country's money supply and price levels,leading to a restoration of trade equilibrium?
A) the gold standard
B) the multinational exchange standard
C) the stable exchange standard
D) flexible exchange rates
E) equation of exchange rates
Q2) Under a gold exchange standard
A) all currencies are directly convertible into gold at fixed rates.
B) the monetary price of gold is allowed to fluctuate freely in response to supply and demand.
C) balance-of-payments surpluses and deficits will not occur.
D) gold is directly convertible into special drawing rights called paper gold.
E) the dollar is convertible into gold at a fixed price, and thus other currencies via fixed exchange rates are indirectly convertible into gold.
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