Survey of Economics
Chapter Exam Questions
Course Introduction
Survey of Economics provides an introduction to the fundamental principles of both microeconomics and macroeconomics, offering students a broad overview of how economic systems function. The course examines basic concepts such as supply and demand, market structures, the role of government, monetary and fiscal policy, and the impact of globalization. Through real-world examples and case studies, students will gain insights into how economic decisions are made by individuals, businesses, and governments, helping them understand current economic issues and policies affecting society.
Recommended Textbook
Economics 20th Edition Volume I and Volume II by Campbell R. McConnell
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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Sample Questions
Q1) Answer the question on the basis of the data given in the following production possibilities table: \(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\quad \)\(\underline{\text { Production Possibilities (Alternatives) }}\) \(\begin{array}{ccccccc}
&\underline{A}&\underline{B}&\underline{C}& \underline{D} &\underline{E}&\underline{F} \\
\text { Capital Goods } &5&4&3&2&1&0\\
\text { onsumer Goods } & 0 & 5 & 9 & 12 & 14 & 15 \end{array}\) Refer to the table.As compared to production alternative D,the choice of alternative C would:
A) tend to generate a more rapid growth rate.
B) be unattainable.
C) entail unemployment.
D) tend to generate a slower growth rate.
Answer: A
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Chapter 2: The Market System and the Circular Flow
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Sample Questions
Q1) (Consider This)Martha's Milkshake Company buys earthquake insurance from the Stable Ground Insurance Company.Based on this purchase,economists would conclude that:
A) Martha's believes a damaging earthquake is imminent.
B) Stable Ground believes no damaging earthquakes will occur.
C) Martha's has a lower tolerance for earthquake risk than Stable Ground.
D) Martha's has a greater tolerance for earthquake risk than Stable Ground.
Answer: C
Q2) The economic function of profits and losses is to:
A) bring about a more equal distribution of income.
B) signal that resources should be reallocated.
C) eliminate small firms and reduce competition.
D) tell government which industries need to be subsidized.
Answer: B
Q3) Continued losses in an industry will cause some firms to reduce output or eventually leave the industry.
A)True
B)False
Answer: True
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Chapter 3: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) In presenting the idea of a demand curve,economists presume the most important variable in determining the quantity demanded is:
A) the price of the product itself.
B) consumer income.
C) the prices of related goods.
D) consumer tastes.
Answer: A
Q2) In which of the following statements are the terms "demand" and "quantity demanded" used correctly?
A) When the price of ice cream rose,the demand for both ice cream and ice cream toppings fell.
B) When the price of ice cream rose,the quantity demanded of ice cream fell,and the demand for ice cream toppings fell.
C) When the price of ice cream rose,the demand for ice cream fell,and the quantity demanded of ice cream toppings fell.
D) None of these statements use the terms correctly.
Answer: B
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Chapter 4: Market Failures: Public Goods and Externalities
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Sample Questions
Q1) If one person's consumption of a good does not preclude another's consumption,the good is said to be:
A) nonrival in consumption.
B) rival in consumption.
C) nonexcludable.
D) excludable.
Q2) If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:
A) price and output would increase.
B) output would increase,but price would remain constant.
C) price would increase and output would decrease.
D) price would increase,but output would remain constant.
Q3) Owners of defective used cars have more information about the condition of their vehicles than potential buyers of those used cars.This is an example of:
A) the moral hazard problem.
B) a spillover cost.
C) a positive externality.
D) asymmetric information.
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Chapter 5: Governments Role and Government Failure
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Sample Questions
Q1) The trading of votes by elected officials to secure favorable outcomes is called:
A) splitting the difference.
B) social engineering.
C) logrolling.
D) grandstanding.
Q2) Because majority voting fails to incorporate the strength of the preferences of individual voters,it:
A) creates negative externalities.
B) under some circumstances produces economically inefficient outcomes.
C) leads to market failure.
D) leads to politics dominated by special interest groups.
Q3) Which of the following would be the best example of regulatory capture?
A) Starbucks buys up all the available supplies of coffee beans.
B) Nike executives influence the rules for track and field events.
C) Federal law makers write and pass legislation that protects domestic companies from foreign competition.
D) Executives from the Ford,General Motors,and Chrysler companies write the rules regulating automobile safety and fuel requirements.
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Chapter 6: Elasticity
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Sample Questions
Q1) The elasticity of supply of product X is unitary if the price of X rises by:
A) 5 percent and quantity supplied rises by 7 percent.
B) 8 percent and quantity supplied rises by 8 percent.
C) 10 percent and quantity supplied stays the same.
D) 7 percent and quantity supplied rises by 5 percent.
Q2) The supply of product X is perfectly inelastic if the price of X rises by:
A) 5 percent and quantity supplied rises by 7 percent.
B) 8 percent and quantity supplied rises by 8 percent.
C) 10 percent and quantity supplied stays the same.
D) 7 percent and quantity supplied rises by 5 percent.
Q3) The price elasticity of demand coefficient measures:
A) buyer responsiveness to price changes.
B) the extent to which a demand curve shifts as incomes change.
C) the slope of the demand curve.
D) how far business executives can stretch their fixed costs.
Q4) The supply of product X is elastic if the price of X rises by:
A) 5 percent and quantity supplied rises by 7 percent.
B) 8 percent and quantity supplied rises by 8 percent.
C) 10 percent and quantity supplied remains the same.
D) 7 percent and quantity supplied rises by 5 percent.
Page 8
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Chapter 7: Utility Maximization
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Sample Questions
Q1) The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas,respectively,would be consistent with consumer equilibrium?
A) $4 and $6
B) $6 and $4
C) $8 and $12
D) $16 and $9
Q2) The slope of a budget line reflects the:
A) elasticity of demand for the two products.
B) price ratio of the two products.
C) amount of the consumer's income.
D) utility ratio of the two products.
Q3) (Consider This)Newspaper dispensing devices seemingly "trust" people to take only a single paper,but the devices actually rely on the law of:
A) supply.
B) increasing opportunity costs.
C) demand.
D) diminishing marginal utility.
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9
Chapter 8: Behavioral Economics
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Sample Questions
Q1) Susie knows that too many sugary treats,while delicious when eaten,have long-term adverse effects on weight and health.Based on this information,a behavioral economist would expect Susie to:
A) carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.
B) eat more sugary treats than is optimal,as she likely gives more weight to present events and outcomes than to ones in the future.
C) give away most of her sugary treats in an effort to resist temptation.
D) compute the caloric intake and calculate how many hours of exercise would be needed to burn off the calories from each treat.
Q2) Salary smoothing,automatic payroll deductions,and early withdrawal penalties are all examples of:
A) mechanisms imposed by companies to extract more from their workers and customers.
B) policies that do not fundamentally alter decisions because they do not change the benefits or costs of an action.
C) precommitments.
D) hardwired heuristics.
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Chapter 9: Businesses and the Cost of Production
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Sample Questions
Q1) (Consider This)In order to apply the concept of diminishing returns to study time:
A) the amount of study time available must be held constant.
B) study time must be considered a long-run production process.
C) all inputs to the learning process must be allowed to vary.
D) all inputs to the learning process except for study time must be assumed to be fixed.
Q2) A firm's economic profit is usually higher than its accounting profit.
A)True B)False
Q3) Other things equal,if the wage rates paid to a firm's labor inputs were to rise,we would expect the:
A) AFC,AVC,ATC,and MC curves all to rise.
B) AVC,ATC,and MC curves all to rise.
C) AFC and ATC curves to fall.
D) MP curve to fall.
Q4) Variable costs are costs that change directly with output.
A)True B)False
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Chapter 10: Pure Competition in the Short Run
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Sample Questions
Q1) Which of the following is not a characteristic of pure competition?
A) Price strategies by firms.
B) A standardized product.
C) No barriers to entry.
D) A larger number of sellers.
Q2) A competitive firm will maximize profits at that output at which:
A) total revenue exceeds total cost by the greatest amount.
B) total revenue and total cost are equal.
C) price exceeds average total cost by the largest amount.
D) the difference between marginal revenue and price is at a maximum.
Q3) If a purely competitive firm is producing at some level less than the profit-maximizing output,then:
A) price is necessarily greater than average total cost.
B) fixed costs are large relative to variable costs.
C) price exceeds marginal revenue.
D) marginal revenue exceeds marginal cost.
Q4) In the short run,a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.
A)True
B)False
Page 12
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Chapter 11: Pure Competition in the Long Run
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Sample Questions
Q1) A purely competitive firm:
A) must earn a normal profit in the short run.
B) cannot earn economic profit in the long run.
C) may realize either economic profit or losses in the long run.
D) cannot earn economic profit in the short run.
Q2) Assume that a decline in consumer demand occurs in a purely competitive industry that is initially in long-run equilibrium.We can:
A) predict that the new price will be greater than the original price.
B) predict that the new price will be less than the original price.
C) predict that the new price will be the same as the original price.
D) not compare the original and the new prices without knowing what cost conditions exist in the industry.
Q3) Innovations that lower production costs or create new products:
A) are rare in competitive industries.
B) discourage new firms from entering the industry.
C) often generate short-run economic profits that do not last into the long run.
D) usually generate long-run economic profits for the innovator.
Q4) The long-run supply curve for a decreasing-cost industry is downsloping.
A)True
B)False
Page 13
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Chapter 12: Pure Monopoly
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Sample Questions
Q1) The practice of price discrimination is associated with pure monopoly because:
A) it can be practiced whenever a firm's demand curve is downsloping.
B) monopolists have considerable ability to control output and price.
C) monopolists usually realize economies of scale.
D) most monopolists sell differentiated products.
Q2) A nondiscriminating pure monopolist finds that it can sell its 50<sup>th</sup> unit of output for $50.We can surmise that the marginal:
A) cost of the 50<sup>th</sup> unit is also $50.
B) revenue of the 50<sup>th</sup> unit is also $50.
C) revenue of the 50<sup>th</sup> unit is less than $50.
D) revenue of the 50<sup>th</sup> unit is greater than $50.
Q3) There is some evidence to suggest that X-inefficiency is:
A) absent whenever two or more producers are competing with one another.
B) not encountered in either competitive or monopolistic firms.
C) more likely to occur in monopolistic firms than in competitive firms.
D) more likely to occur in competitive firms than in monopolistic firms.
Q4) Price discrimination occurs whenever a firm sells a good for two different prices.
A)True
B)False
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Chapter 13: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) In repeated games,credible threats are necessary for the players to reach a Nash equilibrium.
A)True
B)False
Q2) Advertising can enhance economic efficiency when it:
A) increases brand loyalty.
B) raises entry barriers.
C) increases consumer awareness of substitute products.
D) boosts average total cost.
Q3) The kinked-demand curve model of oligopoly:
A) assumes a firm's rivals will ignore a price cut but match a price increase.
B) embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.
C) assumes a firm's rivals will match any price change it may initiate.
D) assumes a firm's rivals will ignore any price change it may initiate.
Q4) Monopolistically competitive industries are inefficient because:
A) they realize diseconomies of scale.
B) advertising costs retard technological advance and product development.
C) they are overpopulated with firms whose plants are underutilized.
D) monopolistically competitive sellers engage in misleading advertising.
Page 15
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Chapter 14: Technology RD and Efficiency
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Sample Questions
Q1) Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic.Which of the following would increase a firm's optimal R&D expenditures and,in equilibrium,reduce the expected rate of return on the last dollar of R&D?
A) A rightward shift of the expected-rate-of-return curve.
B) An upward shift of the interest-rate cost-of-funds curve.
C) A leftward shift of the expected-rate-of-return curve.
D) A downward shift of the interest-rate cost-of-funds curve.
Q2) Which of the following is a true statement?
A) Innovation normally follows invention and precedes diffusion.
B) Invention normally follows diffusion and precedes innovation.
C) Diffusion normally follows invention and precedes innovation.
D) Innovation normally follows diffusion and precedes invention.
Q3) Suppose that Book-Cost Busters (BCB),without authorization,reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website.This action would violate the publisher's:
A) profit rights.
B) patent.
C) copyright.
D) trademark.
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Page 16
Chapter 15: The Demand for Resources
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Sample Questions
Q1) Marginal revenue product measures the:
A) amount by which the extra production of one more worker increases a firm's total revenue.
B) decline in product price that a firm must accept to sell the extra output of one more worker.
C) increase in total resource cost resulting from the hire of one extra unit of a resource.
D) increase in total revenue resulting from the production of one more unit of a product.
Q2) Which of the following occupations is projected to be the fastest growing in the U.S.in terms of percentage increases?
A) Medical assistants.
B) Biomedical engineers.
C) Personal care aides.
D) Software engineers.
Q3) The MRP of labor curve is the firm's labor demand curve.
A)True
B)False
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Chapter 16: Wage Determination
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Sample Questions
Q1) Unions might support a higher minimum wage because:
A) their constitutions obligate them to do so.
B) they feel a higher minimum wage will lower labor's tax payments for welfare programs.
C) a higher minimum wage makes less-skilled workers less substitutable for union workers.
D) the minimum wage is better targeted than are alternative income-maintenance programs.
Q2) In a labor dispute in which the existing contract has expired,a:
A) firm can legally lock up unruly workers.
B) firm can legally lock out union workers.
C) union can legally restrict customer access to the firm.
D) union can legally restrict physical access by management to the firm.
Q3) Suppose a worker feels unhappy with his job and consequently quits.This illustrates:
A) the voice mechanism.
B) featherbedding.
C) the exit mechanism.
D) blacklisting.
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18
Chapter 17: Rent Interest and Profit
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Sample Questions
Q1) The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.
A)True
B)False
Q2) Henry George advocated a single tax on:
A) real capital.
B) entrepreneurial profits.
C) land.
D) labor income.
Q3) Effective usury laws cause:
A) a surplus of money in money markets.
B) the quantity of money demanded to be brought into balance with the quantity supplied.
C) the quantity of money supplied to exceed the quantity demanded.
D) a shortage of money in money markets.
Q4) For all practical purposes,the supply of land is:
A) almost perfectly inelastic.
B) negatively sloped.
C) relatively elastic.
D) perfectly elastic.
Page 19
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Chapter 18: Natural Resource and Energy Economics
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Sample Questions
Q1) Property rights over fish in the open ocean exist once the fish are caught.
A)True
B)False
Q2) (Consider This)The tragedy of the commons occurs primarily:
A) where government subsidies are present.
B) when incentives to preserve are strongest.
C) where property rights are lacking.
D) on privately held lands.
Q3) If a country has a total fertility rate of 1.8,then all else equal we would expect:
A) population in that country to rise over time.
B) population in that country to fall over time.
C) the replacement rate to also equal 1.8.
D) the population to remain stable over time.
Q4) Other things equal,biodiesel becomes economically viable (as or less costly than using oil)when oil prices reach _____ or more per barrel.
A) $60
B) $80
C) $100
D) $120
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Chapter 19: Public Finance: Expenditures and Taxes
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Sample Questions
Q1) (Advanced analysis)Answer the question on the basis of the following information: The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product,the supply equation is P = 3 + .4Q. Refer to the given information.The efficiency loss of this tax is:
A) $125.00.
B) $62.50.
C) $87.50.
D) $1.00.
Q2) The greater the elasticity of demand and supply,the greater is the efficiency loss of a tax.
A)True
B)False
Q3) (Last Word)For each dollar paid in taxes,approximately how much do households in the top quintile receive back in the form of government expenditures?
A) 12 cents.
B) 28 cents.
C) 41 cents.
D) 73 cents.
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Page 21
Chapter 20: Antitrust Policy and Regulation
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Sample Questions
Q1) The largest efficiency gains from deregulation have occurred in the:
A) natural gas and cable television industries.
B) cable television and railroad industries.
C) communications and stock-brokering industries.
D) airlines,trucking,and railroad industries.
Q2) Critics of industrial regulation say that such regulation:
A) benefits small firms at the expense of large firms.
B) perpetuates monopoly long after new technology has eroded natural monopoly.
C) creates insurmountable principal-agent problems.
D) has resulted mainly from the paradox of voting.
Q3) A firm charged with monopolizing a market is less likely to be convicted if:
A) the court accepts a broad definition of the market.
B) the court accepts a narrow definition of the market.
C) it has gained its monopoly through abusive means.
D) it sells its product to other firms,rather than directly to consumers.
Q4) Tying contracts are illegal under the:
A) Wagner Act of 1935.
B) Clayton Act of 1914.
C) FTC Act of 1914.
D) Celler-Kefauver Act of 1950.
Page 22
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Chapter 21: Agriculture: Economics and Policy
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Q1) (Consider This)Which of the following methods is commonly used by farmers to "smooth" income over time?
A) Producing only one crop to benefit from specialization.
B) Renting land from other farmers to increase production.
C) Entering contracts with buyers of their farm output to assure themselves of a fixed price.
D) All of these risk-management techniques are used to hedge against short-run price and output fluctuations.
Q2) The purpose of the Freedom to Farm Act of 1996 was to:
A) immediately end U.S.farm subsidies.
B) end 60 years of U.S.price supports for American grain crops.
C) eliminate U.S.tariffs and quotas on imported farm goods.
D) stabilize short-run crop prices.
Q3) Measured in terms of farm employment and the number of farms,agriculture has been:
A) a declining industry.
B) an expanding industry.
C) a stable industry.
D) a volatile industry.
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Page 23