Survey of Economics Exam Bank
Course Introduction
Survey of Economics provides an overview of fundamental economic concepts, principles, and theories, with an emphasis on both microeconomics and macroeconomics. The course explores how individuals, businesses, and governments make choices regarding the allocation of scarce resources, examines market structures, and discusses the role of supply and demand in determining prices. Topics such as economic growth, inflation, unemployment, fiscal and monetary policy, and international trade are also covered, enabling students to better understand the broader economic forces that shape society. This course is designed for students seeking a foundational understanding of economics, regardless of their intended field of study.
Recommended Textbook
Survey of ECON 3rd Edition by Robert L. Sexton
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Chapter 1: The Role and Method of Economics
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Sample Questions
Q1) A tax cut will lead to higher inflation. This is an example of a positive economic statement.
A)True
B)False
Answer: True
Q2) Which of the following statements best illustrates the fallacy of composition?
A)If I have more money, I will be better off; if we all had more money, we l would all be better off.
B)If the sale of women's clothing is higher this year, the Dow Jones Industrial Average will fall.
C)If I spend more time studying, I will get good grades; if all students spend more time studying, they will all get good grades.
D)If the sale of women's clothing is higher this year, the Dow Jones Industrial Average will fall
E)If the sale of men's clothing is lower this year, the Dow Jones Industrial Average will rise.
Answer: A
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3
Chapter 2: The Economic Way of Thinking
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Q1) When resources are used efficiently, a country can produce more of one good, ceteris paribus, only by:
A)printing more money.
B)charging a lower price for output.
C)charging a higher price for output.
D)producing less of another good.
E)reducing the amounts of inputs.
Answer: D
Q2) Which of the following concepts explains how individual consumers in market economies determine what is to be produced?
A)Competition
B)Consumer sovereignty
C)Efficient resource allocation
D)Free enterprise
E)Centralized decision-making
Answer: B
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4
Chapter 3: Supply and Demand
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Q1) The supply curve for a good will shift to the left if:
A)producers expect that the price of the good will soon be lower.
B)price decreases for a substitute for the good in production.
C)the input price for the good increases.
D)the number of suppliers of the good increases.
E)the price of the good decreases.
Answer: C
Q2) Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.
A)True
B)False
Answer: False
Q3) When quantity demanded increases at every possible price, there is a(n):
A)leftward shift in the demand curve
B)rightward shift in the demand curve.
C)downward movement along the given demand curve.
D)upward movement along the given demand curve.
E)decrease in the slope of the given demand curve.
Answer: B
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Chapter 4: Using Supply and Demand
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Q1) The government proposes a tax on flowers in order to boost its tax revenue. Consumers will bear no part of the tax burden if the:
A)demand for flowers is perfectly inelastic.
B)supply of flowers is perfectly elastic.
C)demand for flowers is perfectly elastic.
D)demand for flowers is unit elastic.
E)supply of flowers is unit elastic.
Q2) For a given increase in price, _____.
A)a greater elasticity of demand will result in a greater decrease in quantity demanded
B)a greater elasticity of demand will result in a greater decrease in demand
C)a smaller elasticity of demand will result in a greater decrease in quantity demanded
D)a smaller elasticity of demand will result in a smaller decrease in demand
E)a greater elasticity of demand will result in a smaller increase in quantity demanded
Q3) Explain the impact of:
a. A rent ceiling set below the equilibrium price.
b. A price floor set above the equilibrium price.
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Chapter 5: Market Failure and Public Choice
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Q1) Which of the following is an example of asymmetric information?
A)A beverage purchased from a vending machine
B)A car wash to benefit the local high school band
C)A collectible baseball card purchased on eBay
D)Cellular service that includes unlimited minutes and texting
E)A buy-one, get-one free offer on garments
Q2) The determination of which goods are public goods depends on:
A)public laws.
B)normative considerations.
C)whether the goods are produced directly by the government or produced by a private-sector firm.
D)whether it is possible to exclude users from consuming the goods if they do not pay for the goods.
E)marginal analysis.
Q3) Which of the following is the best example of a public good?
A)Health care
B)Amusement parks
C)Street lights
D)Telephone service
E)Social Security payments
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Chapter 6: Production and Costs
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Q1) Lintell Inc. earned a total revenue of $9.3 million and incurred an explicit cost of $3.6 million for the financial year 2013-14. The owner of the company could earn an annual salary of $0.5 million if he joined another firm. Lintell Inc.'s economic profit for 2013-14 was:
A)$5.2 million.
B)$5.7 million.
C)$8.8 million.
D)$5.5 million
E)$5.3 million.
Q2) Sunk costs are important for current business decisions.
A)True
B)False
Q3) If a firm's average total cost falls in the long run over a certain range of output, then:
A)it is subject to economies of scale over that range of output.
B)it is subject to diseconomies of scale over that range of output.
C)it is subject to constant returns to scale over that range of output.
D)it has reached the minimum efficient scale of production.
E)it has reached the minimum efficient scale of production
Q4) What is the law of diminishing marginal product? What causes it?
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Chapter 7: Firms in Perfectly Competitive Markets
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Q1) A firm facing a horizontal demand curve:
A)can affect the price it receives for its output.
B)is likely to price its goods below market price.
C)faces a perfectly inelastic demand curve for its product.
D)cannot increase its output even if it wants to.
E)can increase its output as much as it wants at a given price.
Q2) Firms will continue to enter a competitive industry until:
A)the supply curve is vertical.
B)the market price falls below average variable cost.
C)any economic profits have been competed away.
D)any accounting profits have been competed away.
E)the marginal revenue is above the market price.
Q3) If a perfectly competitive industry is neither expanding nor contracting, we would typically expect:
A)accounting profits to be zero.
B)economic profits to be positive.
C)that the price of the good will increase.
D)that the price of the good will decrease.
E)that the price of the good will be stable.
Q4) What are the characteristics of a perfectly competitive industry?
Page 9
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Chapter 8: Monopoly
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Sample Questions
Q1) A monopolist will shut down in the short run if:
A)marginal revenue is less than price.
B)price is less than marginal revenue.
C)total revenue is less than total fixed cost.
D)total revenue is less than total variable cost.
E)marginal revenue is less than marginal cost.
Q2) A monopolist will operate at the quantity where:
A)average revenue equals average cost.
B)marginal revenue equals average cost.
C)average revenue equals marginal cost.
D)total revenue equals total cost.
E)marginal revenue equals marginal cost.
Q3) A natural monopoly is likely to arise when:
A)the government restricts entry through licensing.
B)patents are awarded by the government to protect intellectual property.
C)economies of scale exist over a relevant range of industry demand.
D)a firm controls a crucial input to production.
E)average total cost rises over a relevant range of industry demand.
Q4) Will all monopolistic firms always generate economic profits? Why or why not?
Q5) How can economies of scale lead to monopoly?
Page 10
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Chapter 9: Monopolistic Competition and Oligopoly
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Q1) In a monopolistically competitive market, _____.
A)firms are price takers
B)firms try to differentiate their products from those of competitors
C)firms maximize profits by producing output where price equals marginal cost
D)there are significant barriers to entry
E)firms earn economic profits in the long run
Q2) Although there are certain inefficiencies associated with monopolistic competition, society receives a benefit from monopolistic competition in the form of product variety.
A)True
B)False
Q3) Which of the following is a characteristic of oligopoly?
A)Substantial uncertainties of pricing decisions
B)Zero economic profit in the long run
C)Free entry and exit into the market
D)Diseconomies of scale in production
E)A large number of firms
Q4) What are the characteristics of oligopoly?
Q5) Explain how losses of existing firms are reduced as some firms exit a monopolistically competitive industry due to economic losses.
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Chapter 10: Labor Markets, Income Distribution, and Poverty
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Q1) From 1935 to 2010, the proportion of income received by the poorest 20 percent of Americans has:
A)increased substantially due to the government's efforts
B)decreased sharply due to the impact of the Second World War.
C)slightly decreased due to the impact of the Great Depression.
D)increased from 12 percent to 14 percent.
E)remained virtually unchanged.
Q2) Unionization provides _____ in certain occupations, and, as a result, wage rates in these occupations have a tendency to _____.
A)barriers to entry; decrease
B)barriers to entry; increase
C)ease of entry; decrease
D)ease of entry; increase
E)higher level of employment; decrease
Q3) Poverty rates tend to be substantially higher for families headed by females than for those headed by married couples.
A)True
B)False
Q4) Why does an increasing divorce rate tend to increase income inequality?
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Chapter 11: Introduction to Macroeconomics:
Unemployment, Inflation, and Economic Fluctuations
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Q1) A small town named Erbia has a labor force of 78,567 persons of whom 74,382 are employed. Erbia's unemployment rate is:
A)5.3 percent.
B)5.6 percent.
C)6.0 percent.
D)7.8 percent.
E)8.9 percent.
Q2) People who do not hold a job but are actively seeking work are considered to be:
A)out of the labor force.
B)officially unemployed.
C)underemployed.
D)officially poor.
E)employed in the underground economy.
Q3) High rates of unemployment are undesirable because:
A)they encourage high levels of per capita savings.
B)they result in the loss of potential output of goods and services.
C)they lead to high rates of inflation
D)they lead to high levels of individual consumption.
E)they lead to excessive increases in informal activities.
Q4) Discuss the costs associated with high inflation.
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Chapter 12: Economic Growth
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Q1) _____ would most likely to result in the economic growth of a nation.
A)A decrease in the stock of physical capital
B)An increase in the productivity of labor
C)A decrease in the productivity of labor
D)A decrease in the supply of labor due to emigration
E)An increase in the rate of growth of population
Q2) If a country increases its saving rate, _____.
A)its current consumption decreases
B)its current consumption increases
C)its future interest rate increases
D)its future saving capabilities decreases
E)its future consumption decreases
Q3) In a circular flow model, the total expenditures on an economy's output of goods and services equal the value of total income.
A)True
B)False
Q4) Personal income includes income received in the form of transfer payments
A)True
B)False
Q5) Does the political freedom existing in democracies always aid economic growth?
Page 14
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Chapter 13: Aggregate Demand and Aggregate Supply
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Q1) Which of the following is likely to increase investment in an economy?
A)A decreased demand for investment goods
B)A fall in the real interest rate
C)A rise in the real interest rate
D)An increase in business tax
E)A surplus of goods and services
Q2) An increase in disposable income would tend to shift the aggregate demand curve to the left.
A)True
B)False
Q3) Which of the following would lead to stagflation?
A)A positive supply shock
B)A negative supply shock
C)A sudden decrease in the price level
D)A sudden decrease in the unemployment rate
E)A decrease in input prices
Q4) The long-run level of real GDP changes whenever the aggregate demand curve shifts.
A)True
B)False
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Chapter 14: Fiscal Policy
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Q1) Which of the following is one of the most important automatic stabilizers?
A)Open market operations
B)The reserve requirement ratio
C)The tax system
D)Deficit spending
E)Quantitative easing
Q2) Which of the following accounted for the largest percentage of federal taxes in the United States in 2012?
A)Excise taxes
B)Social security taxes
C)Individual income taxes
D)Corporate income taxes
E)Property taxes
Q3) Automatic stabilizers lead to:
A)a decrease in the taxes collected by the government during an economic expansion.
B)a decrease in unemployment compensation during a recession.
C)Congressional action on changing the tax rates
D)an increase in transfer payments during a recession in an economy.
E)an increase in the price level during a recession in an economy
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Chapter 15: Monetary Institutions
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Q1) Other things constant, a decrease in credit card balances would _____ M1 and _____ M2.
A)increase; increase
B)not change; increase
C)decrease; decrease
D)not change; not change
E)decrease; not change
Q2) If a bank faces a reserve requirement of 10%, then the total potential impact of an initial deposit of $100,000 is most likely to be:
A)$1,000,000.
B)$100,000.
C)$10,000.
D)$1,000.
E)$100.
Q3) Which of the following is an asset to a commercial bank?
A)Borrowings from the Central Bank
B)Time deposits
C)Checkable deposits
D)Making loans
E)Savings accounts
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Chapter 16: The Federal Reserve and Monetary Policy
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Q1) The money supply is almost perfectly inelastic because:
A)people will want to be supplied with more loans as interest rates rise.
B)the Fed makes more money available in response to higher interest rates.
C)banks generally find loans more profitable than keeping their assets as cash
D)the Fed lowers the discount rate as interest rates rise.
E)commercial banks can face losses at lower rates of interest.
Q2) An increase in the interest rates will:
A)cause people to hold less money, which in turn means that the velocity of money increases
B)cause people to hold less money, which in turn means that the velocity of money decreases
C)cause people to hold more money, which in turn means that the velocity of money increases
D)cause people to hold more money, which in turn means that the velocity of money decreases
E)cause people to hold more money, which in turn means that the nominal GDP decreases
Q3) Higher rates of interest increase the opportunity cost of holding money balances
A)True
B)False
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Chapter 17: Issues in Macroeconomic Theory and Policy
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Q1) Which of the following is a problem associated with monetary policy?
A)The Fed cannot control deposit expansion at member banks.
B)The Fed is not able to predict the impact of its monetary policies on the loans issued by member banks.
C)The Fed is not able to predict the impact of its policies on the loans issued by global banks.
D)Monetary policies are subject to excessive implementation lags.
E)Monetary policies are subject to several governmental regulations.
Q2) The crowding-out effect implies that an increase in government borrowing to finance deficit financing results in _____.
A)an increase in the demand for money that causes interest rate to rise
B)a decrease in the demand for money that causes interest rate to rise
C)an increase in private investments by businesses
D)an increase in the demand for money that causes interest rate to fall
E)an increase in consumption spending by households.
Q3) Why does a larger government budget deficit increase the magnitude of the crowding-out effect?
Q4) What do rational expectations theorists believe? What is their critics' point of view?
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Chapter 18: International Economics
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Q1) Subsidies do not distort trade patterns and lead to overall inefficiencies.
A)True
B)False
Q2) Comparative advantage exists when a person or a country can produce a good or service at a lower _____ than others.
A)fixed cost
B)variable cost
C)opportunity cost
D)total cost
E)marginal cost
Q3) Which of the following would likely be a result of a tariff on a particular good?
A)It results in greater revenues to foreign producers.
B)It increases the price of the good to domestic consumers.
C)It redistributes income from domestic producers to domestic consumers.
D)It results in lower sales and revenues to domestic producers.
E)It increases the quantity of the good demanded.
Q4) Trade restrictions will stop foreign imports, which will increase American employment and protect American jobs. Most economists realize that this argument is wrong. Can you explain why?
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