Survey of Economics
Exam Materials
Course Introduction
Survey of Economics provides students with an overview of fundamental economic concepts, including the basic principles of microeconomics and macroeconomics. The course covers topics such as supply and demand, market structures, consumer behavior, production costs, national income, unemployment, inflation, fiscal and monetary policy, and the role of government in the economy. Emphasizing real-world applications, this course equips students with the analytical tools necessary to understand current economic issues, make informed decisions, and appreciate the impact of economic forces on businesses and society.
Recommended Textbook
Foundations of Microeconomics 6th Edition by Robin Bade Michael Parkin
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20 Chapters
5153 Verified Questions
5153 Flashcards
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Page 2
Chapter 1: Getting Started
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337 Flashcards
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Sample Questions
Q1) In the diagram above, which figure(s)show(s)no relationship between the variables?
A)both B and C
B)only B
C)both A and C
D)only D
E)both A and B
Answer: D
Q2) Increasing income tax rates will solve the "social security time bomb issue" is an example of
A)business economic policy.
B)a positive economic statement.
C)marginal cost exceeding marginal benefit.
D)answering the "how" question.
E)globalization.
Answer: B
Q3) What does the slope of the line shown in the above figure equal?
Answer: The slope equals the change in variable on the y-axis divided by the change in the variable on the x-axis, or (30 - 60)/(25 - 15)= -3.0.
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3
Chapter 2: The Usand Global Economies
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Sample Questions
Q1) The personal distribution of income measures which of the following?
A)How federal tax revenues are related to the type of businesses that employs the taxpayers.
B)The distribution of earnings by the factors of production.
C)Proportion of income generated by the four types of expenditures on goods and services.
D)The distribution of income among households.
E)The distribution of income among nations.
Answer: D
Q2) Which of the following correctly lists the categories of factors of production?
A)machines, buildings, land, and money
B)hardware, software, land, and money
C)capital, money, and labor
D)owners, workers, and consumers
E)land, labor, capital, and entrepreneurship
Answer: E
Q3) What are the payments each factor of production receives?
Answer: Rent is paid for the use of land.Wages are paid for the services of labor.Interest is paid for the use of productive capital.Entrepreneurs earn a profit.
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Page 4
Chapter 3: The Economic Problem
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Sample Questions
Q1) What does it mean when a "free lunch" is available? Relate your answer to the production possibilities frontier.
Answer: A free lunch means that there is no tradeoff, that is, the production of one good or service can be increased without decreasing the production of another good or service and thereby giving up some of the other good.A free lunch occurs when the economy is producing at a point within the production possibilities frontier because at these points some resource is unemployed.By utilizing the unemployed resource, more goods or services can be produced without giving up any other goods or services.
Q2) Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas.Hotels are a capital good that,once built, will help produce still more consumption goods.If Puerto Rico produces more hotels than Hawaii,
A)Hawaii's PPF will shift outward further than Puerto Rico's PPF.
B)Hawaii's PPF will shift inward.
C)Puerto Rico's PPF will not shift.
D)Puerto Rico's and Hawaii's PPF will shift outward by the same amount.
E)Puerto Rico's PPF will shift outward further than Hawaii's PPF.
Answer: E
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Page 5
Chapter 4: Demand and Supply
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Sample Questions
Q1) If a market begins in equilibrium and then the demand curve shifts leftward, a
A)shortage is created, which is eliminated by a fall in price.
B)shortage is created, which is eliminated by a rise in price.
C)surplus is created, which is eliminated by a fall in price.
D)surplus is created, which is eliminated by a rise in price.
E)surplus is created, which is eliminated by the supply curve shifting leftward.
Q2) Over the next few years more and more people prefer to ride on scooters.Which of the figures above best illustrates how this change affects the demand curve for scooters?
A)Figure A
B)Figure B
C)Figure C
D)Figure D
E)None of the above answers is correct because the change in tastes will affect the supply curve not the demand curve.
Q3) When does a shortage occur?
Q4) What is the effect on the price and quantity of a product if the demand decreases and the supply simultaneously increases?
Q5) When does a surplus occur?
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Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) Suppose a 20 percent increase in the price of gasoline results in a 25 percent increase in the quantity supplied.This response means that gasoline has an
A)elastic supply.
B)inelastic supply.
C)unit elastic supply.
D)inelastic demand.
E)elastic demand.
Q2) Perfectly inelastic demand means that consumers
A)are willing to buy any quantity of the good at a given price, but none at higher prices.
B)decrease their consumption as price rises.
C)increase their consumption as price rises.
D)will buy a certain quantity, regardless of price.
E)will buy a huge, almost infinite amount more, if the price falls just a little.
Q3) The table above gives the supply schedule for a product.Using the midpoint method, find the price elasticity of supply between points A and B, between B and C, between C and D, and between D and E.
Q4) What effect does a price hike have on the total revenue of the producers?
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) Assume the Nozick rules are being followed in the economy so that the distribution of income is fair.What must be true for this to create an efficient allocation of resources?
A)All people are earning equal incomes.
B)There are no public goods, monopolies, high transactions costs, or external costs and benefits.
C)The costs of administering redistribution equals the benefits the poor receive.
D)The government must redistribute income in a fashion that minimizes the "big tradeoff."
E)The government must allocate resources using a command mechanism.
Q2) Mary is willing to pay $50 for a Christmas tree, John is willing to pay $45 and Jeff is willing to pay $40.The price of a tree is $40.The total consumer surplus for Mary, John and Jeff taken together is
A)$15.
B)$135.
C)$40.
D)$95.
E)$120.
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Page 8
Chapter 7: Government Actions in Markets
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239 Flashcards
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Sample Questions
Q1) Explain why a price floor set below the equilibrium price is ineffective.
Q2) Which of the following is true?
IA price ceiling set above the equilibrium price has no effects.
IiA price ceiling set below the equilibrium price creates a surplus.
IiiA price floor set above the equilibrium price has no effects.
A)Only i
B)Only ii
C)Only iii
D)i and ii
E)ii and iii
Q3) The people who immediately benefit from a minimum wage are
A)employers who now pay the minimum wage.
B)those people who enter the labor force to search for minimum wage jobs.
C)the workers who retain their jobs after enactment of the minimum wage.
D)everyone, both demanders and suppliers, because the minimum wage benefits everyone.
E)all workers.
Q4) Compare and contrast a price ceiling and a price floor.
Q5) Discuss the inefficiencies created by a price floor.
Q6) Why do rent ceilings lead to shortages and black markets?
Page 9
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Chapter 8: Taxes
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Sample Questions
Q1) Which of the following taxes best illustrates the benefits principle of taxation?
A)sales tax on clothing used to fund food stamps
B)state income tax used to fund state universities
C)medicare tax imposed on all workers used to fund medical care for the elderly
D)gasoline tax used to fund road repairs
E)federal income tax used to fund NASA spending
Q2) For the United States, which tax is the single biggest source of tax revenue?
A)Social Security tax
B)sales tax
C)property tax
D)personal income tax
E)corporation income tax
Q3) The average tax rate equals
A)(total tax ÷ change in income)× 100.
B)(change in tax ÷ total income)× 100.
C)(total tax ÷ total income)× 100.
D)(change in tax ÷ change in income)× 100.
E)(marginal tax are × total income)× 100.
Q4) What is the marginal tax rate? Average tax rate? Can these rates ever differ?
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Chapter 9: Global Markets in Action
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276 Flashcards
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Sample Questions
Q1) Who gains from international trade?
A)only the exporting nation
B)only the importing nation
C)both the importing and the exporting nations
D)neither the importing nor the exporting nations
E)The gains depends on which nation gets to keep the total revenue from the sale
Q2) If a tariff is imposed on imports of shrimp into the United States, U.S.consumer surplus from shrimp will ________ and U.S.producer surplus from shrimp will
A)increase; increase B)increase; decrease C)decrease; increase D)decrease; decrease E)increase; not change
Q3) How does the United States attempt to compensate losers from lower trade restrictions?
Q4) Who gains from exports? How do they gain? Who loses? How do they lose? Does the overall economy gain or lose from exports?
Q5) How do exports affect sellers' producer surplus?
Q6) What is dumping?
Page 11
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Chapter 10: Externalities
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Sample Questions
Q1) The figure above shows the market for college education in the United States.If the government does not intervene in this market, the deadweight loss equals ________ per year.
A)$28 billion
B)$14 billion
C)$280 billion
D)$224 billion
E)$7 billion
Q2) The figure above shows the market for college education in the United States.The marginal external benefit associated with educating 14 million students is ________ per student per year.
A)$16,000
B)$13,000
C)$11,000
D)$5,000
E)$7,000
Q3) Why does government provide educational opportunities in the form of vouchers, private subsidies, and public provision?
Q4) Explain the process by which a private subsidy corrects an external benefit.
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) A private good is ________ and ________.
A)rival; excludable
B)rival; nonexcludable
C)nonrival; excludable
D)nonrival; nonexcludable
E)scarce; expensive
Q2) Why is watching sports more important to many prospective voters than watching the news? In your answer, mention the role played by rational ignorance and the cost of gathering information.
Q3) The figure above shows the marginal cost and marginal benefit of police protection in the city of Hugo, Oklahoma.Police protection is a public good.The efficient number of officers that should be hired by the city of Hugo is
A)15.
B)25.
C)10.
D)0.
E)More than 25 because MB > $0 when 25 officers are hired.
Q4) How is the efficient quantity of public goods determined?
Q5) What is rational ignorance?
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Chapter 12: Markets With Private Information
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101 Flashcards
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Sample Questions
Q1) In the used car market with warranties, the equilibrium is a ________ and there is
A)pooling equilibrium; inefficiency, partly because of over-supply of good cars
B)pooling equilibrium; inefficiency, partly because of over-supply of lemons (poor quality used cars)
C)separating equilibrium; no inefficiency
D)separating equilibrium; inefficiency, partly because of over-supply of lemons (poor quality used cars)
E)pooling equilibrium; no inefficiency
Q2) JCPenney guarantees to refund a customer's money if the customer returns poorly made clothing.This guarantee is an example of
A)the adverse selection. problem.
B)the moral hazard problem.
C)the cost of risk.
D)signaling.
E)a lemon problem.
Q3) What is the missing insurance market in health care? Why don't private markets provide this insurance?
Q4) Explain the concept of moral hazard.Give an example.
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Chapter 13: Consumer Choice and Demand
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287 Flashcards
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Sample Questions
Q1) Consider an indifference curve for sodas and pizza, drawn in a figure with sodas measured along the horizontal axis.Moving downward along the indifference curve, the
A)marginal utility per dollar for sodas must increase.
B)marginal utility per dollar for pizza must increase.
C)consumer remains indifferent among the different combinations of soda and pizza.
D)the level of total utility must change.
E)marginal rate of substitution is constant.
Q2) In the indifference curve/budget line framework, at the consumer equilibrium, the consumer
A)is on the budget line.
B)is on the highest attainable indifference curve.
C)has a marginal rate of substitution equal to the relative price of the goods.
D)Only answers A and B are correct.
E)Answers A, B, and C are correct.
Q3) You are studying with a friend, and your friend says "To maximize utility, a consumer must consume the combination of goods so that the marginal utility of good X equals the marginal utility of good Y." Explain whether your friend's statement is correct or incorrect.
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Page 15
Chapter 14: Production and Cost
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Sample Questions
Q1) Normal profit is
A)part of the firm's opportunity costs.
B)the same as economic profits.
C)part of the firm's explicit costs.
D)Answers A and B are correct.
E)Answers A and C are correct.
Q2) Anna owns a dog grooming salon in Brunswick, Georgia.The above table has Anna's total product schedule.Anna pays each worker $300 per week and she pays rent of $600 a week for her salon.These are her only costs.When Anna has a staff of 2 workers, her average fixed cost equals
A)$600.
B)$6.00.
C)$7.50.
D)$10.00.
E)$2,400.
Q3) A firm increases its output and its average total costs remain unchanged.Is the firm experiencing increasing returns to scale, constant returns to scale, or decreasing returns to scale?
Q4) What is the difference between a normal profit and an economic profit?
Q5) What does the average product of labor equal?
Page 16
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Chapter 15: Perfect Competition
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Sample Questions
Q1) A perfectly competitive firm will shut down when the price is just below the minimum point on the
A)average fixed cost curve.
B)average total cost curve.
C)marginal cost curve.
D)average variable cost curve.
E)marginal revenue curve.
Q2) The above figure illustrates a perfectly competitive firm.Curve B represents the A)MR curve.
B)ATC curve.
C)MC curve.
D)AVC curve.
E)AFC curve.
Q3) One part of a perfectly competitive trout farm's supply curve is its
A)marginal cost curve below the shutdown point.
B)entire marginal cost curve.
C)marginal cost curve above the shutdown point.
D)average variable cost curve above the shutdown point.
E)marginal revenue curve above the demand curve.
Q4) What four conditions define a perfectly competitive market?
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Chapter 16: Monopoly
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Sample Questions
Q1) We define a monopoly as a market with A)one supplier and no barriers to entry.
B)one supplier with barriers to entry.
C)many suppliers with no barriers to entry.
D)many suppliers with barriers to entry.
E)a few suppliers and barriers to entry.
Q2) Compared to a perfectly competitive industry, a single-price monopoly produces A)more output.
B)less output.
C)the same output.
D)some amount that might be more, less, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve.
E)some amount that might be more, less, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.
Q3) What is a legal barrier to entry?
Q4) "Because of rent seeking, a monopoly may end up earning a normal profit." Is the previous statement correct or incorrect? Why?
Q5) How can managers of natural monopolies exaggerate their costs?
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Chapter 17: Monopolistic Competition
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Sample Questions
Q1) In monopolistic competition, each firm supplies a small part of the market.This occurs because
A)there are barriers to entry.
B)there are no barriers to exit.
C)there are a large number of firms.
D)firms produce differentiated products.
E)there are a large number of buyers.
Q2) In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.
A)less than B)equal to C)more than D)not comparable to E)All of the above are possible depending on market conditions.
Q3) The darkened area in the figure above is the A)deadweight loss.
B)firm's economic loss.
C)consumer surplus.
D)firm's total cost.
E)firm's total revenue.
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Chapter 18: Oligopoly
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Sample Questions
Q1) The government believes that which entry barrier has allowed Microsoft to gain monopoly power?
A)ownership of the entire supply of a resource
B)patents
C)trademarks
D)economies of scale and network economies
E)territorial confinement
Q2) If an industry has a Herfindahl-Hirschman index of 800, it is considered a A)competitive market.
B)moderately concentrated market.
C)concentrated market.
D)monopoly.
E)small market.
Q3) A market has ten firms, whose market shares are given in the table above.
aIf firms I and J wanted to merge, according to the Department of Justice guidelines, would the Federal Trade Commission challenge the merger?
bIf firms A and B wanted to merge, according to the Federal Trade Commission guidelines, would the Federal Trade Commission challenge the merger?
Q4) What three characteristics do all games have in common?
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Chapter 19: Markets for Factors of Production
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Sample Questions
Q1) As a factor of production, any of the gifts of nature are called A)land.
B)labor.
C)capital.
D)entrepreneurial ability.
E)physical capital.
Q2) Kevin owns a personal training gym in Laredo, Texas.He charges $41 per session.The above table shows the marginal product of trainers in Kevin's gym.If Kevin hires one trainer, the value of marginal product of this trainer equals A)4 clients.
B)$164.
C)$410.
D)$41.
E)None of the above answers is correct.
Q3) Why do baseball players make so much money, while kindergarten teachers in private schools make so much less? In your answer, discuss the value of marginal product and the actions of profit-maximizing firms.
Q4) What factors shift the demand for labor curve? Briefly describe the effect of each.
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21
Chapter 20: Economic Inequality
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Sample Questions
Q1) Describe the effect education and training have on outcomes in the labor market.
Q2) What percent of income is earned by the richest forty percent?
A)5 percent
B)20 percent
C)70 percent
D)55 percent
E)More information is needed to answer the question.
Q3) The inequality of annual income
A)overstates the amount of lifetime inequality.
B)understates the amount of lifetime inequality.
C)cannot change from one year to the next.
D)is about the same as the amount of lifetime inequality.
E)cannot be compared to the amount of lifetime inequality.
Q4) Of the following major characteristics that lead to income disparity, the factor with the smallest impact is A)sex.
B)race.
C)region of the country.
D)education.
E)number of people in the household.
Page 22
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