Survey of Economics
Exam Questions
Course Introduction
Survey of Economics provides an overview of fundamental economic concepts and principles, introducing students to both microeconomics and macroeconomics. The course covers topics such as supply and demand, market structures, consumer behavior, production and costs, national income, unemployment, inflation, fiscal policy, and monetary policy. Emphasis is placed on the application of economic reasoning to real-world problems and contemporary issues, enabling students to gain a broad understanding of how economies function and the decision-making processes of individuals, businesses, and governments. This survey is designed for students seeking a foundational appreciation of economics without extensive mathematical analysis.
Recommended Textbook
Foundations of Economics 6th Edition by Robin Bade
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Chapter 1: Getting Started
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Sample Questions
Q1) We are investigating the relationship among three variables.We have graphed two of them.Suppose that the variable that is not measured on the x-axis or the y-axis changes.Then,there is
A) a movement along the plotted curve.
B) a shift in the plotted curve.
C) no impact on the plotted curve because the variable is not measured on either of the axes.
D) an omitted variable.
E) a violation of the absence of trend assumption.
Answer: B
Q2) Microeconomics includes the study of the
A) aggregate effects on the national economy.
B) recessions and inflation in the global economy.
C) choices made by individuals and businesses.
D) reasons why the government changes interest rates.
E) nationwide unemployment rate.
Answer: C
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Chapter 2: The Usand Global Economies
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Q1) The two biggest items of the U.S.federal government revenue that together account for over approximately 80 percent of total federal government revenue are
A) personal income taxes and Social Security taxes.
B) personal income taxes and corporate income taxes.
C) corporate income taxes and Social Security taxes.
D) corporate income taxes and property taxes.
E) personal income taxes and sales taxes.
Answer: A
Q2) Canada is classified by the International Monetary Fund as A) an advanced economy.
B) a developing economy.
C) a transition economy.
D) an emerging market economy.
E) a natural-resource based economy.
Answer: A
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Page 4
Chapter 3: The Economic Problem
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Sample Questions
Q1) Having a comparative advantage means a nation can
A) benefit from trade.
B) produce at a higher opportunity cost.
C) produce more of the good.
D) produce without incurring an opportunity cost.
E) produce the good at a point beyond its PPF.
Answer: A
Q2) The table above shows a production possibilities frontier for an economy.If the economy tried to produce a combination of 250 loaves of bread and 800 books, A) there is some unemployment.
B) there is full employment.
C) the tradeoff between bread and books is inefficient.
D) it cannot produce this combination because it lacks enough resources or technology.
E) it is enjoying a free lunch.
Answer: D
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Page 5
Chapter 4: Demand and Supply
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Q1) The above figure illustrates the market for corn.If point "a" represents the original equilibrium and point "b" the new equilibrium,which of the following could have caused the change?
A) an increase in consumers' preferences for corn
B) an increase in consumers' income if corn is a normal good
C) an increase in labor costs of producing corn
D) an improvement in the technology of producing corn
E) an increase in consumers' income if corn is an inferior good
Q2) One reason the demand for laptop computers might increase is a
A) fall in the price of a laptop computers.
B) fall in price of desktop computers.
C) change in preferences as laptops have become more portable, with faster processors and larger hard drives.
D) poor quality performance record for laptop computers.
E) decrease in income if laptops are a normal good.
Q3) When the demand for blue jeans increases,what happens next?
Q4) What leads to a decrease in the quantity supplied of a good or service?
Q5) What is the effect on the price and quantity of a product if the demand decreases and the supply simultaneously increases?
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Chapter 5: Elasticities of Demand and Supply
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Q1) The income elasticity of demand for store brands of soda (that is,non-name brands)is negative.What does this fact indicate about consumers' perceptions about the store brands?
Q2) If the price of a movie rises 3 percent and,as a result,the quantity demanded of video rentals increases 6 percent,then the cross elasticity of demand is
A) 2.
B) 1/2.
C) -1/2.
D) -2.
E) 9.
Q3) The price elasticity of demand for Red Delicious apples,a certain type of apple,is likely
A) elastic.
B) inelastic.
C) perfectly elastic.
D) perfectly inelastic.
E) unit elastic.
Q4) Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) Jenn is willing to pay $75 for a purse and the purse's price is $60.What is Jenn's consumer surplus on this purse?
Q2) The table above shows the production possibilities for an economy.When the economy produces a combination of 900 books and 50 loaves of bread,
A) production efficiency occurs because resources are not overused.
B) allocative efficiency is achieved because both goods are produced.
C) production efficiency is not achieved.
D) allocative and production efficiency are both achieved.
E) production efficiency is not achieved but allocative efficiency might be achieved.
Q3) The demand curve is also the
A) total cost curve.
B) total benefit curve.
C) marginal cost curve.
D) marginal benefit curve.
E) marginal deadweight cost curve.
Q4) Briefly describe the concept of the "invisible hand."
Q5) Why is the demand curve the same as the marginal benefit curve?
Q6) What are the two ways demand curves can be interpreted?
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Chapter 7: Government Actions in Markets
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Q1) The graph shows the market for rental housing in Little Rock.The market for apartments is efficient when ________.
A) the quantity of apartments demanded is 12,000 a month
B) the rent ceiling is set at $300 a month
C) there is no rent ceiling
D) the quantity of apartments supplied is 6,000 a month
E) the rent charged is less than $450
Q2) Black markets occur when price ceilings are imposed in a market.Which of the following explains why sellers participate in a black market?
A) Sellers are able to sell the product for a higher than legal price.
B) There are more buyers in the black market than in the legal market.
C) The demand is perfectly elastic in a black market.
D) There is no good reason why sellers participate in a black market.
E) The demand is perfectly inelastic in a black market.
Q3) Suppose that producers are richer than consumers.Is a price support program fair? Explain your answer.
Q4) Compare and contrast a price ceiling and a price floor.
Q5) Explain why a price floor set below the equilibrium price is ineffective.
Q6) Discuss the inefficiencies created by a price floor.
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Chapter 8: Taxes
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Sample Questions
Q1) The buyers pay all of a tax when the demand is
A) perfectly elastic.
B) more elastic than the supply.
C) more inelastic than the supply.
D) unit elastic.
E) perfectly inelastic.
Q2) If the supply of capital is perfectly ________ end up paying the tax on capital income.
A) elastic, lenders
B) elastic, firms that demand capital
C) inelastic, lenders
D) inelastic, firms that demand capital
E) unit elastic, firms that demand capital
Q3) If the average tax rate increases as income increases,the tax is a
A) progressive tax.
B) regressive tax.
C) proportional tax.
D) marginal tax.
E) production-efficient tax.
Q4) How does the elasticity of demand affect the incidence of a tax?
Page 10
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Chapter 9: Global Markets in Action
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Q1) Suppose the world price of widgets is $5 each.If a widget-importing country imposed a $2 per widget tariff,what price would that country's consumers pay for widgets?
A) $10
B) $7
C) $5
D) $3
E) A price that is greater than $5 and less than $7
Q2) Merck,an American pharmaceutical company,produces a vaccination that is used against chicken pox.The table shows the domestic demand for,and supply of,this medication,measured in thousands of doses per day.The world price of this medicine is $24 per dose.
a.With no trade,what is the U.S.price and quantity of the vaccine?
b.At the world price,how many doses are demanded in the United States?
c.At the world price,how many doses are produced in the United States?
d.At the world price,how many doses are exported?
Q3) How does a tariff affect the domestic price of the import,the domestic consumption,the domestic production,and the quantity imported?
Q4) How do exports affect sellers' producer surplus?
Q5) How do exports affect buyers' consumer surplus?
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Chapter 10: Externalities
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Sample Questions
Q1) If the government provides a subsidy to producers,what is the effect of this policy in a supply and demand diagram?
A) The demand curve shifts leftward and the price rises.
B) The supply curve shifts rightward and the price falls.
C) The supply curve shifts leftward and the price falls.
D) The supply curve shifts leftward and the price rises.
E) The demand curve shifts rightward and the price rises.
Q2) In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then when the market is in equilibrium,the deadweight loss is ________ thousand per month.
A) $250
B) $125
C) $150
D) $50
E) zero
Q3) Describe some of the external benefits associated with education.What can government do to encourage production of the efficient amount of education?
Q4) Explain the difference between marginal social benefit and marginal external benefit.
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) The free-rider problem for a public good means that
A) a private market would provide less than the efficient amount of the good.
B) a private market would provide more than the efficient amount of the good.
C) the good is rival.
D) the good is excludable.
E) a private market would provide the efficient amount of the good.
Q2) A good is rival if
A) it has substitutes.
B) it can be consumed by many people simultaneously.
C) it is excludable.
D) consumption by one person decreases the quantity available for another person. E) it has no complements.
Q3) The table above provides information about the marginal cost and marginal benefit of streetlights,which are a public good.
a.What quantity would a private company provide? Why?
b.What is the efficient quantity?
Q4) What are the differences between public goods and private goods?
Q5) "The problem with a common resource is that no one gets to use the resource." Comment on the preceding assertion.
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Chapter 12: Markets With Private Information
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Q1) In the market for auto insurance,in a pooling equilibrium,
A) risky and safe drivers pay the same premium for insurance.
B) risky drivers pay a larger premium than do safe drivers for insurance.
C) risky drivers pay a smaller premium than do safe drivers for insurance.
D) risky drivers cannot obtain insurance.
E) safe drivers cannot obtain insurance.
Q2) Adverse selection can occur when
A) all parties have full information.
B) one party has information not available to the other party.
C) information is not full but both parties have the same information.
D) incentives result in one party not reaching an agreement with the other party.
E) nobody has any information.
Q3) In the used car market,adverse selection is a problem primarily when
A) sellers cannot judge buyers' creditworthiness.
B) buyers cannot signal their willingness to buy.
C) buyers cannot determine the quality of a used car.
D) sellers offer warranties on all used cars.
E) sellers and buyers both agree that a particular used car is a lemon.
Q4) Explain the concept of adverse selection.Give an example.
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Chapter 13: Consumer Choice and Demand
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Sample Questions
Q1) Nadir and Nina consume the same goods.If Nadir has more income than Nina,then Nina's budget line will
A) lie to the left of Nadir's budget line.
B) be steeper than Nadir's budget line.
C) lie to the right of Nadir's budget line.
D) be flatter than Nadir's budget line.
E) More information is needed to determine how Nina's and Nadir's budget lines compare.
Q2) In order to draw Lucky's budget line,we need to know
A) only Lucky's budget.
B) only the prices of the goods Lucky consumes.
C) both Lucky's budget and the prices of the goods Lucky consumes.
D) Lucky's budget, the prices of the goods lucky consumes, and the utilities of the goods Lucky does not consume.
E) the utilities of the goods Lucky consumes.
Q3) How can restaurants offer all-you-can-eat specials without fear of going bankrupt?
Q4) What is "marginal utility?"
Q5) What is the "principle of diminishing marginal utility"?
Q6) What is the utility-maximizing rule?
Page 15
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Chapter 14: Production and Cost
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Q1) Explain how new technologies,which increase productivity,affect the average variable cost,average total cost,and marginal cost curves.
Q2) The main sources of economies of scale are
A) increasing marginal cost and decreasing marginal product.
B) specialization of resources such as labor and capital.
C) caused by the difficulty of coordinating and controlling large enterprises.
D) decreasing marginal cost and increasing marginal product.
E) an increase in a firm's bargaining power to lower the wage rate and the cost of capital as the firm's output increases.
Q3) In a figure showing the average total cost curve and the average variable cost curve,the vertical distance between the two curves is equal to the A) marginal cost.
B) average fixed cost.
C) total fixed cost.
D) total variable cost.
E) average marginal cost.
Q4) When plotted against the total output,what does the total fixed cost curve look like?
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Chapter 15: Perfect Competition
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Q1) A market is ________ when a small number of firms compete.
A) a monopoly
B) perfectly competitive
C) monopolistically competitive
D) an oligopoly
E) either monopolistically competitive or an oligopoly
Q2) The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm
A) will definitely shut down to minimize its losses.
B) will stay open to produce and will make zero economic profit.
C) will stay open to produce and will incur an economic loss.
D) will stay open to produce and will make an economic profit.
E) might shut down but more information is needed about the fixed cost.
Q3) In a market undergoing technological change,firms that
A) adopt the new technology temporarily incur an economic loss.
B) adopt the new technology temporarily make an economic profit.
C) do not adopt the new technology temporarily make an economic profit.
D) do not adopt the new technology increase their market share.
E) do not adopt the new technology continue to make a normal profit.
Q4) What four conditions define a perfectly competitive market?
Page 17
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Chapter 16: Monopoly
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Sample Questions
Q1) A monopoly market has
A) a few firms.
B) a single firm.
C) two dominating firms in the market.
D) only two firms in it.
E) some unspecified number of firms in it.
Q2) The marginal revenue for a single-price monopoly with a downward-sloping demand curve
A) is less than the price.
B) is greater than the price.
C) is equal to the price.
D) might be more than, less than, or equal to the price, depending on whether the slope of the demand curve exceeds 1.0 in magnitude.
E) might be more than, less than, or equal to the price, depending on whether the price elasticity of demand exceeds 1.0 in magnitude.
Q3) What is price discrimination?
Q4) "If a natural monopoly is regulated using a marginal cost pricing rule,the firm makes zero economic profit." Is the previous statement correct or incorrect?
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Chapter 17: Monopolistic Competition
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Q1) In the long run,a firm in monopolistic competition
A) makes zero economic profit.
B) produces at a minimum average total cost.
C) has deficient capacity.
D) can make either a normal profit or an economic profit.
E) produces a quantity where its demand curve is upward sloping.
Q2) How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?
Q3) A differentiated product has
A) many perfect substitutes.
B) no close substitutes.
C) no substitutes of any kind.
D) close but not perfect substitutes.
E) many different complements.
Q4) Why are selling costs high in monopolistic competition?
Q5) Why is collusion about the price and amount of output impossible in monopolistic competition?
Q6) For a firm in monopolistic competition,define efficient scale and excess capacity.Briefly explain each.
Page 19
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Chapter 18: Oligopoly
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Sample Questions
Q1) The first antitrust act was ________ passed in ________.
A) the Clayton Act; 1890
B) the Sherman Act; 1890
C) the Clinton Act; 1999
D) the Rockefeller Act; 1890
E) the Clayton Act; 1914
Q2) Oligopoly is a market structure in which
A) many firms each produce a slightly differentiated product.
B) one firm produces a unique product.
C) a small number of firms compete.
D) many firms produce an identical product.
E) the number of firms is so small that they do not compete with each other.
Q3) If a firm,Best Computer Buys,requires its customers to buy software from it whenever the customers purchase a computer,the company's policy is called
A) an exclusive deal.
B) a territorial confinement.
C) a tying arrangement.
D) pricing discrimination.
E) predatory pricing.
Q4) What three characteristics do all games have in common?
Page 20
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Chapter 19: Markets for Factors of Production
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Q1) The value of marginal product of labor is equal to the marginal product of labor ________ the price of a unit of output.
A) divided by
B) multiplied by C) minus
D) plus
E) squared and then multiplied by
Q2) The demand for a resource is derived from the
A) price of the resource.
B) supply of the resource.
C) supply of substitute resources.
D) demand for the good or service that the resource is used to produce.
E) supply of complement resources.
Q3) A surplus of workers occurs
A) when the wage rate exceeds the equilibrium wage rate.
B) when the wage rate is less than the equilibrium wage rate.
C) at the equilibrium wage rate.
D) whenever there is a shortage of goods.
E) whenever there is a surplus of goods.
Q4) Explain why an individual's labor supply curve is backward bending.
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Chapter 20: Economic Inequality
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Q1) How does the supply curve of high-skilled workers compare to the supply curve of low-skilled workers?
A) Because skills are costly to acquire, at a given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers.
B) Because skills are costly to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers.
C) Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers.
D) Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers.
E) None of the above answers is correct.
Q2) "If the distribution of income was equal,the Lorenz curve would be a straight,45° line." Is the previous statement correct or incorrect?
Q3) What is "human capital" and why is it considered an investment?
Q4) How is human capital acquired?
Q5) Describe the effect education and training have on outcomes in the labor market.
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