Survey of Economics Final
Exam
Course Introduction
Survey of Economics provides an introduction to the fundamental concepts of both microeconomics and macroeconomics. The course explores how individuals, firms, and governments make decisions regarding the allocation of scarce resources, examines supply and demand dynamics, market structures, and the role of government intervention. Additionally, it covers broader economic indicators such as inflation, unemployment, and economic growth, offering students a foundation for understanding key economic issues and current events. This course is designed for non-economics majors seeking a comprehensive overview of economic principles and their real-world applications.
Recommended Textbook Essentials of Economics 4th Edition by
R. Glenn Hubbard
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Page 2
Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) An example of a microeconomics question is:
A) How much will be saved and how much will be produced in the entire economy?
B) What will the level of economic growth be in the entire economy?
C) What factors determine the price of carrots?
D) What determines the average price level and inflation?
Answer: C
Q2) Suppose that to increase sales of hybrid vehicles,auto manufacturers are offering large cash incentives.This is an example of a macroeconomics topic.
A)True
B)False
Answer: False
Q3) All economic questions arise from the fact that resources are unlimited.
A)True
B)False
Answer: False
Q4) When voluntary exchange takes place,neither party gains from the exchange. A)True
B)False Answer: False
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Chapter 2: Choices and Trade-Offs in the Market
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Sample Questions
Q1) Refer to Table 2.4.What is Haley's opportunity cost of making a necklace?
A) 3/4 of a bracelet
B) 3 bracelets
C) 1 1/3 necklaces
D) 2 necklaces
Answer: A
Q2) Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.Where would a combination of 5 pillows and 21 blankets appear?
A) Along Billie's production possibility frontier
B) Inside Billie's production possibility frontier
C) Outside Billie's production possibility frontier
D) At the vertical intercept of Billie's production possibility frontier
Answer: B
Q3) A decrease in population shifts the production possibility frontier outwards over time.
A)True
B)False
Answer: False
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) The law of demand implies,holding everything else constant,that as the price of ice cream
A) increases, the demand for ice cream will increase.
B) increases, the quantity of ice cream demanded will increase.
C) decreases, the quantity of ice cream demanded will increase.
D) decreases, the demand for ice cream will increase.
Answer: C
Q2) A movement along the demand curve for toothpaste would be caused by
A) a change in the price of toothbrushes.
B) a change in consumer income.
C) a change in the price of toothpaste.
D) a change in population.
Answer: C
Q3) Refer to Figure 3-1.If the product represented is a normal good,a decrease in income would be represented by a movement from
A) A to B.
B) B to A.
C) D<sub>1</sub> to D<sub>2</sub>.
D) D<sub>2 </sub>to D<sub>1</sub>.
Answer: D
Page 5
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Chapter 4: Elasticity: The Responsiveness of Demand and Supply
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Sample Questions
Q1) For each pair of items below,determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair colouring product
b.A new Ford Fusion or a tank of gas for your current car
c.A Seiko watch or watches in general
Q2) If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is _________.
A) one that sells an inferior good
B) one that sells a necessity good
C) one that sells a luxury good
D) one that sells a price inelastic good
Q3) Necessities tend to have more inelastic demands than luxuries.
A)True
B)False
Page 6
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Chapter 5: Economic Efficiency,government Price Setting and Taxes
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Sample Questions
Q1) Suppose the demand curve for a product is vertical and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,_________.
A) sellers bear the entire burden of the tax
B) buyers bear the entire burden of the tax
C) the tax burden will be shared equally between buyers and sellers
D) buyers share the burden of the tax with the government
Q2) Paul goes to Sportsmart to buy a new tennis racquet.He is willing to pay $200 for a new racquet,but buys one on sale for $125.What is Paul's consumer surplus from the purchase?
A) $325
B) $200
C) $125
D) $75
Q3) Refer to Figure 5.1.If the market price is $3.00,what is the maximum number of burritos that Arnold will buy?
A) 0
B) 2
C) 3
D) 4
Page 7
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Chapter 6: Technology,production and Costs
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Sample Questions
Q1) If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units,then the average product of 12 workers is ________.
A) 60 units
B) 54 units
C) 48 units
D) 5 units
Q2) Refer to Table 6.6.Alicia Gregory owns a foot massage business.She leases four computer-controlled massage booths,for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months' notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.
Q3) Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.
A)True
B)False
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Chapter 7: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Refer to Figure 7.12.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Q2) Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.The immediate result of this event is:
A) The market price falls and the typical firm suffers an economic loss.
B) The market supply increases to offset the fall in demand.
C) The typical firm's average total cost curve shifts downward.
D) The typical firm's marginal cost curve shifts to the left.
Q3) Refer to Figure 7.2.Why is the total revenue curve a ray from the origin?
A) Because revenue increases at an increasing rate
B) Because revenue increases at a decreasing rate
C) Because the firm can sell its product at a constant price
D) Because the firm must lower its price to sell more
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Page 9
Chapter 8: Monopoly Markets
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Sample Questions
Q1) Refer to Figure 8.2.What is the firm's profit-maximising price?
A) P<sub>1</sub>
B) P<sub>2</sub>
C) P<sub>3</sub>
D) P<sub>4</sub>
Q2) Refer to figure 8.13.In the absence of any government regulation,the profit-maximising owners of this firm will produce ________ units and charge a price of ________.
A) Q<sub>0</sub>; P<sub>0</sub>
B) Q<sub>1</sub>; P<sub>1</sub>
C) Q<sub>1</sub>; P<sub>4</sub>
D) Q<sub>3</sub>; P<sub>3</sub>
Q3) Refer to Table 8.2.What is the profit-maximising quantity and price for the monopolist?
A) Quantity = 8 cases, Price = $9
B) Quantity = 7 cases, Price = $10
C) Quantity = 9 cases, Price = $8
D) Quantity = 10 cases, Price = $7
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Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) An equilibrium in which each player chooses its best strategy given the strategies chosen by the other players is called a Nash equilibrium.
A)True
B)False
Q2) A monopolistically competitive industry that earns economic profits in the short run will face a more elastic demand curve in the long run.
A)True
B)False
Q3) If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue,total cost is $1674 and total revenue is $2000,its average profit is ______.
A) $326
B) $40
C) $6.52
D) impossible to determine without additional information
Q4) For a monopolistically competitive firm,price equals average revenue.
A)True
B)False
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11
Chapter 10: The Markets for Labour and Other Factors of Production
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Sample Questions
Q1) How will an increase in population affect the labour market?
A) It will shift the market supply curve.
B) It will cause a decrease in the quantity of labour demanded.
C) It will increase the supply of jobs.
D) It will increase the opportunity cost of leisure.
Q2) The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.
A)True
B)False
Q3) When is the income effect of a wage increase observed?
A) The higher wage income causes workers to take more leisure and work less.
B) Leisure's higher opportunity cost causes workers to take less leisure and work more.
C) The higher wage income causes workers to take less leisure and work more.
D) Leisure's higher opportunity cost causes workers to take more leisure and work less.
Q4) The marginal product of labour curve is the demand curve for labour.
A)True
B)False
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Chapter 11: Government Intervention in the Market
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Sample Questions
Q1) A market failure
A) refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.
B) refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost.
C) refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.
D) refers to a breakdown in a market economy because of widespread corruption in government.
Q2) 'Free riding' is a characteristic of which type of good?
A) A private good
B) A common resource
C) A public good
D) A good that is both rival and excludable
Q3) Economic rent refers to the price of a factor of production which is fixed in supply.
A)True
B)False
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Chapter 12: Social Policy and Inequality
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Sample Questions
Q1) Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the A) benefits-received principle.
B) social equity principle.
C) ability-to-pay principle.
D) horizontal-equity principle.
Q2) Refer to Figure 12.1.The sales tax revenue collected by the government is represented by the area -.
A) B + C
B) F + G
C) E + H
D) B + C + F + G
Q3) Refer to Figure 12.6.If area X = 2060,area Y = 240,and area Z = 2700,calculate the Gini coefficient for Islandia.
A) 0.41
B) 0.45
C) 0.70
D) 0.76
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Page 14
Chapter 13: Gdp: Measuring Total Production, income and Economic Growth
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Sample Questions
Q1) If a book,film,or piece of software was created today,for how long would Australian copyright law guarantee exclusive legal rights to the creator to use the creation?
A) 10 years
B) 20 years
C) The creator's lifetime plus 50 years for the creator's heirs
D) The creator's lifetime plus 70 years for the creator's heirs
Q2) Which of the following is not a policy that can increase the accumulation of knowledge capital?
A) Subsidised research and development
B) Patent laws to encourage innovation
C) Free provision of education
D) Removing patent laws to allow for the spread of knowledge
Q3) According to 'new growth theory',the market will lead firms to accumulate the efficient level of knowledge capital.
A)True
B)False
Q4) Nominal GDP is GDP measured in current prices and can be smaller than real GDP.
A)True
B)False
Page 15
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Chapter 14: Unemployment and Inflation
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Sample Questions
Q1) Assume that the CPI in 2018 was 217,while the CPI in 1990 was 82.If a person had $6000 in 1990,its equivalent purchasing power in 2018 would be $10 850.
A)True
B)False
Q2) During periods of rising unemployment,the government receives less tax revenue from individuals and from businesses.
A)True
B)False
Q3) Which of the following is an example of a worker experiencing 'frictional unemployment'?
A) A worker who quits his job at the post office to find more interesting work
B) A computer programmer who loses her job because it is outsourced to India
C) An employee who loses his job because the economy is suffering a recession
D) An airline pilot who loses her job because of lack of demand for air travel
Q4) The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.
A)True
B)False
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16
Chapter 15: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.
A)True
B)False
Q2) Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,the
A) long-run aggregate supply curve will shift to the right.
B) long-run aggregate supply curve will shift to the left.
C) economy will move up along the long-run aggregate supply curve.
D) economy will move down along the long-run aggregate supply curve.
Q3) 'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s.He argued that the economy would most likely be
A) below potential GDP.
B) at potential GDP.
C) unstable.
D) above potential GDP.
Q4) 'Stagflation' occurs when short-run aggregate supply decreases.
A)True
B)False
17
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Chapter 16: Money,banks and the Reserve Bank of Australia
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Sample Questions
Q1) Consider the following T-account for a bank:
\[\begin{array} { | c | c | }
\hline \text { Assets (dollars) } & \text { Liabilities (dollars) } \\
\hline \text { Reserves } 1000 & \text { Deposits } 5000 \\
\hline \text { Loans } 4000 & \\
\hline
\end{array}\] If the bank's reserve ratio is 20 per cent and the bank is holding no excess reserves,the bank at this point will not make any more loans.
A)True
B)False
Q2) If you open a savings account at a bank,the bank will record the transaction by increasing its ________ account and increasing its ________ account.
A) deposit; reserve
B) deposit; liability
C) reserve; loan
D) loan; deposit
Q3) 'Broad money' is usually less than M3 in Australia.
A)True
B)False
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Page 18
Chapter 17: Monetary Policy
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Sample Questions
Q1) Suppose the following table illustrates the values of real and potential GDP if the Reserve Bank of Australia (RBA)does not change its current monetary policy to be more contractionary or expansionary.
\[\begin{array} { | c | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Potential GDP } \\
\text { (dollars) }
\end{array} & \text { Real GDP (dollars) } & \text { Price level } \\
\hline 2017 & 1.50 \text { trillion } & 1.50 \text { trillion } & 150 \\
\hline 2018 & 1.56 \text { trillion } & 1.53 \text { trillion } & 153 \\
\hline
\end{array}\] If the RBA wants to keep real GDP at its potential level in 2018,should the RBA use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?
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Page 19
Chapter 18: Fiscal Policy
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Sample Questions
Q1) In Figure 18.2,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the government use to move the economy to point C?
A) Decrease income taxes
B) Decrease government purchases
C) Increase income taxes
D) Sell commonwealth government bonds and securities
Q2) What is the difference between 'discretionary fiscal policy' and 'automatic stabilisers'?
Q3) An appropriate fiscal policy response when aggregate demand is growing at a faster rate than aggregate supply is to increase interest rates.
A)True
B)False
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Page 20
Chapter 19: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Countries that engage in trade will tend to specialise in the production of goods and services in which they have ________ and will ________ these goods and services.
A) a comparative advantage; import
B) an absolute advantage; export
C) a comparative advantage; export
D) an absolute advantage; import
Q2) Exports are domestically produced goods and services _________.
A) sold to other countries
B) sold to the government
C) sold at home
D) which are used to produce other goods and services
Q3) Refer to Table 19.3.Select the statement that accurately interprets the data in the table.
A) Bryce has an absolute advantage in making candles and soap.
B) Tina has an absolute advantage in making candles and soap.
C) Neither Bryce nor Tina has an absolute advantage in making candles.
D) Neither Bryce nor Tina has an absolute advantage in making soap.
Q4) What does it mean for a country to have an absolute advantage in producing a product?
Page 21
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Chapter 20: Macroeconomics in an Open Economy
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Sample Questions
Q1) Which of the following is not included in the financial account?
A) An increase in private Australian asset holdings in foreign countries
B) An increase in foreign government asset holdings in foreign countries
C) An increase in foreign private asset holdings in Australia
D) Income received from investments made overseas
Q2) The East Asian exchange rate crisis of the late 1990s resulted in a greater number of countries with pegged exchange rates.
A)True
B)False
Q3) Assume that the exchange rate between the dollar and the euro is 0.6 = $1.Suppose the exchange rate changes to 0.50 = $1.Because of the change
A) Australian exports should increase and Australian imports should increase.
B) Australian exports should decrease and Australian imports should increase.
C) Australian exports should increase and Australian imports should decrease.
D) Australian exports should decrease and Australian imports should decrease.
Q4) The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.
A)True B)False
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