Survey of Economics
Midterm Exam
Course Introduction
Survey of Economics introduces students to fundamental economic principles, covering both microeconomics and macroeconomics. The course explores how individuals, businesses, and governments make choices regarding the allocation of scarce resources, the functioning of markets, the role of supply and demand, national income determination, and the impact of fiscal and monetary policies. Through real-world examples and current economic issues, students gain an understanding of economic systems, market structures, and the global economy, equipping them with the analytical tools to interpret economic events and trends.
Recommended Textbook
Principles of Economics 7th Edition by Robert H. Frank
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28 Chapters
4171 Verified Questions
4171 Flashcards
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Page 2
Chapter 1: Thinking Like an Economist
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year.
NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry maximizes his economic surplus by attending:
A)Elite U.
B)State College.
C)NoName U because he has a full scholarship there.
D)NoName U because the annual cost is only $20,000. Answer: B
Q2) Economics is best defined as the study of:
A)inflation, interest rates and the stock market.
B)supply and demand.
C)how people make choices in the face of scarcity and the implications of those choices for society as a whole.
D)the financial concerns of businesses and individuals.
Answer: C
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Page 3
Chapter 2: Comparative Advantage
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Sample Questions
Q1) Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. \[\begin{array} { | l | r | r | }
\hline & \text { Calculatars Per Haur } & \text { Camputers Per Haur } \\
\hline \text { Brith } & 100 & 10 \\
\hline \text { Jones } & 120 & 6 \\
\hline \end{array}\]
Suppose Smith and Jones begin by producing 100 calculators per hour; as Smith and Jones choose to efficiently produce fewer computers and more calculators, ________ should devote more time to calculators because his ________.
A)Smith; absolute advantage is larger
B)Jones; absolute advantage is smaller
C)Jones; opportunity costs are lower
D)Smith; opportunity costs are lower
Answer: C
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4
Chapter 3: Supply and Demand
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181 Flashcards
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Sample Questions
Q1) Suppose that both the supply of iPads and the demand for iPads decrease. One can predict that the:
A)equilibrium price will rise, but the change in equilibrium quantity is uncertain.
B)equilibrium price and quantity will fall.
C)equilibrium price and quantity will rise.
D)equilibrium quantity will fall, but the change in equilibrium price is uncertain.
Answer: D
Q2) Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. This is best explained by:
A)an increase in the demand for T-shirts.
B)a decrease in the supply of T-shirts.
C)an increase in the supply of T-shirts.
D)a decrease in the demand for T-shirts.
Answer: B
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Chapter 4: Elasticity
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Sample Questions
Q1) If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:
A)30.
B)0.30.
C)0.333.
D)3.
Q2) If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:
A)increase by 0.33 percent.
B)decrease by 0.33 percent.
C)increase by 3 percent.
D)decrease by 3 percent.
Q3) If the cross-price elasticity of demand between two goods is -1.2, then the two goods are:
A)inferior.
B)elastically demanded.
C)complements.
D)substitutes.
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6
Chapter 5: Demand
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Sample Questions
Q1) Growing rice requires extensive irrigation in California. Economists consider water to be a ________ for rice farmers in California.
A)want
B)need
C)luxury
D)inferior good
Q2) Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?
A)Joe should drive to the warehouse because $1,000 is less than $1,200.
B)Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.
C)Joe should drive to the warehouse if his cost of driving to the warehouse is greater than $200.
D)Joe should drive to the warehouse because the $200 he would save by driving to the warehouse is more than 10% of the purchase price.
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Chapter 6: Perfectly Competitive Supply
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Sample Questions
Q1) Which of the following statements is true for both Microsoft and a locally owned restaurant?
A)Both are perfect competitors.
B)Both confront perfectly elastic demand for their products.
C)Neither firm is able to influence the price of their products.
D)Both seek to maximize profits.
Q2) Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ________ of
A)profit; $370
B)loss; $200
C)profit; $170
D)loss; $170
Q3) A profit-maximizing firm will only produce a positive amount of output if:
A)its total revenue is greater than its total cost.
B)its total revenue is greater than its fixed cost.
C)its total revenue equals its total cost.
D)its total revenue is greater than or equal to its variable cost.
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Page 8
Chapter 7: Efficiency, Exchange, and the Invisible Hand in Action
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Sample Questions
Q1) Accounting profit is equal to:
A)total revenue minus implicit costs.
B)total revenue minus explicit costs.
C)total revenue minus explicit and implicit costs.
D)economic profit minus implicit costs.
Q2) Suppose you own a small business. Last month, your total revenue was $6,000. In addition, you paid:
$1,000 in monthly rent for office space,
$200 in monthly rent for equipment,
$3,000 to your workers in wages for the month, and
$1,000 for the supplies you used that month.
If you correctly determine that your economic profit last month was negative $200, then it must be true that:
A)you do not have any implicit costs.
B)your implicit costs are $200 per month.
C)your implicit costs are $1,000 per month.
D)the rent you pay on your equipment is an implicit cost.
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Page 9
Chapter 8: Monopoly, Oligopoly, and Monopolistic Competition
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Sample Questions
Q1) Consider an industry with two firms producing similar products. Each firm's total cost (in dollars)is given below. Mega Corp: TC = 5,000 + 100Q
Big Inc: TC = 4,000 + 200Q
For both firms, average total cost:
A)declines as quantity increases.
B)increases as quantity increases.
C)is constant for all quantities.
D)declines as quantity increases for Mega Corp and increases as quantity increases for Big Inc.
Q2) De Beers accounts for approximately 80% of diamond sales worldwide. The source of its market power is:
A)its exclusive ownership of South African diamond mines.
B)its patent on diamond production.
C)the perfectly inelastic demand for diamonds.
D)the engagement customs of couples in Western cultures.
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Chapter 9: Games and Strategic Behavior
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Sample Questions
Q1) According to the text, everyone shouts at a party in order to be heard. If instead everyone spoke at a normal volume people would still be heard, but people continue to shout because:
A)shouting is a dominated strategy.
B)shouting is a dominant strategy.
C)shouting can be sustained using a tit-for-tat strategy.
D)the payoff matrix is unknown to the people at a party.
Q2) In a repeated prisoner's dilemma, players:
A)never learn to play their dominant strategies.
B)can sustain cooperation by employing a tit-for-tat strategy.
C)can sustain cooperation by playing their dominant strategy.
D)always play their dominant strategy.
Q3) The use of psychological incentives to solve commitment problems would be least effective in games played:
A)repeatedly between strangers.
B)once between family members.
C)repeatedly between family members.
D)once between strangers.
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Chapter 10: An Introduction to Behavioral Economics
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Sample Questions
Q1) In traditional economic models, the narrowly self-interested, well-informed, highly disciplined and cognitively formidable decision maker is often referred to as:
A)a boundedly rational agent.
B)a behavioral economist.
C)homo economicus.
D)a satisficer.
Q2) The ________ is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer.
A)Nash bargaining game
B)matching pennies game
C)ultimatum bargaining game
D)repeated prisoner's dilemma
Q3) Suppose Danielle receives the highest grade in the class on the first exam in her economics course. Regression to the mean implies that Danielle:
A)isn't likely to do as well on the second exam.
B)is likely to do even better on the second exam.
C)is likely to get an A in the class.
D)is unlikely to forget the material she studied for the exam.
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Chapter 11: Externalities, Property Rights, and the Environment
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Sample Questions
Q1) Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains. These controls were designed to fully offset the cost of pollution generated by diesel fuel vehicles. The effect of the regulation is estimated to increase the equilibrium price of a gallon of diesel fuel by 10 cents. Assuming that the supply of diesel fuel has a positive slope and demand has a negative slope, one can infer that the EPA determined that:
A)the external benefit of using diesel fuel is less than 10 cents.
B)the external cost of using diesel fuel is greater than 10 cents.
C)the external cost of using diesel fuel is less than 10 cents.
D)the external cost of using diesel fuel is equal to 10 cents.
Q2) If coal mining produces a negative externality because it leads to environmental damage, then, at the market equilibrium, the:
A)price of coal will be higher than the socially optimal price.
B)quantity of coal produced will be less than the socially optimal quantity.
C)quantity of coal produced will be greater than the socially optimal quantity.
D)supply curve will lie to the left of the regulated supply curve.
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Chapter 12: The Economics of Information
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Sample Questions
Q1) Rationally, search should continue until:
A)all search options have been explored.
B)the marginal benefit of search equals the marginal cost of search.
C)the marginal benefit of search is zero.
D)the marginal cost of search is zero.
Q2) Suppose you are planning to sell your house. You value your house at $200,000. If you do not hire a realtor, you will be able to sell your house to a buyer whose reservation price is $220,000. If you hire a realtor, you will be able to sell your house to a buyer whose reservation price is $250,000. Assume that the realtor's opportunity cost of negotiating the sale is $5,000. In this case, how much additional economic surplus is generated by using a realtor to sell your house?
A)None, because you value the house at $200,000 no matter who buys it.
B)$250,000.
C)$200,000.
D)$25,000.
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Chapter 13: Labor Markets, Poverty, and Income Distribution
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:
A)doctors' wages to increase.
B)the working conditions of doctors to deteriorate.
C)a persistent shortage of doctors.
D)the supply of doctors to fall.
Q2) A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:
A)labor monopsony.
B)labor union.
C)labor collective.
D)closed shop.
Q3) One reason nonunionized firms do not always drive unionized firms out of business is that:
A)markets are not competitive.
B)unionized firms reduce the value of total output.
C)unionized firms hire more selectively, employing workers with greater human capital.
D)unionized firms receive government subsidies.
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15
Chapter 14: Public Goods and Tax Policy
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Sample Questions
Q1) If low-income households spend a larger share of their income on food than do high-income households, then a tax on food is:
A)a progressive tax.
B)a regressive tax.
C)a proportional tax.
D)a way to redistribute from the wealthy to the poor.
Q2) Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it.
If the cost of paving the driveway is $2,000 and Lane proposes that they each pay 50 percent of this cost, then Riley ________ agree to Lane's proposal because
A)will; repaving the driveway would increase total economic surplus
B)will not; repaving the driveway would lower total economic surplus
C)will; if they split the cost, then Riley's economic surplus would increase
D)will not; if they split the cost, then Riley's economic surplus would decrease
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Page 16
Chapter 15: International Trade and Trade Policy
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Sample Questions
Q1) Free trade is ________, because it ________ the size of the pie available to the economy.
A)inefficient; decreases
B)inefficient; increases
C)efficient; decreases
D)efficient; increases
Q2) The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P. Suppose the economy is closed. The equilibrium price of a car is ________ and equilibrium quantity is ________.
A)$6,000; 14,000
B)$8,000; 12,000
C)$10,000; 10,000
D)$12,000; 8,000
Q3) Why is there often resistance to free trade?
A)Free trade does not benefit the economy as a whole.
B)Specific groups may be hurt by free trade.
C)Free trade does not benefit the global economy.
D)Free trade usually hurts consumers.
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Page 17
Chapter 16: Macroeconomics: The Birds Eye View of the Economy
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Sample Questions
Q1) A cost of aggregation is that:
A)details about individual households and firms are lost.
B)the "big picture" cannot be studied.
C)economy-wide totals cannot be obtained.
D)broad economic trends are obscured.
Q2) A government is running a budget deficit if:
A)government revenue exceeds government spending.
B)government revenue is less than government spending.
C)exports exceed imports.
D)imports exceed exports.
Q3) Since 1950, the standard of living in the United States has:
A)increased when measured by output per person, but decreased when measured by total output.
B)increased when measured by both total output and output per person.
C)decreased when measured by output per person, but increased when measured by total output.
D)decreased when measured by both total output and output per person.
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Page 18
Chapter 17: Measuring Economic Activity: GDP and Unemployment
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Sample Questions
Q1) An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. At the end of the year, the table manufacturers hold the unsold tables in inventory. What is the value of GDP?
A)$5 million
B)$40 million
C)$45 million
D)$50 million
Q2) In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted them. How many people are in the labor force of this town?
A)60
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Chapter 18: Measuring the Price Level and Inflation
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Sample Questions
Q1) The consumer price index for the current year measures the cost of a standard basket in the ________ year relative to the cost of the same basket in the ________ year.
A)current; base
B)current; current
C)base; index
D)base; current
Q2) The ________ is the rate of change of the ________.
A)base year price index; current year price index
B)current year price index; base year price index
C)CPI; rate of inflation
D)rate of inflation; CPI
Q3) If workers received a 5 percent wage increase and the rate of inflation was 3 percent, then their real wage:
A)increased.
B)decreased.
C)remained constant.
D)equaled the nominal wage.
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Chapter 19: Economic Growth, Productivity, and Living Standards
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Sample Questions
Q1) Real GDP per person in Canada was $7,377 in 1950. Over the next 48 years it grew at a compound annual rate of 2.0 percent. If instead real GDP per person had grown at an average compound annual rate 2.5 percent, then real GDP per capita in Canada in 1998 would have been approximately ________ larger.
A)$1,770
B)$5,049
C)$9,370
D)$24,130
Q2) Higher future living standards require:
A)reduced rates of current consumption.
B)increased rates of population growth.
C)increased rates of current consumption.
D)reduced rates of current investment.
Q3) The biggest problem thwarting economic growth in the poorest countries, compared to the richest countries, is:
A)insufficient human capital.
B)outdated physical capital.
C)no access to technology.
D)a legal and/or political environment unfavorable to economic growth.
Page 21
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Chapter 20: The Labor Market: Workers, Wages, and Unemployment
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Sample Questions
Q1) Holding other factors constant, if computers allow factory workers to manufacture more products per hour, then the real wages of factory workers will ________ and employment of factory workers will ________.
A)increase; increase
B)increase; decrease
C)decrease; not change
D)decrease; increase
Q2) Holding other factors constant, if the education and skills of the typical worker in an economy increases, then the real wages of workers will ________ and employment of workers will ________.
A)increase; increase B)increase; decrease
C)decrease; not change
D)decrease; increase
Q3) An increase in the price of the output produced by labor will:
A)increase the supply of labor.
B)decrease the supply of labor.
C)increase the demand for labor.
D)decrease the demand for labor.
Page 22
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Chapter 21: Saving and Capital Formation
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Sample Questions
Q1) Investment is a(n)________ that changes the ________ of capital.
A)flow; stock
B)stock; flow
C)asset; liability
D)liability; asset
Q2) Social Security benefits, welfare payments, and farm support payments are examples of:
A)consumption spending.
B)public interest payments.
C)investment spending.
D)transfer payments.
Q3) Joe's Taco Hut can purchase a delivery truck for $20,000 and Joe estimates it will generate a net income (after taxes, maintenance and operating costs)of $2,000 per year. He has no other opportunities. He should:
A)purchase the truck only if the real interest rate is less than 2 percent.
B)not purchase the truck if the real interest rate is greater than 2 percent.
C)purchase the truck if the real interest rate is greater than 10 percent.
D)purchase the truck if the real interest rate is less than 10 percent.
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Chapter 22: Money Prices and the Federal Reserve
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Sample Questions
Q1) The amount of money in the United States is determined by:
A)the Federal Reserve.
B)the combined behavior of commercial banks and the public, as well as actions of the Federal Reserve.
C)the public.
D)the combined behavior of commercial banks and the public.
Q2) The two main responsibilities of the Federal Reserve System are to ________ and to ________.
A)apprehend counterfeiters; regulate the stock market
B)enable banks to make affordable mortgages; control the exchange rate of the U.S. dollar
C)insure bank deposits; print currency
D)conduct monetary policy; oversee financial markets
Q3) The Federal Open Market Committee makes decisions about ________ policy.
A)monetary
B)fiscal
C)banking
D)deposit insurance
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Chapter 23: Financial Markets and International Capital Flows
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Sample Questions
Q1) When the Chinese government buys U.S. government bonds, from the perspective of the United States, this is a(n):
A)import.
B)export.
C)capital outflow.
D)capital inflow.
Q2) Firms that extend credit to borrowers using funds raised from savers are called:
A)bond dealers.
B)stock brokers.
C)central banks.
D)financial intermediaries.
Q3) In an open economy, if domestic citizens decide to save more, then the domestic real interest rate will ________ and the level of capital investment in the country will ________, holding other factors constant.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; increase
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Chapter 24: Short-Term Economic Fluctuations: An Introduction
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Sample Questions
Q1) In reference to short-term economic fluctuations, the "trough" refers to:
A)a period in which the economy is growing at a rate significantly below normal.
B)the low point of economic activity prior to a downturn.
C)the low point of economic activity prior to a recovery.
D)a particularly strong and protracted recession.
Q2) Economic activity moves from a period of expansion to a ________ and then moves into a period of ________ until it reaches a ________.
A)peak; expansion; trough
B)peak; recession; trough
C)trough; expansion; peak
D)trough; recession; peak
Q3) For policymakers, the problem with a recessionary gap is ________ and the problem with an expansionary gap is ________.
A)a tendency for inflation to increase; wasted resources
B)wasted resources; a tendency for inflation to increase
C)an increase in cyclical unemployment; an increase in structural unemployment
D)an increase in structural unemployment; an increase in cyclical unemployment
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Page 26
Chapter 25: Spending and Output in the Short Run
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Sample Questions
Q1) Dave's Mirror Company expects to sell $1,000,000 worth of mirrors and to produce $1,250,000 worth of mirrors in the coming year. The company purchases $300,000 worth of new equipment during the year. Sales for the year turn out to be $900,000. Actual investment by Dave's Mirror Company equals ________ and planned investment equals ________.
A)$250,000; $150,000
B)$300,000; $200,000
C)$550,000; $450,000
D)$650,000; $550,000
Q2) Short-run equilibrium output is the level of output at which actual output:
A)equals potential output.
B)maximizes firm profits.
C)equals real GDP per capita.
D)equals planned aggregate expenditure.
Q3) As disposable income increases, consumption:
A)increases.
B)decreases.
C)may either increase or decrease depending on the wealth effect.
D)may either increase or decrease depending on the mpc.
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Page 27
Chapter 26: Stabilizing the Economy: The Role of the Fed
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Sample Questions
Q1) The decision about how much money to hold is an application of the:
A)scarcity principle.
B)principle of comparative advantage.
C)principle of increasing opportunity cost.
D)cost-benefit principle.
Q2) The opportunity cost of money is:
A)the time spent going to the bank to withdraw funds.
B)the fees charged by banks to provide checking services.
C)the nominal interest rate.
D)the price level.
Q3) According to the Taylor rule, if inflation equals 3 percent and there is an expansionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.
A)4; 7
B)1; 4
C)1; 3
D)4; 6
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Chapter 27: Aggregate Demand, Aggregate Supply, and Inflation
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Sample Questions
Q1) Starting from a long-run equilibrium, an increase in potential output leads to ________ gap in the short run and to ________ rates of inflation in the long run.
A)an expansionary; higher
B)an expansionary; lower
C)a recessionary; lower
D)a recessionary; higher
Q2) Starting from long-run equilibrium, an adverse inflation shock results in a short-run equilibrium with ________ inflation and ________ output.
A)higher; higher B)higher; lower
C)higher; potential D)lower; lower
Q3) All else equal, an increase in the rate of inflation ________ planned spending and ________ short-run equilibrium output.
A)increases; increases
B)decreases; increases
C)increases; decreases D)decreases; decreases
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Chapter 28: Exchange Rates and the Open Economy
Available Study Resources on Quizplus for this Chatper
157 Verified Questions
157 Flashcards
Source URL: https://quizplus.com/quiz/45070
Sample Questions
Q1) To stop a speculative attack interest rates must be ________, which will ________ aggregate demand.
A)increased; increase
B)increased; decrease
C)decreased; decrease
D)decreased; increase
Q2) The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will depreciate when:
A)real GDP in Japan decreases.
B)real GDP in Japan increases.
C)the U.S. Federal Reserve tightens monetary policy.
D)U.S. consumers decrease their preference for Japanese cars.
Q3) Under a flexible exchange rate system an increase in the value of a currency relative to other currencies is a called a(n)________ and under a fixed exchange rate system an increase in the official value of a currency is called a(n)________.
A)depreciation; devaluation
B)appreciation; revaluation
C)revaluation; appreciation
D)depreciation; appreciation
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