Survey of Economics Question
Bank
Course Introduction
Survey of Economics provides students with an introduction to the fundamental concepts and principles of both microeconomics and macroeconomics. The course covers topics such as supply and demand, market structures, consumer behavior, production costs, economic growth, inflation, unemployment, fiscal and monetary policy, and the role of government in the economy. By examining real-world examples and current events, students develop analytical skills to better understand how economic forces affect individuals, businesses, and society as a whole. This broad overview prepares students for more advanced study in economics and related fields.
Recommended Textbook
Economics USA 8th Edition Edition by
Nariman Behravesh
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Page 2
Chapter 1: What is Economics
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Q1) The relationship between household income and number of DVD players is
A) nonexistent.
B) direct.
C) negative.
D) fluctuating.
E) terminal.
Answer: B
Q2) Opportunity cost
A) is the production forgone from the best alternative use of a resource.
B) reduces the need to make choices.
C) applies only to allocating capital.
D) is another name for the "invisible hand."
E) is greater for free resources than for economic resources.
Answer: A
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Page 3
Chapter 2: Markets and Prices
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Q1) In the circular flow model,income to the household is,from the point of view of the firm that pays this income,the same things as
A) investment.
B) savings.
C) revenue.
D) production costs.
E) working capital.
Answer: D
Q2) According to economic analysis,shortages of a good mean
A) supply is too low.
B) demand is too high.
C) the actual price is too low.
D) production is too low.
E) the equilibrium price is too low.
Answer: C
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Chapter 3: The Business Firm: Organization,motivation,and
Optimal Input Decisions
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Q1) Any production function embodies a
A) predetermined rate of return.
B) statement of the firm's goals and objectives.
C) rate of depreciation.
D) given state of technology.
E) financial commitment to common stockholders.
Answer: D
Q2) The term that best denotes anything a firm uses in its production process is A) machine.
B) plant.
C) asset.
D) output.
E) input.
Answer: E
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Page 5
Chapter 4: Getting Behind the Demand and Supply Curves
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Q1) A $1 price increase would reduce the quantity demanded in this market by A) zero.
B) one.
C) two.
D) three.
E) four.
Q2) If the total cost of 100 units is $560 and the marginal cost of the 101st unit is $6
A) total cost will fall.
B) total fixed cost will rise.
C) total variable cost will fall.
D) average total cost will rise.
E) average variable cost will fall.
Q3) The average variable cost of producing 2 units is
A) $13.
B) $23.
C) $26.
D) $33.
E) $66.
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6
Chapter 5: Market Demand and Price Elasticity
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Q1) The idea behind the direct market experiment to measure demand is to A) see the effects on the quantity demanded of actual variations in the price of a product.
B) use statistical methods to estimate demand curves from historical data.
C) measure demand by interviewing consumers about their buying habits and intentions.
D) measure the effect of changes in variables, such as income or taste, on price.
E) measure the effect of changes in price on quantities supplied.
Q2) Suppose the short-run price elasticity of demand for gasoline is 0.4.Acting on this information,one gasoline station at an intersection where there are three additional gasoline stations raises its price by 10 percent.If the other three stations keep their original prices,the first gasoline station will probably see its gasoline sales
A) increase by 0.4 percent.
B) remain unchanged.
C) fall by 0.4 percent.
D) fall by 4 percent.
E) fall by more than 4 percent.
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Chapter 6: Economic Efficiency,market Supply,and Perfect Competition
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Q1) Which of the following is implied by the graph?
A) Output rate B is more profitable than output rate A.
B) Any positive output rate less than C is profitable.
C) Output rate A maximizes profits.
D) After output rate B, total cost increases more slowly than total revenue.
E) All output rates greater than C are profitable.
Q2) As Eastern European economies embraced capitalistic processes in the 1990s,they
A) dramatically reduced or eliminated price controls.
B) increased government ownership of factories.
C) immediately experienced rapidly increasing levels of output with no inflation.
D) began to rely even more heavily on central planning by government bureaucracies.
E) were able to eliminate poverty virtually overnight.
Q3) In a free market,a price ceiling
A) encourages sellers to produce more.
B) leads to a decrease in the market demand curve.
C) improves the ability of a market to adjust to changes in demand.
D) eliminates the need to ration.
E) creates shortages.
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Chapter 7: Monopoly and Its Regulation
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Q1) A firm given exclusive rights by the government to do business in a particular area is a(n)________ monopoly.
A) patent
B) output
C) natural
D) franchise
E) input
Q2) When marginal revenue exceeds marginal cost,a monopolist should
A) expand output.
B) discontinue production.
C) raise price.
D) reduce demand.
E) encourage new firms to compete with it.
Q3) A notable movement in the direction of deregulation of industry in the United States occurred during
A) the 1930s.
B) World War II.
C) the late 1940s and early 1950s.
D) the early 1960s.
E) the late 1970s and early 1980s.
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Chapter 8: Monopolistic Competition,oligopoly,and Antitrust
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Q1) This short-run equilibrium price
A) is also the long-run equilibrium price.
B) is not profitable for the monopolistic competitor.
C) requires the firm to advertise to avoid continuing to lose money.
D) equals marginal cost.
E) will not be sustained because there is an incentive for entry.
Q2) Although a cartel may readily agree on a uniform price,problems nevertheless arise because
A) marginal cost is the same as marginal revenue.
B) consumer demand will increase as a result.
C) decisions must be made as to how to allocate production among cartel members.
D) the product is either homogeneous or differentiated.
E) all cartels are illegal.
Q3) The two approaches to antitrust policy are market
A) conduct and market structure.
B) size and market scope.
C) concentration and market disintegration.
D) power and market monopoly.
E) merger and market shares.
Page 10
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Chapter 9: Pollution and the Environment
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Q1) An effluent fee induces a polluter to A) increase his or her profits.
B) reduce waste discharge.
C) eliminate pollution entirely.
D) overspend on pollution reduction to the point where profits disappear.
E) stop production.
Q2) If the government charges Crystal Clear Glass Company according to the estimated pounds of waste it discharges into the atmosphere,this is an example of
A) direct regulation.
B) a tax credit.
C) an effluent fee.
D) private cost regulation.
E) a transferable emissions permit.
Q3) Point C represents the A) highest cost of pollution.
B) average cost of pollution.
C) optimal level of pollution
D) absence of pollution.
E) point where the costs of pollution equal the costs of pollution control.
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Page 11
Chapter 10: The Supply and Demand for Labor
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Q1) The demand for labor (and other inputs),not as ends in themselves but as means to produce other things,is called ________ demand.
A) derived
B) aggregate
C) complementary
D) transactions
E) exogenous
Q2) Determination of the price of labor under perfect competition is based on the assumption that
A) labor is the sole input in the production process.
B) buyers of labor are output maximizers.
C) prices of inputs and outputs are taken by firms as given.
D) the supply curve of labor slopes upward.
E) all occupations are equally desirable.
Q3) Union membership,as a percentage of the total U.S.labor force
A) has declined fairly steadily for about 30 years now.
B) has stayed about the same since the turn of the century.
C) has grown slightly since the 1930s.
D) has grown rapidly since the 1930s.
E) declined from the early 1950s to the 1970s but is now growing slowly.
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Chapter 11: Interest,rent,and Profit
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Q1) Profits from innovation represent greater than normal returns to capital,because in the case of innovation
A) it is extremely difficult to calculate an expected rate of return.
B) borrowers are often taken advantage of by lenders.
C) no one wants to lend innovators any money to finance their businesses.
D) it leads to the formation of a natural monopoly.
E) the rate of return generally exceeds the interest rate.
Q2) Marx called that part of labor's productivity appropriated by employers
A) surplus value.
B) capital.
C) interest.
D) the value of the marginal product.
E) excess capacity.
Q3) Approximately what percent of the gross domestic product is before-tax corporation profits?
A) 2 to 3 percent
B) 5 to 10 percent
C) 15 to 25 percent
D) 33 to 50 percent
E) over 50 percent
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Chapter 12: Poverty,income Inequality,and Discrimination
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Q1) Assume a negative income tax that is structured according to the formula T = -$5,000 + 0.5Y,where T = tax liability and Y = earned income.The break-even income,when the family neither receives a tax payment nor pays any income tax,is
A) $5,000.
B) $7,500.
C) $10,000.
D) $12,500.
E) $15,000.
Q2) Sales taxes are typically considered to be
A) regressive.
B) proportional.
C) progressive.
D) indirect.
E) indivisible.
Q3) The 2011 U.S.per capita income was about
A) $25,000.
B) $33,000.
C) $40,000.
D) $48,000.
E) $55,000.
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Chapter 13: Economic Growth
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Q1) Once an economy is at full employment,further growth can occur only by
A) running a budget deficit.
B) expanding the money supply.
C) promoting slack in labor markets by reducing employment.
D) increasing the capital-output ratio above its full-employment values.
E) influencing factors that cause potential output to expand.
Q2) In essence,the Corn Laws
A) lowered the profits of landlords.
B) imposed high tariffs on grain.
C) were designed to benefit industrialists by ensuring low agricultural prices.
D) were written to encourage the substitution of British corn for U.S. and Canadian wheat.
E) provided poor people in England with free grain.
Q3) Combining monetary and fiscal policies to achieve full employment can lead to a one-shot improvement in economic growth by
A) decreasing the gap between actual and potential output.
B) shifting the production possibilities curve outward.
C) pushing to a new equilibrium where desired GDP exceeds actual GDP.
D) reducing government expenditures.
E) increasing nominal GDP faster than real GDP.
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Page 15
Chapter 14: Public Goods and the Role of the Government
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Q1) When companies and newscasters say that any additional excise tax will just be "passed on to the consumer," they are correct only if
A) the quantity demanded is completely insensitive to the price.
B) the amount of the tax is relatively small.
C) producers do not want to absorb any of the tax themselves.
D) the government allows firms to do that.
E) the tax reduces the equilibrium quantity of the good.
Q2) For a society operating at full employment,an increase in the amount of publicly provided goods
A) can be achieved without the sacrifice of privately provided goods.
B) means a reduction in the scope of government services.
C) means that the rate of unemployment falls.
D) means that society must reduce its consumption of privately provided goods.
E) means that the production possibilities curve has shifted to the left.
Q3) A sales or excise tax
A) is often considered to be an incidental tax.
B) has a very high collection cost relative to its yield.
C) is another name for a supply-side tax.
D) imposes a greater relative burden on the rich.
E) in general is paid by both the buyer and the seller.
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Chapter 15: National Income and Product
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Q1) Productive activities typically excluded from GDP include
A) government and private transfer payments.
B) sales of secondhand goods.
C) services performed by government.
D) nonmarket transactions.
E) sales and purchases of securities.
Q2) In this economy
A) the stock of capital goods fell during the year.
B) the government balanced its budget.
C) value added exceeded the income.
D) output exceeded GDP.
E) imports exceeded exports.
Q3) A leading pioneer in the efforts to provide the first estimates of U.S.income and output was
A) Alexander Hamilton.
B) David Schoenmacher.
C) Franklin D. Roosevelt.
D) John Maynard Keynes.
E) Simon Kuznets.
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Page 17
Chapter 16: Business Fluctuations and Unemployment
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Q1) While much of the U.S.business world was struggling with the problems of the Great Depression and clinging to the classical view that the country's economic problems would rectify themselves,John Maynard Keynes felt that the way out of the depression was to
A) hold the lid on consumer demand while expanding production.
B) expand effective aggregate demand by using government's power to spend and tax.
C) make larger numbers of people employable.
D) limit government power to tax.
E) nationalize all basic industries as the first step toward socialism.
Q2) To construct an aggregate demand curve,one must assume that
A) the quantity of money is fixed.
B) the price level is fixed.
C) interest rates are fixed.
D) real output is fixed.
E) aggregate supply is fixed.
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18
Chapter 17: The Determination of National Output and the Keynesian Multiplier
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Q1) If disposable income increases from $1,900 to $2,000 billion,the marginal propensity to consume is
A) 0.8.
B) 0.84.
C) 0.92.
D) 1.0.
E) 1.08.
Q2) If the morning paper reports that Americans,for the sixth month in a row,tend to spend more money and save less,these events would be depicted in an income expenditures model as
A) causing the 45-degree line to slope upward.
B) a downward shift in the supply function.
C) an upward shift in the consumption function.
D) an upward shift in the investment function.
E) a right to left movement along the consumption function.
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Page 19
Chapter 18: Fiscal Policy and National Output
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Q1) Which of the following events would correct the condition shown?
A) a decrease in the money supply by the government
B) a shift to the left in the short-run aggregate supply curve
C) a significant tax increase accompanied by a decrease in government spending
D) an increase in private sector spending
E) an increase in wages and other input prices
Q2) According to the Keynesian view,the short-run aggregate supply curve is
A) horizontal.
B) downward sloping.
C) close to vertical.
D) shaped like a parabola.
E) dependent on the shape of the aggregate demand curve.
Q3) Tax cuts and tax surcharges are examples of
A) public works programs.
B) discretionary fiscal policy.
C) welfare transfers.
D) monetary policy.
E) automatic stabilizers.
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Chapter 19: Inflation
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Q1) Inflation occurs whenever
A) aggregate demand rises.
B) the price of any given commodity rises.
C) the money supply increases more rapidly than output.
D) the tax rate is lower than the government spending rate.
E) the money supply falls.
Q2) In 1997,weekly payrolls in manufacturing were $553,while the consumer price index was 161 (1982-84 = 100).In terms of base-period dollars,real weekly earnings for the quarter were
A) identical to real weekly earnings in 1982-84.
B) greater than $553.
C) equal to $553.
D) less than $553.
E) impossible to determine from the information given.
Q3) Which of the following must decline for demand-side inflation to slow?
A) productivity
B) spending
C) taxes
D) population
E) unemployment
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Chapter 20: Money and the Banking System
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Q1) Fractional-reserve banking means that
A) banks hold less in reserves than the amounts they owe their depositors.
B) all of a bank's reserves are held by Federal Reserve Banks.
C) some gold is reserved to back paper money but not 100 percent.
D) reserves actually have three components: required, excess, and free.
E) a dangerous situation exists in which bank loans exceed deposits.
Q2) The Fed can set the ratio of legally required reserves between the limits of 8 and 14 percent on checkable deposits.Hence,the maximum multiple by which the banking system could theoretically expand a dollar of excess reserves would vary between
A) 2 and 3.
B) 5 and 6.
C) 8 and 14.
D) 12 and 7.
E) 14 and 6.
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Chapter 21: The Federal Reserve and Monetary Policy
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Q1) The results of the Fed's efforts to help member banks in 1931 illustrate the general principle that
A) any action the Fed takes with regard to commercial banks causes an inevitable reaction in the economy as a whole.
B) any action taken by the Fed to help member banks has a negative impact on the economy as a whole.
C) actions taken by the Fed have far less impact on the overall economy than was once believed.
D) keeping member banks solvent is, in the long run, the single best way to stimulate a sluggish economy.
E) the nation's monetary system should be tied to the gold standard.
Q2) The number of Federal Reserve banks is
A) one.
B) seven.
C) 12.
D) 50.
E) 6,000.
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Page 23
Chapter 22: Supply Shocks and Inflation
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Q1) An incomes policy typically
A) requires that unions forgo wage increases.
B) gives particular firms and industries guidelines for decision making on wages and prices.
C) establishes worker retraining programs.
D) legislates penalties for compliance.
E) redistributes incomes in favor of the poor.
Q2) If the long-run Phillips curve is vertical,expansionary monetary and fiscal policies that attempt to reduce the unemployment rate below its natural rate
A) lower inflationary expectations.
B) eliminate the wage-price spiral.
C) lead to accelerating rates of inflation.
D) shift the short-run Phillips curve downward to the left.
E) reduce the consumer price index.
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Chapter 23: Productivity,growth,and Technology Policy
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Q1) Which of the following is cited as a reason for the productivity swings in the United States?
A) a value system that promotes a materialistic philosophy
B) changes in the rate of growth of the capital-labor ratio
C) a shift in national output away from services toward goods
D) the depletion of our natural resources
E) swings in the balance of trade
Q2) The basic argument for government grants and contracts in support of civilian technology is that they
A) make it easier to predict the social costs and benefits of a proposed project.
B) are both direct and selective.
C) provide better investment qualities than market incentives.
D) enable the government to earn money on the patents it acquires as a result of these grants.
E) decrease the market rate of interest on investment funds since banks need to be responsible for funding high-risk R&D activities.
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Chapter 24: Surpluses,deficits,public Debt,and the Federal Budget
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Q1) Some opposed to using federal budget surpluses to cut taxes argue that A) surpluses could disappear and deficits return in the future, so we should not take any chances and instead pay down the national debt.
B) since the tax has already been collected, there is no need to return it.
C) cutting taxes would set off a recession, reducing government revenue.
D) the larger the budget surplus, the greater the money supply, which automatically reduces taxes.
E) taxes are currently at historically low levels.
Q2) The budget policy that sets the government's budget to attain a socially optimal combination of unemployment and inflation is likely to
A) be balanced each and every year.
B) cause continual growth in the public debt.
C) have a cyclically adjusted surplus.
D) run surpluses even when unemployment is high.
E) be balanced over the course of the business cycle.
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Chapter 25: Monetary Policy,interest Rates,and Economic Activity
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Q1) An increase in the price level
A) decreases interest rates.
B) increases the transactions demand for money.
C) increases the prices of financial assets.
D) increases the value of existing money balances.
E) decreases imports.
Q2) Monetarists regard the rate of growth of the money supply as the principal determinant of nominal GDP.By nominal GDP,they mean GDP
A) unadjusted for changes in the price level.
B) measured in constant dollars.
C) excluding the government.
D) divided by the money supply.
E) corrected for the velocity of circulation.
Q3) Milton Friedman and his followers propose that the
A) Fed be given powers over tax rates.
B) functions of the Fed be taken over by the Council of Economic Advisers.
C) Fed conform to a rule specifying a fixed, agreed-upon rate of growth in the money supply.
D) Fed be directly responsible to the Joint Economic Committee of Congress.
Page 27
E) Fed be given powers to control wages and prices.
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Chapter 26: Controversies Over Stabilization Policy
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Q1) The notion that workers are more inclined to shun risk and accept stable wages with layoffs based on seniority is an important element in
A) the theory of deferred payments.
B) new classical macroeconomic theory.
C) profit-sharing plans.
D) the "efficient insider" hypothesis.
E) implicit contract theory.
Q2) The effectiveness of a market economy's self-regulating mechanisms in stabilizing the economy is most closely associated with A) new Keynesians.
B) Marxists.
C) traditional Keynesians.
D) socialists.
E) new classical macroeconomists.
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Chapter 27: International Trade
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Q1) If the U.S.government were to impose a quota on shoes imported from Italy,the
A) price of shoes in the United States would remain the same but the quantity bought would rise.
B) United States would reduce its export of shoes.
C) price of shoes in Italy would rise.
D) total quantity of shoes purchased (both domestically produced and imported) would decline in the United States.
E) revenue raised would exceed that from a tariff (which would have had the same effect on the shoe market).
Q2) From the diagrams,it can be seen that
A) country A has a comparative advantage in both commodities.
B) country B has an absolute advantage in both commodities.
C) country B has a comparative advantage in chemicals.
D) it is more costly in terms of resources to produce steel in country A.
E) the slopes of the two curves indicate both countries will specialize in chemicals.
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Chapter 28: Exchange Rates and the Balance of Payments
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Q1) If merchandise exports exceed merchandise imports,the country has a A) positive investment balance.
B) gold exchange standard.
C) balance-of-payments deficit.
D) favorable balance of trade.
E) leveraged trade advantage.
Q2) Under the gold standard,when a country increases the price of gold,it is said to have ________ its currency.
A) appreciated
B) devalued
C) accredited
D) releveraged
E) prefabricated
Q3) Evidence clearly shows that the process of globalization leads to A) fewer jobs.
B) reduced living standards.
C) a greater international division of labor.
D) more disparity in the international distribution of labor.
E) slower worldwide economic growth.
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