Survey of Economics Question Bank
Course Introduction
Survey of Economics offers a broad overview of fundamental economic concepts and principles, exploring both microeconomics and macroeconomics. The course introduces students to topics such as supply and demand, market structures, consumer behavior, production and costs, fiscal and monetary policy, national income, inflation, and unemployment. Emphasis is placed on how economic theories are applied to real-world issues and decision-making processes, providing a solid foundation for understanding the forces that shape economies at individual, national, and global levels.
Recommended Textbook
Microeconomics Student Value 4th Edition by R.
Glenn Hubbard
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18 Chapters
2548 Verified Questions
2548 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Which of the following is motivated by an efficiency concern?
A)In 2009,the Obama administration increased unemployment benefits.
B)As part of an economic stimulus package,each taxpayer received a $3,000 tax rebate check.
C)Following a six-month drought,a city banned homeowners from watering their lawns in an effort to conserve water.
D)Some U.S.colleges have cut back on merit scholarships since these programs siphon money from need-based programs,thus harming lower-income students with greater financial need.
Answer: C
Q2) Which of the following is a positive economic statement?
A)Everyone should live at the same standard of living.
B)If the price of gasoline rises,a smaller quantity of it will be bought.
C)The government should close income tax loopholes.
D)U.S.firms should not be allowed to outsource production of goods and services.
Answer: B
Q3) As population declines,scarcity eventually disappears.
A)True
B)False
Answer: False
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Chapter 2: Trade-Offs, comparative Advantage, and the Market System
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) A guild is
A)a group of independent producers competing with each other.
B)an organization of producers that limits the amount of a good produced.
C)a group of nations who agree not to compete with each other.
D)a nation that is a free market benchmark.
Answer: B
Q2) Refer to Table 2-4.Finland has a comparative advantage in the production of A)both products.
B)lumber.
C)cell phones.
D)neither product.
Answer: C
Q3) Refer to Figure 2-8.In the circular flow diagram,economic agents M represent A)households.
B)product markets.
C)firms.
D)factor markets.
Answer: A
Q4) List the four broad categories of factors of production. Answer: labor,capital,natural resources,and entrepreneurship
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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147 Flashcards
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Sample Questions
Q1) Prices of commercial airline tickets (assume that this is a normal good)have fallen in recent months.Over this same period,the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets?
A)The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the left.
B)The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for airline tickets have both shifted to the right.
D)The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.
Answer: B
Q2) Refer to Figure 3-5.At a price of $5,
A)there would be a surplus of 4 units.
B)there would be a scarcity of 4 units.
C)there would be a shortage of 6 units.
D)there would be a shortage of 4 units.
Answer: D
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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138 Flashcards
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Sample Questions
Q1) The willingness of consumers to buy a product at different prices is shown on a A)demand curve.
B)supply curve.
C)production possibilities frontier.
D)marginal cost curve.
Q2) Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the second ice cream cone?
A)$0.50
B)$1.50
C)$3.00
D)$10.50
Q3) Refer to Table 4-2.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the market price of Marko's polo shirts is $18
A)Marko's will produce four shirts.
B)producer surplus from the first shirt is $18.
C)producer surplus will equal $22.
D)there will be a surplus; as a result,the price will fall to $7.
Q4) What is deadweight loss? When is deadweight loss equal to zero?
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Chapter 5: Externalities, environmental Policy, and Public Goods
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Sample Questions
Q1) If the EPA does implement its plan to enact tougher limits on smog-forming ozone,the quantity of product being produced by the polluting firms will ________ and the product price will ________.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease
Q2) In 2011,the Environmental Protection Agency proposed a plan to enact tougher limits on smog-forming ozone.By implementing new pollution regulations,the government will cause the polluters'
A)marginal private cost curve to shift up.
B)marginal private cost curve to shift down.
C)marginal social cost curve to shift up.
D)marginal social cost curve to shift down.
Q3) Classifying a good as rival means
A)that the good is produced in a competitive market.
B)that there is a shortage of the good.
C)that when one person consumes a unit of the good no one else can consume it.
D)anyone who does not pay for the good cannot consume it.
Q4) How does a positive externality in consumption reduce economic efficiency?
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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150 Flashcards
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Sample Questions
Q1) A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "As a result [of the increase in milk prices],retail prices for ice cream are up 4 percent from last year....And ice cream consumption is down 3 percent."
Source: John Curran,"Ice Cream,They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press,July 23,2001.
Based on the information given,what is the price elasticity of demand for ice cream?
A)0.75 (in absolute value)
B)1.33 (in absolute value)
C)12%
D)We do not have enough information to calculate the elasticity.
Q2) If a good has a negative income elasticity of demand,this indicates that the good is A)a substitute with another good.
B)a complement with another good.
C)inferior.
D)normal.
Q3) Briefly explain the economic concept of elasticity.
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Page 8
Chapter 7: The Economics of Health Care
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Sample Questions
Q1) Economists who support market-based reforms for health care believe that increased competition among providers of health care would
A)decrease costs but decrease economic efficiency.
B)decrease costs and increase economic efficiency.
C)increase costs but increase economic efficiency.
D)increase costs and decrease economic efficiency.
Q2) ________ account(s)for between 1 and 4 percent of health care costs in the United States.
A)The aging population
B)Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices
C)The payments to settle malpractice lawsuits and the premiums doctors pay for malpractice insurance
D)Advances in medical technology
Q3) In what ways do economists and policymakers who believe that the federal government should have a larger role in the health care system criticize the Patient Protection and Affordable Care Act (PPACA)?
Q4) How can increases in a country's total income improve health?
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Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) As a business type,corporations ________ in the United States.
A)earn the majority of profits
B)are the most common
C)are the least common
D)are subject to the least amount of taxes
Q2) David Myers,former controller for WorldCom,pleaded guilty to falsely reported costs for WorldCom that were ________ than they actually were,resulting in reported accounting profits for WorldCom that were ________ than their actual level.
A)higher; higher
B)lower; higher
C)lower; lower
D)higher; lower
Q3) How does a firm raise external funds through direct finance?
Q4) What happens in the primary market?
A)primary inputs like electricity are sold
B)a corporate financial manager will resell previously issued shares of stock
C)newly issued claims are sold by the borrowing firm to the initial buyer
D)already issued claims are sold from one investor to another
Q5) Define a corporation.
Q6) Define a sole proprietorship.
Page 10
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Chapter 9: Comparative Advantage and the Gains From International Trade
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) In 1930,the U.S.government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff.In response to this tariff,other countries ________ and international trade ________.
A)lowered their tariffs; thrived
B)raised their tariffs; collapsed
C)eliminated tariffs; began to grow outside of the United States
D)doubled their tariffs; became unrestricted
Q2) Twenty-seven countries in Europe have formed the European Union (EU).After the EU was formed it
A)eliminated all tariffs among its member countries.
B)completed a trade treaty (NAFTA)that reduced tariff rates between the EU and North American countries.
C)greatly decreased imports and exports among its member countries.
D)barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus,a European company.
Q3) a.Distinguish between a tariff and a quota.
b.In what ways are tariffs and quotas similar?
c.In what ways are tariffs and quotas different?
d.Why might a foreign producer prefer a quota rather than a tariff?
Page 12
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Chapter 10: Consumer Choice and Behavioral Economics
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154 Flashcards
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Sample Questions
Q1) The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?
A)income effect only or substitution effect only but not both effects
B)income and substitution effects
C)price effect
D)consumption effect
Q2) An economist observes two consumers in a supermarket.One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola.Both colas sell for the same price and the ages and incomes of the consumers are also the same.Based on this information,how would the economist explain the consumers' choices?
A)One of the consumers made the wrong choice,but it is impossible to say which one.
B)Both consumers should have considered buying other colas that had lower prices.
C)Both consumers should have purchased less than a case because they would be able to buy more later.
D)Apparently,the consumers had different tastes.
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Page 13
Chapter 11: Technology, production, and Costs
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165 Flashcards
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Sample Questions
Q1) The long run refers to a time period
A)during which a firm is able to purchase all of its inputs,including its plant and equipment.
B)long enough for a firm to vary all of its inputs,to adopt new technology and change the size of its physical plant.
C)long enough for a firm to pay all of its creditors in full.
D)long enough for a firm to change the use of its variable inputs.
Q2) Refer to Table 11-5.Elegant Settings experiences
A)economies of scale up to an output level of 400.
B)diminishing returns up to an output level of 400.
C)increasing returns beyond an output level of 400.
D)economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.
Q3) As output increases,the distance between average total cost and average variable cost increases.
A)True
B)False
Q4) Are the costs of utilities always fixed,always variable,or can they be both? Briefly explain.
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Chapter 12: Firms in Perfectly Competitive Markets
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151 Flashcards
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Sample Questions
Q1) Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.
Q2) If a perfectly competitive firm achieves productive efficiency then
A)it will raise its price in order to earn an economic profit.
B)the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold.
C)it is producing at minimum efficient scale.
D)it is producing the good it sells at the lowest possible cost.
Q3) If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is
A)a constant-cost industry.
B)an increasing-cost industry.
C)a decreasing-cost industry.
D)a fixed-cost industry.
Q4) If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?
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Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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Sample Questions
Q1) One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?
Q2) Why are many companies concerned about brand management?
Q3) If a monopolistically competitive firm lowers its price and,as a result,its total revenue decreases then
A)the output effect of the price change was less than the price effect.
B)the output effect of the price change was greater than the price effect.
C)the firm's demand curve must have decreased.
D)the substitution effect of the price change was greater than the income effect.
Q4) The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.
A)True
B)False
Q5) A profit-maximizing monopolistically competitive firm produces and sells an allocatively efficient quantity of output.
A)True
B)False
Page 16
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) For years economists believed that market structure explained the ability of some firms to earn economic profits.For example,firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with low entry barriers.Which of the following has caused economists to question this explanation and seek other explanations for why firms are profitable?
A)Studies have shown that,on average,firms in competitive industries earn higher profit rates than firms in industries with little competition.
B)In recent years new technologies have increased the potential entry of new firms in industries with high entry barriers.
C)Studies have shown that firms in industries that have little competition and high entry barriers are not very profitable.Economists conclude from this that some competition is necessary in order to force firms to lower their costs and develop products that satisfy new consumer demands.
D)The market structure explanation fails to explain how firms in the same industry can have very different levels of profit.
Q2) Firms in an oligopoly are said to be interdependent.What does this mean?
Q3) What is the difference between explicit collusion and implicit collusion?
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Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) The U.S.Congress has given two government entities the authority to police mergers.These two entities are
A)the antitrust division of the Department of State and the Securities and Exchange Commission.
B)the Federal Trade Commission and the Internal Revenue Service.
C)the Antitrust Division of the U.S.Department of Justice and the Council of Economic Advisors.
D)the Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice.
Q2) What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?
Q3) Refer to Figure 15-5.If this industry was organized as a perfectly competitive industry,the market output and market price would be
A)output = 62; price = $24. B)output = 83; price = $22. C)output = 62; price = $18. D)output = 104; price = $20.80.
Q4) Identify four reasons for high entry barriers? Briefly explain each reason.
Q5) If you own the only bookstore in a small town,do you have a monopoly?
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) Though large firms have the knowledge and resources to utilize a better pricing strategy,many choose to use cost-plus pricing.One reason for this is that
A)large firms do not have to maximize their profits because they face little competition from other firms.
B)there is less risk of violating antitrust laws if a cost-plus pricing strategy is used rather than a profit-maximizing pricing strategy.
C)the additional revenue that would result from a profit-maximizing pricing strategy is an insignificant fraction of the firms' revenues.
D)firms often adjust the markup they charge to reflect current demand.
Q2) Book publishers use price discrimination routinely,but the form of price discrimination they use is different from the form used by airlines and other industries.Explain.
Q3) A successful strategy of price discrimination requires that a firm be a price-taker.
A)True
B)False
Q4) What conditions are required for a firm to use a price discrimination strategy?
Q5) Are restaurant coupons a form of price discrimination? Why or why not?
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Page 19
Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) Refer to Table 17-1.What is the amount of profit added as a result of hiring the fourth worker?
A)$7,200
B)$1,200
C)$800
D)$400
Q2) A firm should hire more workers to increase its profits if
A)the marginal product of labor is greater than the wage the firm will pay these workers.
B)the wage rate is less than the marginal revenue product of labor.
C)there is enough capital and other resources for the workers to use.
D)the demand for labor is elastic.
Q3) Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system,yet many firms continue to pay their workers salaries.List three reasons why a firm would choose a salary system of compensation.
Q4) What are the three most important variables that cause the market supply curve of labor to shift?
Q5) Why are there superstar baseball players but no superstar chiropractors?
Page 20
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Chapter 18: Public Choice, taxes, and the Distribution of Income
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Sample Questions
Q1) In the United States,taxpayers are allowed to exclude from taxation a certain amount of income,called
A)the personal income exclusion.
B)the income allowance.
C)the income tax credit.
D)the personal exemption.
Q2) Between 1970 and 2006,the poverty rate in East Asia declined dramatically from 58.8 percent to 1.7 percent,while the poverty rate in Sub-Saharan Africa decreased from 39.9 percent to only 31.8 percent.The main reason for this is that
A)the population growth rate decreased in East Asia and increased in Sub-Saharan Africa.
B)Governments in East Asia increased transfer payments to poor families over this period of time.The governments of Sub-Saharan Africa had practically no transfer payment programs from 1970 to 2006.
C)The countries of East Asia have progressive income tax systems.The countries of Sub-Saharan Africa all have regressive income tax systems.
D)East Asia experienced higher economic growth than Sub-Saharan Africa.
Q3) What is rent seeking and how is it related to regulatory capture?
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