Survey of Economics Review
Questions
Course Introduction
Survey of Economics offers an introduction to the fundamental concepts of microeconomics and macroeconomics, providing students with a broad understanding of how economies function at both the individual and national levels. Topics include supply and demand, market structures, the role of government in the economy, fiscal and monetary policy, unemployment, inflation, and international trade. The course is designed for non-majors and those seeking a practical overview of economic principles and their application to current events and everyday life.
Recommended Textbook ECON MICRO 6th Edition by William
A. McEachern
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Economics is the only social science and the only business discipline for which the Nobel Prize is awarded.
A)True
B)False
Answer: True
Q2) When economists say that people act as rational decision makers,they mean that
A)people act on the basis of their instincts.
B)once a pattern of behavior has been established, people tend to become set in their ways.
C)people respond in predictable ways to changes in costs and benefits.
D)people rarely make errors when permitted to make transactions.
E)once made, decisions are never reversed.
Answer: C
Q3) An economic model will produce poor predictions if it includes assumptions.
A)True
B)False
Answer: False
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Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) Comparativeadvantage is measured in terms of _____
A)opportunity costs.
B)absolute advantage.
C)sunk costs.
D)dollar costs.
E)trade.
Answer: A
Q2) Every economy must answer each of the following questions,except for one.Which of the following is the exception?
A)Which goods will be produced?
B)Why are these particular goods produced?
C)Which resources should be used?
D)How should resources be combined to produce each product?
E)Who will actually consume the goods produced?
Answer: B
Q3) A rational decision maker engages in an activity if that activity is more attractive than the best alternative.
A)True
B)False
Answer: True
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Which of the following is a major advantage of a sole proprietorship?
A)Separation of ownership and control
B)Limited liability for business debt
C)Transferability of ownership and firm continuity over time
D)Ease of start-up
E)Ease of obtaining financing
Answer: D
Q2) Which of the following components of U.S.household spending has grown the most over the past ten years?
A)Taxes
B)Savings
C)Spending on services
D)Spending on nondurable goods
E)Spending on durable goods
Answer: C
Q3) If left to market forces,activities that produce external benefits will be overproduced.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) Refer to Table 4.6. In which of the following combination does the equilibrium quantity increase?
A)Box A
B)Box B
C)Box C
D)Box D
E)Equilibrium quantity does not increase in any combination.
Q2) Which of the following is most likely to cause a leftward shift of the demand curve for a normal good in the current period?
A)an increase in the price of the good
B)a decrease in the price of the good
C)a decrease in the price of a complementary good
D)an expectation that price will decline in the future
E)an increase in the price of a substitute good
Q3) Which of the following will affect market demand?
A)the money income of consumers
B)consumer expectations
C)consumer tastes
D)the number or composition of consumers in the market
E)a change in price
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Chapter 5: Elasticity of Demand and Supply
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Sample Questions
Q1) Refer to Table 5.3,which shows the change in the quantity demanded for Good A and Good B as a result of the change in their price.Use the information to calculate the price elasticity of demand for Good A.
A)?5/2
B)?11/3
C)?3/10
D)?10/3
E)?19/11
Q2) If demand is elastic,a decrease in price leads to a decrease in total revenue.
A)True
B)False
Q3) The availability of substitutes makes the demand for a good less elastic.
A)True B)False
Q4) Inferior goods have an income elasticity of demand that is _____
A)positive.
B)negative.
C)zero.
D)greater than 1 in absolute value.
E)equal to 1 in absolute value.
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Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) If medical care is provided free of charge,_____
A)beneficiaries will consume it up to the point at which the marginal utility of the final unit is positive.
B)beneficiaries will consume it up to the point at which the demand curve intersects the vertical axis.
C)beneficiaries will derive no consumer surplus from medical care.
D)beneficiaries will consume it up to the point at which the marginal utility of the final unit is negative.
E)beneficiaries will consume it up to the point at which the marginal utility of the final unit is zero.
Q2) Carvel advertises a football-shaped ice cream cake for $7; you can buy a second one for only $4.What does Carvel know about consumer preferences?
A)Consumers would never buy a second ice cream cake.
B)Two cakes are worth less to a consumer than one.
C)The marginal utility of ice cream cakes diminishes.
D)Consumers only value the first cake at $4.
E)Consumers value all cakes they eat at $4.
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Page 8
Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) Refer to Exhibit 7.3,which shows the U-shaped cost curves for a producer.Curve B represents _____
A)marginal cost
B)average total cost
C)average variable cost
D)average fixed cost
E)total fixed cost
Q2) Refer to Exhibit 7.2,which shows different cost curves.Which of the curves represents fixed cost?
A)A
B)B
C)C
D)both A and B
E)both A and C
Q3) In the short run,all costs are fixed.
A)True
B)False
Q4) The short-run average fixed cost curve is a horizontal line.
A)True
B)False
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Chapter 8: Perfect Competition
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Sample Questions
Q1) _____ is the change in total cost from producing one more unit of the output.
A)Marginal cost
B)Variable cost
C)Opportunity cost
D)Average cost
E)Fixed cost
Q2) Perfectly competitive firms will leave the industry that they are operating in if they
A)are unable to cover their variable costs.
B)suffer losses, despite covering variable costs in the short run.
C)experience economies of scale.
D)earn a normal profit.
E)experience economies of scope.
Q3) In the short run,if a firm shuts down,its loss is equal to _____
A)zero.
B)its variable cost.
C)its fixed cost.
D)its fixed cost minus its variable cost.
E)its fixed cost minus total revenue.
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Page 10
Chapter 9: Monopoly
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Sample
Questions
Q1) A non-discriminating monopolist observes that marginal revenue is $23 and marginal cost is $30 at its present output level.In order to maximize profit,it should
A)raise price and lower output.
B)lower both price and output.
C)raise both price and output.
D)lower price and raise output.
E)lower output but leave price unchanged.
Q2) A natural monopoly forms when _____
A)small firms merge to form larger firms.
B)one firm has control over the entire supply of a basic input required to produce the product.
C)one firm's monopoly position is created and enforced by the government.
D)one firm receives patent protection for certain basic production processes.
E)the long-run average cost incurred by a firm declines as the firm expands output.
Q3) A monopolist maximizes profit at the output rate where its total revenue equals total cost.
A)True
B)False
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Page 11
Chapter 10: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) In a coordination game,a Nash equilibrium occurs when _____
A)each player ignores the strategy of the other player.
B)each player chooses no strategy, but maintains the status quo.
C)each player chooses the same strategy.
D)one player can improve the outcome by changing his strategy.
E)each player chooses different strategies.
Q2) An oligopoly _____
A)can be an industry dominated by many firms.
B)can be an industry dominated by one firm.
C)has to be differentiated.
D)has to be undifferentiated.
E)differentiated or undifferentiated.
Q3) The concept of the prisoner's dilemma is applicable only when considering the illegal behavior that firms in a non-competitive market may pursue.
A)True
B)False
Q4) Cartels are inherently unstable.
A)True
B)False
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Chapter 11: Resource Markets
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Sample Questions
Q1) Refer to Table 11.1,which shows the product price of a perfectly competitive firm and the output produced by the firm. The diminishing marginal returns first become evident with the addition of the _____ machine.
A)first
B)second
C)third
D)fourth
E)fifth
Q2) Refer to Exhibit 11.6,which shows the demand and supply curves of a resource.The equilibrium price of the resource is _____
A)less than $1.
B)more than $1.
C)$1.
D)less than $2.
E)more than $0 but less than $1.
Q3) An increase in the price of a resource will cause a movement along the demand curve for that resource.
A)True
B)False
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Page 13
Chapter 12: Labor Markets and Labor Unions
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Sample Questions
Q1) An increase in labor supply will increase the equilibrium wage rate.
A)True
B)False
Q2) Strikes are expensive for _____
A)workers only, because their income falls.
B)employers only, because their revenue falls.
C)the public only, because output falls.
D)both the public and employers, because workers are compensated by the union for lost income.
E)workers, employers, and the public.
Q3) Refer to Exhibit 12.5,which shows age,education,and pay among workers.Which education level is represented by point D?
A)professional degree
B)bachelor's degree
C)high school diploma
D)no high school diploma
E)No education level is represented.
Q4) Most labor negotiations in the United States end without a strike.
A)True
B)False
Page 14
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Chapter 13: Capital, interest, entrepreneurship, and Corporate Finance
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Sample Questions
Q1) Other things constant,the supply of loanable funds curve is _____
A)upward sloping because fewer people have to be persuaded to forgo current consumption as the interest rate rises.
B)downward sloping, showing that more investment will be undertaken as inflation decreases.
C)upward sloping because the reward for saving increases as the interest rate increases.
D)downward sloping, showing that as more funds are available, the risk of loaning funds decreases.
E)usually horizontal, showing that the supply of loans is independent of the rate of inflation in an economy.
Q2) An increase in the interest rate tends to increase the demand for loanable funds.
A)True
B)False
Q3) Interest rates on credit card balances are usually very low,as credit cards are held by people with good credit ratings.
A)True
B)False
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Chapter 14: Transaction Costs, asymmetric Information, and Behavioral Economics
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Sample Questions
Q1) Copious Corp.is owned by 2 million stockholders,who elect a board of directors.This board selects a management team responsible for hiring workers to serve customers by selling and repairing computer monitors.Which of the following statements is true?
A)In the principal-agent relationship between workers and customers, the customers are the agents.
B)In the principal-agent relationship between workers and managers, the managers are the agents.
C)In the principal-agent relationship between the stockholders and the board of directors, the stockholders are the agents.
D)In the principal-agent relationship between the stockholders and the customers, the stockholders are the agents.
E)In the principal-agent relationship between management and the board of directors, the managers are the agents.
Q2) In the market for used cars,asymmetric information guarantees that very few lemons are sold.
A)True
B)False
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Page 16
Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) A natural monopoly usually faces _____
A)a lack of natural competitors.
B)low fixed costs and diseconomies of scale.
C)huge initial capital costs.
D)a lack of government regulation.
E)constant costs of production.
Q2) Governments often enact regulations that benefit producers because _____
A)they seek to regulate in the best interest of the public.
B)consumers have less information than producers and therefore seek government protection.
C)consumers have a strong interest in matters that affect their standard of living.
D)producers typically are better able to bring about regulations that favor themselves.
E)producers seek to act in the best interest of the public.
Q3) If the pre-merger Herfindahl-Hirschman Index is less than 1,000,the Department of Justice is likely to challenge the merger.
A)True
B)False
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17
Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) Which of the following activities constitutes tax avoidance?
A)increasing one's charitable contributions in December
B)selling illegal drugs on the street
C)not reporting the tips earned from waiting at tables
D)selling a condominium
E)selling alcohol and cigarettes
Q2) Price support for corn involves _____
A)concentrated benefits but widespread costs.
B)both concentrated benefits and costs.
C)widespread benefits but concentrated costs.
D)both widespread benefits and costs.
E)widespread benefits and zero costs.
Q3) If the managers of a private firm perform poorly,each owner has the option of
A)closing down the firm.
B)selling his or her share of the firm.
C)managing the firm himself or herself.
D)not paying any taxes on the little profit he or she receives.
E)selling off some of the equipment of the firm.
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Page 18
Chapter 17: Externalities and the Environment
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Sample Questions
Q1) What poses as a potential threat of contamination for groundwater?
A)paper products
B)fluorocarbon sprays
C)automobile emissions
D)underground storage tanks for oil and chemicals
E)recycled plastic
Q2) A metal stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to take a nap.Which of the following is likely to be true according to the Coase theorem?
A)The factory should move.
B)The day care center should move.
C)The factory should install sound insulation.
D)The day care center should install sound insulation.
E)An optimal solution cannot be achieved unless the costs are given.
Q3) The Coase solution to the externality problem works only when bargaining costs are high.
A)True
B)False
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Chapter 18: Poverty and Redistribution
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Sample Questions
Q1) Data show that _____
A)the elderly are the poorest demographic group in the United States because Social Security payments have not kept pace with inflation.
B)the elderly are the poorest demographic group in the United States because they do not have a steady income.
C)the elderly are the poorest demographic group in the United States because poverty increases with age.
D)poverty rates for each group declined between 1959 and 1968.
E)those between 40 and 50 years of age are the poorest demographic group in the United States.
Q2) The percentage of the U.S.population on welfare has declined after the welfare reforms in 1996.
A)True
B)False
Q3) The distribution of income among African-American families is more even than it is for the population as a whole.
A)True
B)False
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Chapter 19: International Trade
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Sample Questions
Q1) Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.
A)True
B)False
Q2) The top trading partners for U.S.exports and imports in 2016 were _____
A)Canada, Ireland, Japan
B)China, Canada, Mexico
C)the United Kingdom, Germany, Brazil
D)South Korea, Japan, Germany
E)France, India, Ireland
Q3) As a result of the Uruguay Round,average tariffs fell to _____ of the value of imports.
A)40 percent
B)20 percent
C)10 percent
D)6 percent
E)4 percent
Q4) Japan is generally considered a closed economy.
A)True
B)False
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Chapter 20: International Finance
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Sample Questions
Q1) A more descriptive phrase for the balance-of-payments account would be _____
A)balance of economic transactions.
B)balance of trade debits.
C)balance of trade credits.
D)balance-of-investment transactions
E)unilateral transfer balance
Q2) If the exchange rate changes from 1 euro per U.S.dollar to 1.2 euros per U.S.dollar,the euro has _____
A)appreciated, since its value has increased.
B)appreciated, since the price of U.S. dollars has increased.
C)appreciated, making U.S. goods cheaper in European countries.
D)depreciated, since its value has declined.
E)depreciated, since its value has increased.
Q3) Any increase in the demand for foreign exchange,other things constant,will _____
A)increase the number of foreign exchange units required to purchase dollars.
B)reduce the number of dollars required to purchase one unit of foreign exchange.
C)cause the dollar to depreciate.
D)cause the foreign currency to depreciate.
E)have no effect.
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Page 22
Chapter 21: Economic Development
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Sample
Questions
Q1) Which of the following is true of the foreign aid provided by the United States?
A)During the last four decades, the United States has provided less than $400 million in aid.
B)Most U.S. aid has been coordinated by the Department of Defense.
C)The U.S. Agency for International Development emphasizes short-range plans.
D)The U.S. Agency for International Development focuses on health, education, and agriculture.
E)Foreign aid is a large part of the U.S. federal budget.
Q2) There is a possibility of increased capital imports,investment,and consumption in countries that receive foreign aid because,in general,foreign aid provides _____
A)a surplus in all product markets.
B)additional agricultural output.
C)additional purchasing power.
D)a regular inflow of skilled labor.
E)additional foreign exchange.
Q3) Export promotion provided infant industries with a protected market in many developing countries.
A)True
B)False
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Page 23