Survey of Economics Review Questions
Course Introduction
Survey of Economics provides an accessible introduction to both microeconomics and macroeconomics, exploring the fundamental concepts that shape economic decision-making in individual, business, and government settings. The course examines how markets operate, the role of supply and demand, price mechanisms, and the impact of government intervention. Students will also gain insights into broader economic indicators such as inflation, unemployment, and economic growth, as well as the effects of fiscal and monetary policy. Emphasizing real-world applications, this course equips students with the analytical tools needed to understand contemporary economic issues and make informed economic choices.
Recommended Textbook
Foundations of Economics 6th Edition by Robin Bade
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Chapter 1: Getting Started
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Sample Questions
Q1) Three variables are related and two of them are plotted in a figure.If the variable that is not measured on either the x-axis or the y-axis changes,then there is
A) a movement along the drawn curve.
B) a shift in the curve.
C) no impact on the curve because the variable is not measured on either of the axes.
D) either a shift in the curve or a movement along the curve but more information is needed to determine which.
E) None of the above answers is correct.
Answer: B
Q2) Economists measure opportunity cost
A) only when it is on the margin.
B) as the best thing given up.
C) as the sum of all forgone opportunities.
D) as the same as marginal benefit.
E) as equal to the sum of all the sunk costs.
Answer: B
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Chapter 2: The Usand Global Economies
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Sample Questions
Q1) In the circular flow model,there are two types of markets: the ________ market and the ________ market.
A) producers; consumers
B) households; firms
C) service; goods
D) goods; factor
E) supply; demand
Answer: D
Q2) Income taxes paid by corporations are
A) the major source of revenue for the federal government.
B) the major source of revenue for state governments.
C) the major source of revenue for local governments.
D) about 9 percent of the federal government's revenue.
E) the major source of expenditure by the federal government.
Answer: D
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Chapter 3: The Economic Problem
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Sample Questions
Q1) Once you find the opportunity cost of producing one unit of a good,to find the opportunity cost of producing the other good,you must
A) take the inverse.
B) multiply by the total amount produced of the second good.
C) divide by the total amount produced of the second good.
D) do nothing because the opportunity cost for the first good is the same as the opportunity cost for the second good.
E) None of the answers is correct.
Answer: A
Q2) A country has a comparative advantage in the production of a good if it can
A) produce more of the good than another country.
B) produce more of the good most efficiently.
C) produce the good on and remain on its production possibilities frontier.
D) tradeoff producing the good for another good.
E) produce the good at the lowest opportunity cost.
Answer: E
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Chapter 4: Demand and Supply
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Sample Questions
Q1) When the demand for blue jeans increases,what happens next?
Q2) The above table gives the demand and supply schedules for cat food.If the supply increases by 20 tons at every price,what is the new equilibrium price and quantity?
Q3) Other things remaining the same,the quantity of a good or service demanded will increase if the price of the good or service
A) rises.
B) falls.
C) does not change.
D) rises or does not change.
E) rises or falls.
Q4) The above figures show the market for HD televisions.If the price of the LCD screens used to produce these televisions falls,which figure shows the effect of this change in price?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) None of the figures represent this change.
Q5) When does a shortage occur?
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Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300,using the midpoint formula the elasticity of supply equals
A) 0.20.
B) 2.80.
C) 0.36.
D) 0.40.
E) 3.20.
Q2) One reason why the demand for gasoline is inelastic is because A) substitutes for gas abound.
B) substitutes for gas are hard to find.
C) gasoline is a luxury item.
D) people have a long time to shop around for automobiles that use less gas. E) buses run on diesel fuel rather than gasoline.
Q3) Does the fact that the price elasticity of demand for a good is inelastic violate the law of demand?
Q4) The price elasticity of demand is always positive,as is the price elasticity of supply.Is the cross elasticity of demand always positive? Explain your answer.
Q5) Water is considered a necessity.So,is the demand for water elastic or inelastic?
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) Mandy saved her allowance to buy a 12 pack of cream soda.When Mandy's brother saw the soda,he took four.Sodas were allocated between Mandy and her brother through
A) force.
B) majority rule.
C) first-come, first-served.
D) sharing equally.
E) personal characteristics.
Q2) The figure above shows the market for hot dogs.
a.What is the maximum price consumers are willing to pay for the 25th hot dog?
b.What is the efficient quantity?
c.Suppose that the production was limited to 25 hot dogs.In the figure,indicate the amount of the deadweight loss.
Q3) Honda will sell its vehicles to anyone who wants to and can buy one.Honda is using a ________ allocation method.
A) first-come, first-served
B) market price
C) contest
D) majority rule
E) command
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Chapter 7: Government Actions in Markets
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Sample Questions
Q1) The above figure shows the market for DVDs.The government decides that all citizens deserve to watch affordable DVDs so a price ceiling of $12 per DVD is placed on DVDs.After this price ceiling is in effect,producer surplus equals ________.
A) $900,000
B) $400,000
C) $200,000
D) $100,000
E) $1,800,000
Q2) In the housing market,if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00,why will nothing change?
Q3) The figure above shows the labor market in a region.For a minimum wage to change the wage rate and amount of employment,it must be
A) left to the forces of supply and demand.
B) set above $6 an hour.
C) set equal to $6 an hour.
D) set below $6 an hour.
E) set at $12 per hour.
Q4) Compare and contrast a price ceiling and a price floor.
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Page 9
Chapter 8: Taxes
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Sample Questions
Q1) A sales tax imposed on sellers of a good
A) decreases the demand and shifts the demand curve rightward.
B) decreases the supply and shifts the supply curve leftward.
C) decreases both the demand and the supply and shifts both the demand and supply curves leftward.
D) decreases the supply and shifts the supply curve rightward.
E) has no effect on either the demand or the supply.
Q2) Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,
A) barley sellers pay the entire tax.
B) barley buyers pay the entire tax.
C) the government pays the entire tax.
D) the tax is split evenly between barley buyers and sellers.
E) who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers.
Q3) Which would be a better source of tax revenue for the government,a good with elastic or a good with an inelastic demand? Explain your reasoning.
Q4) What is the marginal tax rate? Average tax rate? Can these rates ever differ?
Q5) What is the difference between vertical equity and horizontal equity?
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Chapter 9: Global Markets in Action
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Sample Questions
Q1) If the United States imposes a tariff on foreign chocolate,how are U.S.buyers of chocolate affected?
A) The price they pay for chocolate rises.
B) Their demand for chocolate increases because the U.S. production chocolate increases.
C) The quantity they consume is unchanged.
D) The price they pay for chocolate falls but they consume less chocolate because less is imported.
E) The price they pay for chocolate falls and they consume more chocolate.
Q2) When a nation exports a good,its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Q3) Economics demonstrates that opening up unrestricted free international trade is beneficial to all nations.However,are there any losers from such a policy change?
Q4) How do exports affect buyers' consumer surplus?
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Chapter 10: Externalities
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Sample Questions
Q1) The Coase theorem is the proposition that if property rights exist and are enforced,private transactions are
A) inefficient.
B) efficient.
C) inequitable.
D) illegal.
E) unnecessary.
Q2) Harry,the owner of a beauty salon,hires a new hair stylist.The wages paid to the new stylist are
A) a private cost and not an external cost .
B) an external cost and not a private cost.
C) both a private cost and an external cost.
D) neither a private cost nor an external cost.
E) only a private benefit because people want their hair styled.
Q3) When studying pollution and the environment,economists
A) have no role to play.
B) concentrate on the physical aspects of the environment.
C) emphasize costs and benefits.
D) attempt to reduce pollution at all costs.
E) think pollution is good if it occurs when production takes place.
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) ________ is the decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit.
A) Rational ignorance
B) The principle of minimum differentiation
C) A free rider
D) Consumer ignorance
E) The tragedy of the commons
Q2) To determine the efficient quantity of a public good to supply,
A) the private firms that will produce the good each produce the exact same quantity.
B) marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
C) total benefit is equated to total cost, the same as is done to determine the efficient quantity of a private good.
D) politicians use the principle of maximum differentiation.
E) marginal benefit must exceed marginal cost by as much as possible.
Q3) What are the differences between public goods and private goods?
Q4) Under what conditions will the political process provide an inefficient amount of a public good?
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Page 13
Chapter 12: Markets With Private Information
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Sample Questions
Q1) Suppose there are only two kind of cars in the market for used cars: lemons and good cars.A lemon is worth $1,000 both to its current owner and to anyone who buys it.A good car is worth $8,000 to its current and potential owners.Buyers can't tell whether a car is a lemon until after they have bought the car,and there is no warranty.What is the equilibrium price of a used car?
A) $8,000
B) $1,000
C) $4,500
D) $9,000
E) The equilibrium price depends on how many lemons and how many good cars are traded.
Q2) In the market for automobile insurance,adverse selection implies that
A) drivers with greater risks want to buy a policy without deductibles.
B) drivers with greater risks want to buy a policy with large deductibles.
C) uninsured drivers will drive recklessly.
D) insured drivers will drive recklessly.
E) moral hazard does not exist in this market.
Q3) What role does moral hazard play in the market for health care?
Q4) Explain the concept of adverse selection.Give an example.
Q5) What is private information and what problems does it create?
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Chapter 13: Consumer Choice and Demand
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Sample Questions
Q1) Based on the figure above,on which budget line is the relative price of gum the highest?
A) Budget line BL .
B) Budget line BL .
C) Budget line BL .
D) The relative price is the same along all three budget lines.
E) To answer the question, more information is needed about the consumer's income.
Q2) A curve that shows combinations of goods among which a consumer does not prefer one combination to another is
A) a budget line.
B) an indifference curve.
C) a production possibilities curve.
D) a demand curve.
E) a marginal rate of substitution curve.
Q3) How is a budget line similar to a production possibilities frontier? How do they differ?
Q4) What is the marginal rate of substitution and how does it relate to an indifference curve?
Q5) Describe the consumer equilibrium in the indifference curve/budget line model.
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Chapter 14: Production and Cost
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Sample Questions
Q1) Which of the following is an explicit cost in Jim's business venture?
A) the salary Jim could have earned at another job
B) the interest Jim does not earn because he invested his savings in his business
C) the wages Jim pays his workers
D) Jim's normal profit
E) Answers A, B, and D are correct.
Q2) What are diseconomies of scale and why might they occur?
Q3) A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?
A) Labor's marginal product has increased.
B) Diseconomies of scale were absent in the larger plant.
C) The firm's scale initially was so large that it experienced diseconomies of scale.
D) The firm's scale initially was too small to experience economies of scale.
E) Its long-run marginal cost was smaller with the larger plant than with the smaller plant.
Q4) What is a normal profit? Is it part of the firm's opportunity costs,total revenue,or neither?
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Chapter 15: Perfect Competition
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Sample Questions
Q1) Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run?
A) when it is making a normal profit
B) whenever its marginal cost is less than its marginal revenue
C) when the price is less than its minimum average variable cost
D) whenever its total cost is greater than its total revenue
E) when the price is less than its minimum average total cost
Q2) A firm's marginal revenue is
A) the change in total revenue that results from a one-unit increase in the quantity sold.
B) total revenue minus total cost.
C) the change in total revenue minus the change in total cost.
D) the change in total revenue that results from an increase in the demand for the good or service.
E) less than the market price for a perfectly competitive firm.
Q3) Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?
Q4) What four conditions define a perfectly competitive market?
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Chapter 16: Monopoly
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Sample Questions
Q1) A price-discriminating monopoly is a monopoly that
A) sells its output at a single price to all of its customers.
B) sells different units of a good or service at different prices.
C) has control over the resources used to produce the product.
D) has a license to sell the product.
E) illegally charges different customers different prices for the good it produces.
Q2) A single-price monopoly can sell 1 unit for $9.00.To sell 2 units,the price must be $8.50 per unit.The marginal revenue from selling the second unit is
A) $17.50.
B) $17.00.
C) $8.50.
D) $8.00.
E) $9.00
Q3) Why do some utilities have an incentive to exaggerate their costs of production?
Q4) How can managers of natural monopolies exaggerate their costs?
Q5) Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing,average cost pricing,rate of return regulation,and price cap regulation.
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Chapter 17: Monopolistic Competition
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Sample Questions
Q1) What do demand and marginal revenue curves look like in monopolistic competition? How do they compare to the demand and marginal revenue curves in perfect competition and monopoly?
Q2) Which of the following statements about a firm in long-run equilibrium is true?
A) P > MC for a firm in monopolistic competition and P = ATC for a firm in perfect competition
B) MR > P for a firm in monopolistic competition and P = ATC for a firm in perfect competition
C) P = MC for firms in both monopolistic competition and perfect competition
D) P = MC for a firm in perfect competition and P < ATC for a firm in monopolistic competition
E) Both answers A and B are correct.
Q3) If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized,then that firm
A) must be suffering an economic loss.
B) must be earning an economic profit.
C) has excess capacity.
D) is producing at its capacity output.
E) must be earning a normal profit.
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Chapter 18: Oligopoly
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Sample Questions
Q1) If an industry has a Herfindahl-Hirschman index of 800,it is considered a
A) competitive market.
B) moderately concentrated market.
C) concentrated market.
D) monopoly.
E) small market.
Q2) The tool that economists use to analyze the mutual interdependence of oligopolies is
A) economies of scale.
B) the four-firm concentration ratio.
C) game theory.
D) the HHI.
E) the efficient scale.
Q3) Which of the following is found ONLY in oligopoly?
A) producers who sell identical products
B) one firm's actions affect another firm's profit
C) entry into the industry is blocked
D) sellers face a downward sloping demand curve for their product
E) the firm's demand curve is horizontal
Q4) What is the legal status of a cartel among firms in the United States?
Page 20
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Chapter 19: Markets for Factors of Production
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Sample Questions
Q1) Kevin owns a personal training gym in Laredo,Texas.He charges $41 per session.The above table shows the marginal product of trainers in Kevin's gym.If Kevin hires four trainers,the value of marginal product of the fourth trainer equals A) 10 clients.
B) $410.
C) $41.
D) 1 client.
E) $10.25.
Q2) The price of an nonrenewable resource is expected to rise at a rate equal to the A) rate of supply.
B) rate of population growth.
C) rate of technological change.
D) rate of demand.
E) interest rate.
Q3) "The decision to employ an additional unit of labor depends on whether the value of marginal product of labor is greater than or less than the wage rate." Is the previous statement correct or incorrect?
Q4) What factors other than the wage rate influence the demand for labor? How is demand affected by changes in these factors?
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Chapter 20: Economic Inequality
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Sample Questions
Q1) Fully explain why it is a good idea for young people who are considering dropping out of high school to stay in school if the U.S.government pursues more liberal immigration policies over the next 20 years.
Q2) Describe the effect education and training have on outcomes in the labor market.
Q3) Pete just started a new job as an assembler and is earning a wage of $10 per hour.Sam,who is an experienced assembler assigned to train Pete,earns $15 per hour.The opportunity cost to Pete of acquiring this skill is
A) $25 per hour.
B) $15 per hour.
C) $10 per hour.
D) $5 per hour.
E) $0 per hour because Pete is being paid a wage.
Q4) Poverty for a household is defined as the state of
A) having a total income that is below the median total income.
B) having an income that can be spent on food, shelter, and clothing that is below the median for food, shelter, and clothing.
C) income below what is thought fair.
D) income below what is thought necessary for food, shelter, and clothing.
E) having an income that is below average.
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