Survey of Economics Test
Bank
Course Introduction
Survey of Economics provides a comprehensive introduction to the fundamental principles of both microeconomics and macroeconomics. Students will explore core concepts such as supply and demand, market structures, consumer behavior, production costs, and the role of government in the economy. The course also examines broader topics including national income, unemployment, inflation, fiscal and monetary policies, and international trade. By integrating real-world examples and current economic issues, this course equips students with the analytical tools needed to understand the economic forces that shape society, make informed decisions, and evaluate public policy.
Recommended Textbook
Essential Foundations of Economics 6th Edition by Robin Bade
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20 Chapters
5980 Verified Questions
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Page 2
Chapter 1: Getting Started
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Sample Questions
Q1) The figure above shows the relationship between study time and the number of problems worked. The curve becomes less steep because as you study more,
A)study time becomes less effective.
B)study time becomes more effective.
C)the number of problems worked increases.
D)the number of problems worked decreases.
E)the relationship between study time and the number of problems worked changes from direct to inverse.
Answer: A
Q2) You have data for the amount of rainfall in 50 cities for the month of June. The type of graph to best display these data would be a
A)time-series graph.
B)multi-variable time series graph.
C)cross-section graph.
D)scatter diagram.
E)trend-line diagram.
Answer: C
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Chapter 2: The Us and Global Economies
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Sample Questions
Q1) Social Security tax is deducted from your paycheck. In the figure above this will be shown as
A)taxes flowing from households to governments.
B)taxes flowing from firms to governments.
C)taxes flowing from households to firms.
D)wages flowing from firms to households.
E)wages flowing from firms to governments.
Answer: A
Q2) Which of the following is NOT a function of the federal government?
A)collecting property taxes
B)making social security and welfare payments
C)making transfers to state and local governments
D)providing public goods and services
E)imposing a personal income tax.
Answer: A
Q3) What effect, if any, will a good college education have on your human capital?
Explain your answer.
Answer: Human capital refers to the skills people possess. These skills can be gained through education, on the job training, and experience. Thus your college education is increasing your human capital.
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Chapter 3: The Economic Problem
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Sample Questions
Q1) Explain why a movement from a point inside a production possibilities frontier to the production possibilities frontier is described as a free lunch and a movement along a production possibilities frontier is described as a tradeoff.
Answer: The key point to answer this question is the fact that producing more of a good requires more resources. Hence, if all resources are employed efficiently, as is the case when producing on the production possibilities frontier, producing more of one good means reallocating resources away from the production of another good; there is a tradeoff between the two goods. In other words, to produce more of one good, the production of another must be given up. If, however, resources are used inefficiently, as is the case when producing inside the production possibilities frontier, then the production of a good can be increased by using the resources efficiently; hence no tradeoff is required and the additional goods are a free lunch.
Q2) How is economic growth shown in a production possibilities frontier graph?
Answer: Economic growth is illustrated as an outward shift of the PPF.
Q3) How can a combination of goods be unattainable?
Answer: A combination of goods can be unattainable if producing that combination requires more resources and technology than are available.
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Page 5
Chapter 4: Demand and Supply
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Sample Questions
Q1) Millions of people from Mexico have migrated to the United States. This has reduced the supply of labor in Mexico and increased the supply of labor in the United States. Assume that the demand for labor in Mexico and the United States is unchanged. Then wages in the United States ________ and wages in Mexico ________.
A)fall; rise
B)rise; rise
C)rise; do not change
D)fall; fall
E)do not change; fall
Q2) Which of the following indicates that the law of supply applies to makers of soda?
A)An increase in the price of a soda leads to an increase in the demand for soda.
B)An increase in the price of a soda leads to an increase in the supply of soda.
C)An increase in the price of a soda leads to an increase in the quantity of soda supplied.
D)A decrease in the price of a soda leads to an increase in the quantity of soda demanded.
E)A decrease in the price of a soda leads to an increase in the supply of soda.
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Page 6
Chapter 5: Elasticities of Demand and Supply
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Sample Questions
Q1) A firm raises the price it charges. The firm's total revenue does not change. What can we conclude about the price elasticity of demand?
A)Demand is elastic.
B)Demand is unit elastic.
C)Demand is inelastic.
D)Demand is perfectly elastic.
E)Not enough information is given to conclude anything about price elasticity of demand.
Q2) If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is
A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly unit elastic.
E)perfectly elastic.
Q3) The income elasticity of demand for store brands of soda (that is, non-name brands)is negative. What does this fact indicate about consumers' perceptions about the store brands?
Q4) What factors determine the size of the price elasticity of demand?
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Chapter 6: Efficiency and Fairness of Markets
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Sample Questions
Q1) What did Adam Smith identify as the source of the invisible hand in 1776?
A)a benevolent central government that decided was best for everyone
B)an individual's concern for fellow humans
C)an individual's own self-interest
D)the stock market
E)buyers' and suppliers' concerns to obtain and retain good reputations
Q2) In the figure above, when 6,000 pizzas are produced, the marginal benefit of a pizza
________ its marginal cost, which means ________ pizza is being produced.
A)exceeds its marginal cost; too little
B)exceeds its marginal cost; too much
C)is below its marginal cost; too much
D)is below its marginal cost; too little
E)equals its marginal cost; the efficient quantity of
Q3) Outcomes are fair according to the
A)rules view if private property rights are established and trade is voluntary.
B)results view if private property rights are established and trade is voluntary.
C)rules view if there is not too much inequality.
D)results view if there is not a big tradeoff.
E)results view if there is equality of opportunity.
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Page 8
Chapter 7: Government Actions in Markets
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Sample Questions
Q1) If a $10 sales tax is imposed on a good and the equilibrium price increases by $10, the tax is
A)split between buyers and sellers but not evenly.
B)paid fully by sellers.
C)paid fully by buyers.
D)split evenly between buyers and sellers.
E)impossible to determine the incidence of without further information.
Q2) The above figure shows the domestic market for wheat. Suppose this market is isolated from global competition and the government intervenes by setting a support price of $15 a ton. The quantity bought by domestic users once the price support is in place is
A)300 million tons.
B)400 million tons.
C)250 million tons.
D)200 million tons.
E)100 million tons.
Q3) In the housing market, if a rent ceiling of $600.00 is imposed when the equilibrium rent is $500.00, why will nothing change?
Q4) Why do rent ceilings lead to shortages and black markets?
Q5) Discuss the inefficiencies created by a price floor.
Page 9
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Chapter 8: Global Markets in Action
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Sample Questions
Q1) The typical relationship between a worker's productivity and the worker's wage rate is
A)high productivity workers receive low wage rates.
B)low productivity workers receive low wage rates.
C)no link between productivity and wages earned.
D)high productivity workers find that their jobs are often outsourced.
E)that workers with high productivity need to have their high wages protected by tariffs.
Q2) The above figure shows the U.S. market for replacement cell phone batteries. Area E is the
A)producer surplus when there is free trade.
B)deadweight loss from tariff.
C)tariff revenue.
D)increase in producer surplus due to the tariff.
E)gain in total surplus due to the tariff.
Q3) The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?
Q4) How does a tariff affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?
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Page 10
Chapter 9: Externalities: Pollution, Education, and Health Care
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Sample Questions
Q1) If the government provides a subsidy to producers, what is the effect of this policy in a supply and demand diagram?
A)The demand curve shifts leftward and the price rises.
B)The supply curve shifts rightward and the price falls.
C)The supply curve shifts leftward and the price falls.
D)The supply curve shifts leftward and the price rises.
E)The demand curve shifts rightward and the price rises.
Q2) If the production of a good causes pollution (an external cost)is the unregulated competitive market equilibrium of that product efficient?
Q3) The figure above shows the marginal social cost of generating electricity and the marginal private cost. For 4 billion kilowatts, what is the marginal external cost?
A)$0.12
B)$0.08
C)$0.04
D)$0.00
E)$0.20
Q4) Explain the difference between a negative production externality and a negative consumption externality.
Page 11
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Chapter 10: Production and Cost
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Sample Questions
Q1) Are the short-run average total cost curve and the long-run average cost both U-shaped for the same reasons?
If so, carefully explain these reasons. If not, explain why each curve is U-shaped.
Q2) The relationship between the MP and MC curves is
A)over the range where the MP curve has a negative slope, the MC curve also has a negative slope.
B)there is no predictable relationship.
C)over the range where the MC curve has a positive slope, the MP curve also has a positive slope.
D)over the range where the MP curve has a positive slope, the MC curve has a negative slope.
E)that the MP is not defined when the MC curve has a negative slope.
Q3) Which curve shows the lowest average total cost at which it is possible to produce each output when the firm has time to change both its labor force and plant size?
Q4) What does the average product of labor equal?
Q5) What are diseconomies of scale and why might they occur?
Q6) What is the difference between a normal profit and an economic profit?
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Page 12
Chapter 11: Perfect Competition
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Sample Questions
Q1) ________ a large number of firms competing by making similar but slightly different products.
A)Monopoly requires
B)Perfect competition requires
C)Monopolistic competition requires
D)Oligopoly requires
E)Both perfect competition and monopolistic competition require
Q2) The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit.
a. Find the profit maximizing level of output for this firm.
b. How much economic profit is the firm making?
Q3) Suppose the firm's marginal cost of producing a can increases by $1 per can. Then the firm would
A)produce zero cans.
B)decrease the amount of cans it produces but not to zero cans.
C)not change the amount of cans it produces.
D)increase the amount of cans it produces.
E)More information is needed to determine what action the firm will take.
Q4) What is a perfectly competitive firm's short-run supply curve?
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Chapter 12: Monopoly
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Sample Questions
Q1) The demand curve for a monopoly is
A)horizontal because the demand is perfectly elastic.
B)downward sloping.
C)vertical because the demand is perfectly inelastic.
D)upward sloping.
E)undefined because it is the only supplier in the market.
Q2) Which of the following must a firm be able to do to successfully price discriminate?
I. divide buyers into different groups according to their willingness to pay
Ii. prevent resale of the good or service
Iii. identify into which group (high willingness to pay or low willingness to pay)a buyer falls
A)ii only
B)i and ii
C)i and iii
D)iii only
E)i, ii, and iii
Q3) How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?
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14
Chapter 13: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) In the above figure, the output of an oligopoly will range between
A)0 and Q .
B)Q and Q .
C)Q and Q .
D)Q and Q .
E)0 and Q .
Q2) For a duopoly, the maximum total profit is reached when the duopoly produces A)the same amount of output as the competitive outcome.
B)the same amount of output as the monopoly outcome.
C)an amount of output that lies between the competitive outcome and the monopoly outcome.
D)more output than the competitive outcome.
E)less output than the monopoly outcome.
Q3) "Because firms in an oligopoly are so large, they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.
Q4) An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent. What is the Herfindahl-Hirschman Index?
Q5) Why are cartels among firms usually kept secret?
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Chapter 14: Gdp: a Measure of Total Production and Income
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Sample Questions
Q1) The expenditure approach to measuring GDP is done by using data on only A)consumption expenditure.
B)consumption expenditure and investment.
C)consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.
D)consumption expenditure, investment, and government expenditures.
E)wages, rent, interest, and profit.
Q2) To calculate GDP it is necessary to
A)add the total amounts of all the goods produced.
B)use the market price to place a dollar value on each good produced.
C)use production cost to place a dollar value on all goods produced.
D)use the average market price over the last five years to place a dollar value on all goods produced.
E)average the cost of producing a good with the price of the good to place a dollar value on all goods produced.
Q3) What is the difference between real and nominal GDP, and why do economists make this distinction?
Q4) Investment, as included in GDP, consists of what?
Q5) Define and discuss GDP.
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Chapter 15: Jobs and Unemployment
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Sample Questions
Q1) How does the Current Population Survey determine if a person should be counted in the labor force?
Q2) The natural unemployment rate is the unemployment rate that exists when there is no
A)structural unemployment.
B)frictional unemployment.
C)cyclical unemployment.
D)cyclical or structural unemployment.
E)unnecessary unemployment.
Q3) When the economy is at full employment,
A)100 percent of the labor force is employed.
B)there is no structural or cyclical unemployment.
C)there is no cyclical unemployment.
D)there is only frictional unemployment.
E)the natural unemployment rate equals zero.
Q4) What are the three types of unemployment and how do they change over the business cycle?
Q5) What is the definition of the unemployment rate?
How are part-time workers and discouraged workers treated when calculating the unemployment rate?
17
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Chapter 16: The Cpi and the Cost of Living
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Sample Questions
Q1) If we look at real and nominal interest rates in the United States since 1971, we see that
A)the nominal interest rate has always been less than the real interest rate because of inflation.
B)the real interest rate has almost always been less than the nominal interest rate because of inflation.
C)at times the nominal interest rate has been greater than the real interest rate and at times has been less than it.
D)the difference between the nominal and real interest rates has widened during the 1990s because of inflation.
E)both the nominal and real interest rates were negative in the highly inflationary 1970s.
Q2) What is the commodity substitution bias? What effect does it have on the CPI?
Q3) If nominal GDP is $230 for a period and real GDP is $200 for the same period, what is the GDP price index for this period?
Q4) Is the CPI a biased measure of the inflation rate?
Explain your answer.
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Chapter 17: Potential Gdp and Economic Growth
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Sample Questions
Q1) The standard of living is measured by
A)real GDP.
B)employment.
C)employment per person.
D)real GDP per person.
E)the population.
Q2) The figure above shows the U.S. supply of labor curve. What was the affect of the decline in birth rates during the 1960s and 1970s on the supply of labor curve in the 1980s?
A)a rightward shift of the supply of labor curve
B)the supply of labor curve became steeper
C)a movement downward along the supply of labor curve from a point such as A to a point such as B
D)a leftward shift of the supply of labor curve
E)None of the above answers is correct because there was no change in the supply of labor curve.
Q3) Real GDP equals $12 trillion and aggregate hours equals 300 billion hours. What does labor productivity equal?
Q4) List and explain the three factors that can increase labor productivity.
Q5) What are the sources of human capital?
Page 19
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Chapter 18: Money and the Monetary System
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Sample Questions
Q1) The Banks of the Mississippi has excess reserves of $20,000, desired reserves of $80,000 and the desired reserve ratio is 5 percent. What are the total amount of deposits in this bank?
A)$5,000
B)$1,000,000
C)$1,600,000
D)$100,000
E)$180,000
Q2) Which of the following is NOT a component of M1?
A)demand deposits
B)traveler's checks
C)savings deposits
D)currency
E)Both answers C and D are correct.
Q3) The money multiplier is used to determine how much the
A)monetary base increases when the Fed purchases government securities.
B)quantity of money increases when the monetary base increases.
C)monetary base increases when the quantity of money increases.
D)quantity of money increases when the required reserve ratio increases.
E)monetary base increases when the Fed sells government securities.
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Chapter 19: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) What can lead to the shift illustrated in the figure above?
Q2) According to the figure above, which point or points correspond to full employment?
A)only point a
B)only point b
C)only point c
D)points a and b
E)points a, b, and c
Q3) A demand-pull inflation initially is characterized by
A)increasing real output and a labor shortage.
B)increasing real output and a labor surplus.
C)decreasing real output and a labor shortage.
D)decreasing real output and a labor surplus.
E)no change in real output and a labor shortage.
Q4) Give examples of factors that decrease aggregate supply. Which way does the AS curve shift?
Q5) In the above figure, illustrate the effect on the AS curve from an increase in the money price of a key resource such as oil.
Q6) Can actual real GDP exceed potential GDP?
Q7) How does a fall in the money wage rate affect the aggregate supply curve?
Page 21
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Chapter 20: Fiscal Policy and Monetary Policy
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Sample Questions
Q1) The government expenditure multiplier and the tax multiplier are
A)identical in size.
B)different in size and the tax multiplier is larger.
C)different in size and the government expenditure multiplier is larger.
D)not comparable because the government expenditure multiplier applies to aggregate demand and the tax multiplier applies to aggregate supply.
E)not comparable because the government expenditure multiplier applies to aggregate supply and the tax multiplier applies to aggregate demand.
Q2) Discretionary fiscal policy is defined as fiscal policy
A)left to the discretion of military authorities.
B)initiated by an act of Congress.
C)initiated by a Presidential proclamation.
D)triggered by the state of the economy.
E)with multiplier effects.
Q3) If there is an inflationary gap, what is the proper monetary policy to restore price stability?
What actions can the Fed undertake to restore price stability?
Q4) "The federal budget is required by law to balance." Is the previous statement correct or incorrect?
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