Survey of Economics Test
Questions
Course Introduction
Survey of Economics provides students with a comprehensive introduction to the fundamental principles of microeconomics and macroeconomics. The course covers essential concepts such as supply and demand, market structures, the role of government in the economy, fiscal and monetary policy, and international trade. Emphasis is placed on understanding how individuals, businesses, and governments make economic decisions and the impact of these decisions on society. By examining real-world examples, students will gain insights into current economic issues and develop the analytical skills necessary to interpret economic data and trends.
Recommended Textbook
Principles of Microeconomics 6th Edition by
Robert H. Frank
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14 Chapters
1931 Verified Questions
1931 Flashcards
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Page 2
Chapter 1: Thinking Like an Economist
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?
A)Students go to college even when the net benefit is negative.
B)The opportunity cost of attending college is lower when unemployment is high.
C)The opportunity cost of attending college is higher when unemployment is high.
D)The benefit of attending college is lower because college graduates are less likely to find jobs.
Answer: B
Q2) A study that deals with the salaries of university professors would be considered:
A)macroeconomics
B)microeconomics
C)economic naturalism
D)real economics
Answer: B
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Chapter 2: Comparative Advantage
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) An individual has an absolute advantage in producing pizzas if that individual:
A)has a lower opportunity cost of producing pizzas than anyone else.
B)can produce more pizzas in a given amount of time than anyone else.
C)has a higher opportunity cost of producing pizzas than anyone else.
D)charges the lowest price for pizzas.
Answer: B
Q2) If Les can produce two pairs of pants per hour while Eva can produce one pair per hour, then it must be true that:
A)Les has a comparative advantage in producing pants.
B)Les has an absolute advantage in producing pants.
C)Eva has a comparative advantage in producing pants.
D)Les has both comparative and absolute advantage in producing pants.
Answer: B
Q3) If Al has an absolute advantage over Beth in preparing meals, then:
A)it takes Al more time to prepare a meal than Beth.
B)the problem of scarcity applies to Beth but not to Al.
C)Al's opportunity cost of preparing a meal is lower than is Beth's.
D)Al can prepare more meals in a given time period than Beth.
Answer: D
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Page 4
Chapter 3: Supply and Demand
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120 Flashcards
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Sample Questions
Q1) When the price of a good is below its equilibrium value:
A)consumers will bid the price up.
B)excess supply will occur.
C)it will tend to stay below the equilibrium value.
D)suppliers will notice their inventories are growing.
Answer: A
Q2) The supply curve illustrates that firms:
A)increase the supply of a good when its price rises.
B)increase the quantity supplied of a good when its price rises.
C)decrease the quantity supplied of a good when input prices fall.
D)decrease the quantity supplied to earn higher profits.
Answer: B
Q3) Suppose that the equilibrium price of rice falls and the equilibrium quantity falls. Which of the following best fits the observed data?
A)An increase in demand with supply constant.
B)An increase in demand coupled with a decrease in supply.
C)An increase in demand coupled with an increase in supply.
D)A decrease in demand with supply constant.
Answer: D
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Page 5
Chapter 4: Elasticity
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148 Flashcards
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Sample Questions
Q1) If most consumer goods and services are ______, then most income elasticities are ______.
A)normal; negative
B)inferior; positive
C)normal; greater than one
D)normal; positive
Q2) For Outback Steakhouse, seating capacity is limited in the short run. In the long run, they can add as many seats as they want. Therefore, the price elasticity of supply for meals at Outback would be ______ in the short run than in the long run.
A)higher
B)lower
C)the same
D)more variable
Q3) Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:
A)electricity is a luxury good.
B)the fraction of income spent on electricity is large.
C)few substitutes for electricity exist.
D)electricity is sold in a monopoly market.
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Chapter 5: Demand
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134 Flashcards
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Sample Questions
Q1) If a consumer reallocates his or her spending away from good A and towards good B, then the consumer's total utility will increase if: A)MU<sub>A</sub>/P<sub>A</sub> > MU<sub>B</sub>/P<sub>B</sub> B)MU<sub>A</sub>/P<sub>A</sub> < MU<sub>B</sub>/P<sub>B</sub>
C)MU<sub>A</sub>/P<sub>A</sub> > 0 and MU<sub>B</sub>/P<sub>B</sub> > 0 D)MU<sub>A</sub>/P<sub>A</sub> < 0 and MU<sub>B</sub>/P<sub>B</sub> < 0
Q2) At his current level of consumption, Evan gets twice as much marginal utility from an additional bottle of water as that from an additional bottle of soda. If the price of soda is $1.00 per bottle, then Evan is maximizing utility if the price of a bottle of water is:
A)$1.00
B)$1.50
C)$2.00
D)$.50
Q3) If a consumer buys two goods, the rational spending rule requires that the: A)total expenditure on the two goods be equal.
B)ratio of total utility to price be equal for the two goods.
C)ratio of average utility to price be equal for the two goods.
D)ratio of marginal utility to price be equal for the two goods.
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Page 7
Chapter 6: Perfectly Competitive Supply
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its average variable cost is ______ and its average total cost is ______.
A)$8; $2
B)$10; $10
C)$10; $2
D)$8; $10
Q2) Which of the following will cause a decrease the supply of jeans?
A)An increase in the wages paid to workers who make jeans.
B)A decrease in the demand for jeans.
C)A decrease in the price of jeans.
D)A decrease in the expected future price of jeans.
Q3) If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:
A)$20.
B)$24.
C)$22.
D)$480.
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Page 8
Chapter 7: Efficiency, Exchange, and the Invisible Hand in Action
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:
A)firms will have to spend money on advertising.
B)positive economic profit is only possible in the short run.
C)firms will compete on the basis of better service rather than lower prices.
D)a long-run equilibrium cannot be achieved.
Q2) Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:
A)her consumer surplus will be $2 per hour.
B)her economic rent will be $2 per hour.
C)her economic profit will be $8 per hour.
D)her accounting profit will be $8 per hour, and her economic profit will be $0 per hour.
Q3) Adam Smith believed that the individual pursuit of self-interest:
A)is impossible in a perfectly competitive market.
B)should usually be discouraged.
C)always leads to an efficient outcome.
D)often promotes the broader interests of society.
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Page 9
Chapter 8: Monopoly, Oligopoly, and Monopolistic Competition
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Sample Questions
Q1) Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. If you make 1,000 t-shirts, your average total cost is
A)$3
B)$3.10
C)$10.30
D)$1.03
Q2) If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should:
A)do nothing.
B)decrease output in order to increase the gap between marginal revenue and marginal cost.
C)increase output until marginal revenue equals marginal cost.
D)increase output until price equals marginal cost.
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Chapter 9: Games and Strategic Behavior
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144 Flashcards
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Sample Questions
Q1) A strategy that limits defection in a repeated prisoner's dilemma game is:
A)a Nash equilibrium.
B)a tit-for-tat strategy.
C)a cartel.
D)an ultimatum bargaining game.
Q2) A prisoner's dilemma illustrates situations in which:
A)resources with the lowest opportunity cost should be used first.
B)everyone does best when each person specializes in the activities in which he or she has a comparative advantage.
C)efficiency is an important social goal.
D)there is a conflict between the narrow self-interest of individuals and the broader interests of a group.
Q3) A credible threat is:
A)possible to carry out.
B)legally enforceable.
C)in the threatener's interest to carry out.
D)not in the threatener's interest to carry out.
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11
Chapter 10: Externalities and Property Rights
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. Over time, you would expect that students would:
A)stop eating so much at lunch because they would notice that it generates waste.
B)start distributing themselves more evenly over the lunch hours to avoid long lines.
C)come earlier and earlier for lunch in order to have a better selection from which to choose.
D)be pickier in their selections from the buffet.
Q2) Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel finds that when Fran's consumption rises, Shel feels worse off. Fran feels the same way about Shel's consumption. Fran has bought a new Jaguar (a luxury car), and shortly thereafter, Shel bought a new Mercedes (also a luxury car). Shel and Fran seem to be:
A)making independent rational consumption decisions.
B)unaware of the other's actions.
C)involved in a positional arms race.
D)imposing external benefits on each other.
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Chapter 11: The Economics of Information
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123 Flashcards
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Sample Questions
Q1) Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects, the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer. The expected starting salary for a college graduate with a bachelor's degree in economics is ______.
A)$30,000
B)$40,000
C)$45,000
D)$50,000
Q2) Imagine a world in which landlords always fix problems quickly, tenants never damage property and always pay their rent in a timely fashion. In such a world, lease agreements would ______.
A)still exist to solve the commitment problem
B)be unnecessary
C)apply only to people with low monthly income
D)only serve the interests of tenants
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Page 13
Chapter 12: Labor Markets, Poverty, and Income Distribution
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) Differences in wage rates associated with differences in working conditions are called:
A)compensating income differentials.
B)equalizing wage ratios.
C)conditional differentials.
D)compensating wage differentials.
Q2) Means-tested welfare benefits provide recipients with a strong incentive to:
A)leave welfare.
B)underreport their earnings.
C)work.
D)accurately disclose their earnings.
Q3) Consumer discrimination exists when consumers are willing to pay ______ for a good or service produced by the favored group, even though the quality of the good or service is ______.
A)more; better
B)less; the same
C)more; worse
D)more; the same
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14
Chapter 13: The Environment, Health, and Safety
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) It is socially optimal to hire an additional police officer if:
A)the marginal benefit of doing so is positive.
B)hiring an additional police officer reduces crime.
C)the marginal benefit of doing so is greater than the marginal cost.
D)the marginal benefit of hiring a police officer is decreasing.
Q2) Insurance that pays all expenses generated by the insured activity is known as:
A)total-dollar insurance coverage.
B)last-dollar insurance coverage.
C)cradle-to-grave insurance coverage.
D)first-dollar insurance coverage.
Q3) If workers' compensation premiums reflected the full social cost of the injuries sustained by each employer's workers, then this would lead to:
A)fewer workplace injuries than is socially optimal.
B)more workplace injuries than is socially optimal.
C)the socially optimal number of workplace injuries.
D)the elimination of workplace injuries.
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Chapter 14: Public Goods and Tax Policy
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it. If the cost of paving the driveway is $2,000 and Lane proposes that they each pay 50 percent of this cost, then Riley ______ agree to Lane's proposal because ______.
A)will; repaving the driveway would increase total economic surplus
B)will not; repaving the driveway would lower total economic surplus
C)will; if they split the cost, then Riley's economic surplus would increase
D)will not; if they split the cost, then Riley's economic surplus would decrease
Q2) Assume that each day ten thousand children watch Sesame Street on public television and that watching Sesame Street generates a benefit of $100 per child per year. Once a year, public televisions hold a pledge drive asking viewers to make voluntary contributions in order to keep the programming available to everyone. If public television stations collect less than $100 per child during the pledge drive, then this is evidence:
A)that the government should not subsidize public television.
B)that parents do not care about their children.
C)of the free-rider problem.
D)that head taxes are regressive.
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Page 16