Business Economics
Question Bank
Course Introduction
Business Economics explores the application of economic theories and quantitative methods to analyze and solve practical problems faced by businesses. This course covers key topics such as demand and supply analysis, cost structures, market competition, pricing strategies, and the economic environment of business operations. Students will develop an understanding of how economic concepts influence managerial decision-making, resource allocation, and strategic planning. The course also examines the impact of government policies and global economic trends on business activities, equipping students with the tools to make informed and effective economic decisions within organizational settings.
Recommended Textbook
Principles of Microeconomics 7th Canadian Edition by McKenzie Mankiw
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22 Chapters
4636 Verified Questions
4636 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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218 Verified Questions
218 Flashcards
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Sample Questions
Q1) If education produces external benefits for society,what might NOT be an appropriate policy for society to establish regarding education
A)tax incentives for schooling
B)mandatory minimum levels of education
C)programs that promote the hiring of high school dropouts
D)free bussing to local high schools
Answer: C
Q2) What term refers to a situation in which markets fail to allocate resources efficiently
A)economic depression
B)market failure
C)corporate bankruptcy
D)disequilibrium
Answer: B
Q3) What is one component necessary for markets to work
A)government intervention
B)a non-profit sector of society
C)property rights
D)abundant resources
Answer: C
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Page 3
Chapter 2: Thinking Like an Economist
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239 Flashcards
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Sample Questions
Q1) According to a simple circular-flow diagram,how many markets do households and firms interact in
A)one type of market
B)two types of markets
C)three types of markets
D)four types of markets
Answer: B
Q2) Refer to Figure 2-10.What is the movement from point B to point C
A)a shift of the curve
B)a change in price
C)a movement along the curve
D)a change in costs to the firm
Answer: A
Q3) Which of the following is an example of a normative statement
A)If the price of a product decreases, quantity demanded increases.
B)Reducing speed limits to 40km/hr would reduce accidents involving pedestrians.
C)Students who take public transit to school are more concerned about the environment.
D)An increase in minimum wages will increase unemployment.
Answer: C
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Chapter 3: Interdependence and the Gains From Trade
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207 Flashcards
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Sample Questions
Q1) What does comparative advantage reflect
A)productivity
B)relative opportunity cost
C)equity
D)terms of trade advantage
Answer: B
Q2) Regan grows flowers and makes vases.Jayson also grows flowers and makes vases,but Regan is better at producing both.Who has an absolute or comparative advantage in what activity
A)Regan has an absolute advantage in both activities.
B)Jayson has an absolute advantage in both activities.
C)Regan has a comparative advantage in growing flowers.
D)Jayson has a comparative advantage in growing flowers.
Answer: A
Q3) Refer to the table.What is the opportunity cost of one birdhouse for Alberta
A)1/3 basket
B)1 basket
C)4/3 baskets
D)3 baskets
Answer: D
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) What will happen in the rice market if buyers are expecting higher prices in the near future
A)Demand increases and supply decreases.
B)Both demand and supply increase.
C)Demand decreases and supply increases.
D)Both demand and supply decrease.
Q2) Funsters Inc.sells its most popular doll for $35.It has just learned that its leading competitor is mass producing an excellent copy and plans to flood the market with their $10 doll in six weeks.What should Funsters do
A)increase the supply of their doll now before the other doll hits the market
B)fight fire with fire and decrease supply for six weeks, then increase the supply of its doll too
C)continue business as usual, since consumers will not buy the cheaper imitation
D)discontinue their doll
Q3) Refer to the Figure 4-1.What could cause the movement from S to S
A)a decrease in the price of the good
B)an improvement in technology
C)an increase in income
D)an increase in input prices
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Page 6
Chapter 5: Elasticity and Its Application
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Sample Questions
Q1) A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.70,the bakery would be willing to supply 900.Using the midpoint method,what is the elasticity of supply for bagels
A)0.58
B)0.77
C)1.24
D)1.71
Q2) What are the most basic tools of economics
A)demand and supply
B)price and quantity
C)price floors and price ceilings
D)elasticity of demand and supply
Q3) What would be the absolute value of the elasticity if demand is inelastic
A)less than 1
B)equal to 1
C)greater than 1
D)equal to 0
Q4) A linear demand curve becomes more elastic as price falls.
A)True
B)False
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Chapter 6: Supply, demand, and Government Policies
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Sample Questions
Q1) Refer to Figure 6-2.If the government imposes a binding price floor of $14.00 in this market,what is the result
A)a surplus of 30 units
B)a shortage of 30 units
C)a surplus of 40 units
D)a shortage of 40 units
Q2) Market demand is given as Q<sub>D </sub>= 210 - 5P.Market supply is given as Q<sub>S </sub>= 2P.Which legally imposed price would constitute a binding price floor
A)$10
B)$15
C)$30
D)$35
Q3) Refer to Figure 6-7.At which price would a binding price floor exist
A)$2.00
B)$4.00
C)$5.00
D)any price above $6.00
Q4) How does elasticity affect the burden of a tax
Justify your answer using supply and demand diagrams.
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Chapter 7: Consumers, producers, and the Efficiency of Markets
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Sample Questions
Q1) Refer to Figure 7-6.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.What would be the increase in producer surplus to producers already in the market
A)$90
B)$210
C)$360
D)$480
Q2) What does the "invisible hand" refer to
A)the marketplace guiding the self-interests of market participants into promoting general economic well-being
B)the marketplace as a place where government looks out for the interests of individual participants in the market
C)the equity that results from market forces allocating the goods produced in the market
D)the automatic maximization of consumer surplus in free markets
Q3) Consider the following equation: P = 0.5Q.Answer the following questions.
a.What is the producer surplus when price is equal to $8
b.What is the change of the producer surplus when price changes to $10
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Chapter 8: Application: the Costs of Taxation
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Sample Questions
Q1) Consider a (per unit) tax on two different goods,X and Y.Good X has very elastic supply,while good Y has very inelastic supply.Assume the demand curve for each good is the same.If the government wants to minimize deadweight loss,which good should they tax
Q2) When a tax is imposed,the loss of consumer surplus and producer surplus as a result of the tax exceeds the revenue raised by the government.
A)True
B)False
Q3) Which of the following effects is NOT encouraged by taxes on labour
A)workers take early retirement from the labour force
B)one parent stays at home rather than both parents working in the labour force
C)employees work overtime
D)people are paid under the table
Q4) What is Employment Insurance primarily a tax on
A)earnings from labour
B)interest income
C)real estate holdings
D)capital gains
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Chapter 9: Application: International Trade
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Sample Questions
Q1) Refer to Figure 9-6.Without trade,what would consumer surplus be
A)$210.50
B)$245.50
C)$367.50
D)$560.00
Q2) Refer to Figure 9-11.What is the amount of revenue collected by the government from the tariff
A)$200
B)$400
C)$600
D)$800
Q3) If Belgium exports chocolate to the rest of the world,Belgian chocolate sellers benefit from higher producer surplus,Belgian chocolate buyers are worse off because of lower consumer surplus,but total surplus in Belgium increases because of trade.
A)True
B)False
Q4) How is an import quota similar to,and different than,an equivalent tariff
Q5) Define the two approaches a nation can take to achieve free trade.Does one approach have an advantage over the other
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Chapter 10: Externalities
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Sample Questions
Q1) What is one advantage of allowing a market for pollution permits to control the total amount of pollution released in an area
A)The government knows exactly how much each firm is allowed to pollute.
B)Government revenue from the sale of permits is greater than revenue from a corrective tax.
C)The initial allocation of permits to firms does not affect the efficiency of the market.
D)Firms will work together to eventually eliminate pollution.
Q2) If it is illegal for a biochemical manufacturer to release its waste into a nearby stream,what is this an example of
A)a market-based policy
B)a command-and-control policy
C)a pollution permit
D)a transaction cost
Q3) What is one way to internalize a technology spillover
A)with taxes
B)with patents
C)with government regulations
D)with private bargaining
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12
Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) Can we use cost and benefit analysis to evaluate human life and how
Q2) Which of the following would be considered a private good
A)national defence
B)a public beach
C)local Internet service
D)a bottle of natural mineral water
Q3) Tolls could not be used to alter people's incentives to drive during rush hour.
A)True
B)False
Q4) Some advocates of antipoverty programs claim that fighting poverty is a public good.Explain what these advocates mean by classifying charity as a public good.What does this have to do with the need for government intervention
Q5) Some goods can be either common resources or public goods,depending on which of the following
A)whether the good is rival in consumption
B)how policymakers deal with the good
C)the marginal cost of the good
D)whether the good is excludable
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Chapter 12: The Design of the Tax System
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200 Flashcards
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Sample Questions
Q1) Approximately what percentage of the federal government's receipts come from personal income taxes
A)10
B)25
C)35
D)48
Q2) Refer to Table 12-7.If the government imposes a $2000 lump-sum tax,what would be the average tax rate for Leslie and Paulo,respectively
A)4 percent and 5 percent
B)6 percent and 8 percent
C)9 percent and 12 percent
D)10 percent and 13 percent
Q3) What is NOT a cost of taxes to taxpayers
A)the tax payment itself
B)deadweight losses
C)administrative burdens
D)goods and services provided by the government
Q4) Resources devoted to complying with the tax laws are a type of deadweight loss.
A)True
B)False
Page 14
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Chapter 13: The Costs of Production
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Sample Questions
Q1) Refer to Table 13-2.Adrianne has received an order for 3000 boxes of chocolates for next week.Suppose she expects that the trend in the marginal product (MP) of labour will continue in the same direction.What is most likely her best decision
A)not commit to meeting the order until she can move to a larger room and hire more workers to box the chocolates
B)close her business until she is able to hire more productive workers
C)hire about 12 new workers and hope she can satisfy the order
D)commit to meeting the order and then take three weeks to complete the job
Q2) Average total cost and marginal cost are merely ways to express information that is already contained in a firm's total cost.
A)True
B)False
Q3) Refer to Scenario 13-4.How will average variable cost behave
A)It will always rise.
B)It will always fall.
C)It will be U-shaped, first falling and then rising.
D)It will remain constant.
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Page 15
Chapter 14: Firms in Competitive Markets
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261 Flashcards
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Sample Questions
Q1) When economists refer to a production cost that has already been committed and cannot be recovered,what term do they use
A)implicit cost
B)explicit cost
C)variable cost
D)sunk cost
Q2) When a profit-maximizing firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs,what should it do in the short run
A)It should shut down and incur a loss equal to its fixed costs.
B)It should shut down until it is able to produce where average revenue exceeds average fixed cost.
C)It should continue to produce as long as marginal cost is less than average revenue.
D)It should continue to produce as long as total revenue is sufficient to pay variable costs.
Q3) If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?
Q4) List and describe the characteristics of a perfectly competitive market.
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Chapter 15: Monopoly
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Sample Questions
Q1) If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $5 per unit,what is the monopolist's profit
A)$200
B)$300
C)$600
D)$800
Q2) A monopolist faces market demand given by P = 100 - 3Q.For this market,MR = 1005Q and MC = 25.What quantity of output will the monopolist produce in order to maximize profits
A)15
B)25.0
C)62.5
D)75.0
Q3) What situation is described by perfect price discrimination
A)The monopolist knows the exact willingness to pay of each of its customers.
B)The monopolist charges exactly two different prices to exactly two different groups of customers.
C)The monopolist maximizes consumer surplus.
D)The monopolist experiences a zero economic profit.
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Page 17
Chapter 16: Monopolistic Competition
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Sample Questions
Q1) What does a monopolistically competitive firm do to maximize profit
A)It takes the price as given and it chooses its quantity, just as a competitive firm does.
B)It takes the price as given and chooses its quantity, just as a colluding oligopolist does.
C)It chooses its quantity and price, just as a competitive firm does.
D)It chooses its quantity and price, just as a monopoly does.
Q2) Which statement explains the characteristics of a monopolistically competitive market
A)There are only a few sellers.
B)Each firm takes the price of its product as given.
C)Firms can enter or exit the market without restriction.
D)Each firm produces a product that is essentially identical to the products of other firms in the market.
Q3) In the long run,a monopolistically competitive firm produces a quantity that is which of the following
A)equal to the efficient scale
B)less than the efficient scale
C)greater than the efficient scale
D)consistent with diseconomies of scale
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Chapter 17: Oligopoly
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Sample Questions
Q1) Refer to Table 17-5.For which store is the dominant strategy to increase the size of its store and parking lot
A)SuperDuper Saver, but not Ultimate Saver
B)Ultimate Saver, but not SuperDuper Saver
C)both SuperDuper Saver and Ultimate Saver
D)neither SuperDuper Saver and Ultimate Saver
Q2) How are oligopolists generally best off,in terms of their profits
A)operating in a Nash equilibrium
B)producing a total quantity of output that falls short of the Nash-equilibrium total quantity
C)producing a total quantity of output that exceeds the Nash-equilibrium total quantity
D)charging a price that falls short of the Nash-equilibrium price
Q3) Increasing production will increase quantity sold,which will decrease the price of all units sold.What is this concept known as
A)income effect
B)input effect
C)output effect
D)price effect
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Chapter 18: The Markets for the Factors of Production
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Sample Questions
Q1) Refer to Table 18-1.What is the fourth worker's contribution to total revenue
A)-$200
B)$300
C)$600
D)$800
Q2) A firm's demand for a factor of production is linked to its decision to supply a good in the market.What do we call this type of demand
A)differentiated demand
B)secondary demand
C)derived demand
D)hybrid demand-supply
Q3) Refer to Table 18-1.To maximize its profit,how many workers will the firm hire
A)1
B)2
C)3
D)4
Q4) Average productivity can be measured as total output divided by total units of labour.
A)True
B)False
20
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Chapter 19: Earnings and Discrimination
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Sample Questions
Q1) What have studies shown about the earnings of union workers
A)They earn about 30 to 40 percent less than nonunion workers.
B)They earn about 10 to 20 percent less than nonunion workers.
C)They earn about 10 to 20 percent more than nonunion workers.
D)They earn about 30 to 40 percent more than nonunion workers.
Q2) What can we say about the earnings gap between workers with high skills and workers with low skills in Canada
A)It has not been documented by reliable evidence.
B)It has remained roughly unchanged over the past 27 years.
C)It is evident, but it has diminished by 50% over the past 27 years.
D)It is evident, and it has widened over the past 27 years.
Q3) Why can some discriminatory hiring practices be expected,even if markets are competitive
A)unrestricted entry and exit in markets
B)lower costs of hiring
C)a perfectly elastic market demand
D)customer preferences
Q4) Discuss the analogy between physical and human capital.
Q5) List the factors that can contribute to gender wage gaps in the competitive market.Could the gap disappear over time
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Chapter 20: Income Inequality and Poverty
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Sample Questions
Q1) As a result of the tradeoff between income equality and incentives to work,what do we know about an optimal redistribution policy
A)It can never be funded through taxes on wage income.
B)It must always achieve a full egalitarian society.
C)It is only consistent with transfers to the middle class.
D)It always falls short of achieving a full egalitarian society.
Q2) The concept of utility is fundamental to utilitarianism and describes which of the following
A)the optimal distribution of wealth in society
B)the level of satisfaction derived from a person's circumstances
C)the method by which society chooses to allocate resources
D)the method whereby wealth is stored
Q3) If income were equally distributed among households,what would be the result
A)The household's relative share of income would increase.
B)The household's relative share of income would decline.
C)Fifty percent of the households would receive exactly 50 percent of the income.
D)All households would become rich.
Q4) What is the R-factor? How did the R-factor change from 1976 to 2011 in Canada?
Q5) What is the ongoing debate regarding the current EI system in Canada?
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Chapter 21: The Theory of Consumer Choice
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Sample Questions
Q1) Refer to Figure 21-3.Assume that a consumer faces both budget constraints in graph (a) and graph (b) on two different occasions.If her income has remained constant,what has happened to prices
A)The price of X in graph (a) is higher than the price of X in graph (b).
B)The price of Y in graph (a) is higher than the price of Y in graph (b).
C)The prices of both X and Y are lower in graph (a).
D)The prices of both X and Y are lower in graph (b).
Q2) A slightly bowed inward set of indifference curves represents the two goods as which of the following types
A)perfect substitutes
B)perfect complements
C)very close substitutes
D)very close complements
Q3) Refer to Figure 21-1.At what point in the figure is a consumer choosing to spend less than her total income
A)point B
B)point C
C)point D
D)point E
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Page 23
Chapter 22: Frontiers of Microeconomics
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Sample Questions
Q1) One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.
A)True
B)False
Q2) What is the relationship of the Condorcet paradox to the Arrow impossibility theorem
A)It proved that the Arrow impossibility theorem is wrong.
B)It was proved wrong by the Arrow impossibility theorem.
C)It serves as an example of the Arrow impossibility theorem.
D)It pertains to voting systems, whereas Arrow's impossibility theorem does not.
Q3) Arrow's impossibility theorem is disturbing in the sense that it proves which of the following
A)No voting system is perfect.
B)Only a dictator can produce a desirable social outcome.
C)The preferences of the wealthy should be given more weight than the preferences of the poor.
D)The centuries-old Condorcet paradox was not a paradox after all.
Q4) Explain the Condorcet paradox.To which type of voting system does it apply?
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