Economic Analysis
Exam Review
Course Introduction
Economic Analysis is a foundational course that equips students with the tools and concepts necessary to understand, evaluate, and interpret economic phenomena in both microeconomic and macroeconomic contexts. The course explores theoretical frameworks, such as supply and demand, market structures, consumer and producer behavior, and public policy impacts. Through case studies and practical applications, students will learn how to use quantitative and qualitative methods to assess economic decisions, measure efficiency, and analyze trends affecting individuals, businesses, and governments. By the end of the course, students will be prepared to apply economic reasoning to real-world problems and policy debates.
Recommended Textbook Microeconomics 3rd Australian Edition by Glenn Hubbard
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3350 Verified Questions
3350 Flashcards
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Chapter 1: Economics: Foundations and Models
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160 Flashcards
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Sample Questions
Q1) The branch of economics which studies the behaviour of entire economies is called
A)public economics.
B)microeconomics.
C)macroeconomics.
D)normative economics.
Answer: C
Q2) Who receives the most of what is produced in a market economy?
A)lawmakers and other politically favoured groups
B)those who are willing and able to buy them
C)people who earn the highest incomes
D)Everyone receives an equal amount.
Answer: B
Q3) What is an economic variable?
Answer: An economic variable is something measurable that can have different values,such as the wages of software programmers.
Q4) When voluntary exchange takes place,neither party gains from the exchange.
A)True
B)False
Answer: False
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Chapter 2: Choices and Trade-Offs in the Market
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Sample Questions
Q1) Refer to Table 2-5.Which of the following statements is true?
A)Fred has a comparative advantage in making both products.
B)Barney has a comparative advantage in making both products.
C)Barney has a comparative advantage in making pogo sticks and Fred in making unicycles.
D)Barney has a comparative advantage in making unicycles and Fred in making pogo sticks.
Answer: D
Q2) Refer to Table 2-8.What is Scotland's opportunity cost of producing one motorcycle?
A)0.25 guitar
B)4 guitars
C)12 guitars
D)16 guitars
Answer: B
Q3) On a diagram of a production possibility frontier,opportunity cost is represented by the production possibility frontier shifting outward.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample
Questions
Q1) Refer to Figure 3-4.At a price of $10,how many units will be sold?
A)200
B)400
C)600
D)800
Answer: A
Q2) Refer to Figure 3-2.An increase in the number of firms in the market would be represented by a movement from
A)A to B.
B)B to A.
C)S<sub>1</sub> to S<sub>2</sub>.
D)S<sub>2 </sub>to S<sub>1</sub>.
Answer: C
Q3) If the price of music downloads was to decrease,then
A)the demand for MP3 players would decrease.
B)the demand for MP3 players would increase.
C)the supply of MP3 players would increase.
D)the quantity demanded of MP3 players would decrease.
Answer: B
Page 5
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Chapter 4: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?
A)0.11
B)0.37
C)2.69
D)9.33
Q2) If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.
A)True
B)False
Q3) Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that A)wine and spirits are luxury goods.
B)wine is a luxury good and spirits are inferior goods.
C)wine and spirits are highly price elastic.
D)wine is a luxury good and spirits are necessities.
Q4) Briefly explain the economic concept of elasticity.
Page 6
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Chapter 5: Economic Efficiency, Government Price Setting and Taxes
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Sample Questions
Q1) What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price,where must price ceilings and price floors be set to have an effect on the market.
Q2) The excess burden of a tax is also a deadweight loss.
A)True
B)False
Q3) If the quantity of soccer balls demanded is represented by the equation Q<sub>D</sub> = 80 - 2P,then the corresponding price of soccer balls is represented by the equation
A)P = 1.6Q<sub>D</sub> + 80.
B)P = 80 - Q<sub>D</sub>.
C)P = 40 - 0.5Q<sub>D</sub>.
D)P = Q<sub>D</sub> + 160.
Q4) Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.
A)True
B)False
Q5) What is the difference between scarcity and a shortage?
Q6) What is economic surplus? When is economic surplus at a maximum?
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Chapter 6: Consumer Choice and Behavioural Economics
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Sample Questions
Q1) Economists assume people's tastes are identical.
A)True
B)False
Q2) Refer to Table 6-6.What is Jay's optimal consumption bundle?
A)1 burger and 2 Pepsis
B)2 burgers and 3 Pepsis
C)3 burgers and 1 Pepsi
D)3 burgers and 2 Pepsis
Q3) In explaining consumer behaviour,economists explain how consumer tastes and preferences are formed.
A)True
B)False
Q4) Under Big W's everyday low pricing policy,the everyday low prices
A)ended up being the highest prices ever charged by the company.
B)were always lower than the sale prices under the previous policy.
C)were not actually charged every day,but only once a month during half-off sales.
D)ended up being higher than the sale prices under the previous pricing policy.
Q5) Describe the demand curve for a Giffen good.
Q6) Explain the endowment effect.
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Chapter 7: Technology, Production and Costs
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300 Flashcards
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Sample Questions
Q1) A change in the slope of an isocost line is due to a change in
A)the output price.
B)the price of one or both inputs.
C)total cost.
D)quantity of output.
Q2) Refer to Figure 7-6.In the figure above,which letter represents the marginal cost curve?
A)A
B)B
C)C
D)D
Q3) If fixed costs do not change,then marginal cost
A)also remains constant.
B)equals the change in variable cost divided by the change in output.
C)equals the change in average variable cost divided by the change in output.
D)equals the change in average fixed cost divided by the change in output.
Q4) If the marginal product of labour is decreasing,then marginal cost of production must be rising.
A)True
B)False
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Chapter 8: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) If a firm shuts down it
A)will suffer a loss equal to its fixed costs.
B)will produce nothing but must pay its variable costs.
C)will produce nothing but must pay its fixed and variable costs.
D)will earn enough revenue to cover its variable costs but not all of its fixed costs.
Q2) If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,what should the farm do to maximise its profit?
A)determine what the total revenue and total cost of production are
B)increase output
C)decrease output
D)lower its price to sell more
Q3) A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.
A)loss of $14 000
B)profit of $14 000
C)profit of $50 000
D)There is insufficient information to answer the question.
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Chapter 9: Monopoly Markets
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Sample Questions
Q1) A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.
A)True
B)False
Q2) The 10-year protection period from generic competition for drug manufacturers is a form of
A)copyright.
B)trademark.
C)hallmark.
D)patent.
Q3) Network externalities
A)can only exist when there are economies of scale.
B)prevent the dominance of a market by one firm.
C)exist when the usefulness of a product increases with the number of consumers who use it.
D)are created when celebrity endorsements of products lead to a surge in the demand for those products.
Q4) How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.
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Chapter 10: Monopolistic Competition
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Sample Questions
Q1) Economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive.
A)True
B)False
Q2) Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is
A)more elastic because there are many close substitutes for the product of a monopolistically competitive firm.
B)less elastic because monopolistically competitive firms produce similar,but not identical,products.
C)just as elastic because there are many sellers in both markets.
D)more elastic because in the long run,the demand curve is tangent to the firm's average total cost curve.
Q3) Refer to Table 10-5.At the profit-maximising or loss-minimising output level
A)the firm makes a profit of $12.
B)the firm incurs a loss equal to its fixed cost.
C)the firm makes a profit of $16.
D)the firm incurs a loss of $14.
Q4) What is the difference between zero accounting profit and zero economic profit?
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Chapter 11: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) In economics,the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called
A)decision theory.
B)game theory.
C)market structure analysis.
D)profit analysis.
Q2) Which of the following is not one of the five competitive forces?
A)the threat from potential entrants
B)the bargaining power of buyers
C)the firm's ability to differentiate its product
D)the bargaining power of suppliers
Q3) The profit-maximising level of output and the profit-maximising price for an oligopolist cannot be calculated when we don't know
A)what the concentration ratio for the oligopolist's industry is.
B)what the minimum efficient scale in the oligopolist's industry is.
C)the demand curve and the marginal revenue curve of the oligopolist.
D)the type of barrier to entry that exists in the oligopolist's industry.
Q4) List the competitive forces in the five competitive forces model.
Q5) Firms in an oligopoly are said to be interdependent.What does this mean?
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Chapter 12: The Markets for Labour and Other Factors of Production
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Sample Questions
Q1) The total amount of copper in the earth is not increasing.Does this mean that in the market for copper,the supply curve is perfectly inelastic? Explain.
Q2) Refer to Figure 12-4.Which of the following is true if the wage rate increases from W<sub>0</sub> to W<sub>1</sub>?
A)The income effect is larger than the substitution effect.
B)The substitution effect is larger than the income effect.
C)The income effect and the substitution effect are equal.
D)The supply curve is unit-elastic.
Q3) Refer to Table 12-1.Suppose the output price is $3.If the firm represented in the table is maximising its profit by hiring six workers,what is the wage rate?
A)$120
B)$65
C)$40
D)There is insufficient information to answer the question.
Q4) If the labour demand curve shifts to the right and the labour supply curve remains unchanged,what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.
Q5) What is personnel economics?
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Chapter 13: International Trade
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131 Flashcards
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Sample Questions
Q1) Refer to Table 13-3.Select the statement that accurately interprets the data in the table.
A)Bryce has a greater opportunity cost than Tina for making candles.
B)Bryce's opportunity cost for making candles is less than Tina's.
C)Tina has a greater opportunity cost than Bryce for making candles.
D)Bryce's opportunity cost for making candles and making soap are both greater than Tina's.
Q2) Refer to Table 13-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Belize consume?
A)150
B)270
C)930
D)1200
Q3) A tariff is a tax imposed by a government on its own exports.
A)True
B)False
Q4) Free trade refers to trade between countries without government restrictions.
A)True
B)False
Q5) What is an 'open economy'?
Page 15
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Chapter 14: Government Intervention in the Market
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Sample Questions
Q1) Overuse of a common resource may be avoided by all of the following methods except
A)charging for the use of a common resource.
B)issuing tradable permits for the use of a common resource.
C)government taking over ownership of all private common resources.
D)setting quotas or legal limits on the quantity consumed of the common resource.
Q2) A trademark is
A)a legal instrument which grants a firm the right to differentiate its product.
B)a legal right to position a firm's product in high-traffic public areas such as airports and post offices.
C)a patent on a firm's product.
D)a distinguishing attribute such as a sign or logo that allows a firm to uniquely identify its product.
Q3) The supply curve of a public goods shows
A)the total quantities that all producers are willing and able to supply at each price.
B)the maximum amount suppliers require to produce each quantity of the good.
C)the total cost of producing each unit of the good.
D)the marginal cost of producing each unit of the good.
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Page 16
Chapter 15: Externalities, Environmental Policy and Public Goods
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Sample Questions
Q1) Refer to Figure 15-5.If,because of an externality,the economically efficient output is Q<sub>2</sub> and not the current equilibrium output of Q<sub>1</sub>,what does D<sub>1</sub> represent?
A)the demand curve reflecting external benefits
B)the demand curve reflecting social benefits
C)the demand curve reflecting private benefits
D)the demand curve reflecting the sum of private and social benefits
Q2) Which of the following is an example of a Pigovian tax?
A)payments by utilities to obtain tradable emissions allowances
B)a payroll tax
C)payments for licenses to pollute
D)a tax imposed on a utility that internalises the cost of externalities caused by the utility
Q3) Refer to Figure 15-3.The efficient output level is
A)Q<sub>m</sub>.
B)Q<sub>n</sub>.
C)Q<sub>o</sub>.
D)Q<sub>o</sub><sub> </sub>- Q<sub>m</sub>.
Q4) What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?
Page 17
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Chapter 16: The Distribution of Income and Social Policy
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Sample Questions
Q1) If you pay $14 000 in taxes on an income of $125 000,and $17 400 in taxes on an income of $144000,what is your marginal tax rate? Show your work.
Q2) If,as your taxable income decreases,you pay a smaller percentage of your taxable income in taxes,then the tax is
A)regressive.
B)proportional.
C)progressive.
D)unfair.
Q3) The poverty rate is defined as the percentage of the A)labour force that is poor according to the federal government's definition of poverty. B)population that is exempt from paying federal income taxes.
C)population who qualify to receive welfare payments.
D)population that is poor according to the federal government's definition of poverty.
Q4) For a given supply curve,the deadweight loss from the imposition of a tax is smaller if demand is more elastic.
A)True
B)False
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