Economic Analysis
Midterm Exam
Course Introduction
Economic Analysis introduces students to the fundamental principles and techniques used to evaluate economic issues and policies. The course covers key concepts such as supply and demand, market structures, consumer and producer behavior, and the allocation of resources. Through case studies and practical applications, students learn how to apply microeconomic and macroeconomic tools to real-world problems, interpret economic data, and make informed decisions. The focus is on developing analytical skills to assess economic efficiency, costs and benefits, and the broader impact of economic policies on society.
Recommended Textbook
Microeconomics 7th Edition by R. Glenn Hubbard
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18 Chapters
4654 Verified Questions
4654 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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240 Verified Questions
240 Flashcards
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Sample Questions
Q1) Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets.By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that
A)people are rational.
B)people respond to economic incentives.
C)optimal decisions are made at the margin.
D)equity is more important than efficiency.
Answer: A
Q2) If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?
A)13 percent
B)30 percent
C)75 percent
D)77 percent
Answer: B
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Page 3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Sample Questions
Q1) Refer to Table 2-2.Assume that Billie's Bedroom Shop only produces pillows and blankets.Billie faces ________ opportunity costs in the production of pillows and blankets.
A)increasing
B)constant
C)decreasing
D)negative
Answer: B
Q2) If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other.
A)True
B)False
Answer: True
Q3) If the opportunity cost of producing more of one good remains the same as more of that good is produced, then the production method is inefficient.
A)True
B)False
Answer: False
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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242 Flashcards
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Sample Questions
Q1) A decrease in the price of GPS systems will result in
A)a smaller quantity of GPS systems supplied.
B)a larger quantity of GPS systems supplied.
C)a decrease in the demand for GPS systems.
D)an increase in the supply of GPS systems.
Answer: A
Q2) Refer to Figure 3-2.An increase in price of inputs would be represented by a movement from
A)A to B.
B)B to A.
C)S to S .
D)S to S .
Answer: D
Q3) The law of demand implies, holding everything else constant, that as the price of gelato
A)increases, the demand for gelato will increase.
B)increases, the quantity of gelato demanded will increase.
C)decreases, the quantity of gelato demanded will increase.
D)decreases, the demand for gelato will increase.
Answer: C
Page 5
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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208 Flashcards
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Sample Questions
Q1) Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.
A)True
B)False
Q2) If the market price is at equilibrium, the producer surplus is minimized.
A)True
B)False
Q3) Refer to Figure 4-1.If the market price is $3.00, what is the maximum number of burritos that Arnold will buy?
A)0
B)2
C)3
D)4
Q4) Marginal cost is
A)the total cost of producing one unit of a good or service.
B)the average cost of producing a good or service.
C)the difference between the lowest price a firm would have been willing to accept and the price it actually receives.
D)the additional cost to a firm of producing one more unit of a good or service.
6
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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262 Verified Questions
262 Flashcards
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Sample Questions
Q1) Which of the following is an example of a Pigovian tax?
A)payments by utilities to obtain tradable emission allowances
B)a payroll tax
C)payments for licenses to pollute
D)a tax imposed on a utility that internalizes the cost of externalities caused by the utility
Q2) A negative externality exists if
A)there are price controls in a market.
B)there are quantity controls in a market.
C)the marginal social cost of producing a good or service exceeds the private cost.
D)the marginal private cost of producing a good or service exceeds the social cost.
Q3) Alternative approaches for reducing carbon dioxide emissions are
A)carbon taxes and carbon scrubbing.
B)carbon trading and carbon subsidies.
C)carbon taxes and tradable emission allowances.
D)burning low carbon coal and deforestation.
Q4) Should the level of pollution be reduced to zero and if not, then to what level?
Q5) What are some of the limitations of the Coase theorem in practice?
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) To calculate the price elasticity of demand, we divide
A)the percentage change in quantity demanded by the percentage change in price.
B)the percentage change in price by the percentage change in quantity demanded. C)rise by the run.
D)the average price by the average quantity demanded.
Q2) The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, what is the approximate change in the quantity of teenage labor supplied?
A)7.3 percent
B)14.4 percent
C)25.5 percent
D)There is insufficient information to answer the question.
Q3) If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.
A)True
B)False
Q4) Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?
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Q5) What is the relationship between price elasticity of demand and total revenue?
Chapter 7: The Economics of Health Care
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Sample Questions
Q1) Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctors' offices account for ________ of health care costs in the United States.
A)between 1 and 4 percent
B)approximately 25 percent
C)almost 40 percent
D)between 15 and 20 percent
Q2) Most employees ________ pay taxes on the value of health insurance provided by employers, and most people ________ get a tax break when buying individual health insurance policies.
A)do; do
B)do; do not
C)do not; do
D)do not; do not
Q3) In most circumstances, employees do not pay taxes on the value of health insurance their employers provide them.
A)True
B)False
Q4) What is moral hazard?
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Chapter 8: Firms, the Stock Market, and Corporate Governance
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261 Verified Questions
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Sample Questions
Q1) If you own a $1,000 face value bond with one year remaining to maturity and a five percent coupon rate and new bonds are paying 12 percent, what is the most you can get for your old bond?
A)$1,120
B)$1,000
C)$937.50
D)impossible to determine without additional information
Q2) Goodwill is listed as an asset on a firm's balance sheet.
A)True
B)False
Q3) The coupon rate of a bond is equal to
A)the coupon payment.
B)the interest payment.
C)the interest rate.
D)the face value.
Q4) In a typical year, ________ new firms open in the United States.
A)more than 400,000
B)more than 1 million
C)less than 200,000
D)approximately 125,000
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) If the opportunity costs of production for two goods is different between two countries, then
A)trade cannot benefit either country.
B)only one country can be made better off by trade.
C)mutually beneficial trade is possible.
D)trade will only benefit both countries if one can lower its opportunity costs.
Q2) A tariff is a numerical limit on the quantity of a good that can be imported.
A)True
B)False
Q3) Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries.This protectionism will cause the greatest harm to
A)Canadian manufacturers.
B)the Canadian government.
C)manufacturers who export to Canada.
D)Canadian consumers.
Q4) Each year, the United States exports about 50 percent of its wheat crop.
A)True
B)False
Page 11
Q5) What is the difference between imports and exports?
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Chapter 10: Consumer Choice and Behavioral Economics
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304 Flashcards
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Sample Questions
Q1) The income effect of an increase in the price of peaches is
A)the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power.
B)the change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant.
C)the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant.
D)the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.
Q2) Refer to Table 10-2.What is Keira's marginal utility per dollar spent on the third cup of soup?
A)72 utils
B)36 utils
C)12 utils
D)6 utils
Q3) Explain the endowment effect.
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Page 12
Chapter 11: Technology, Production, and Costs
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327 Verified Questions
327 Flashcards
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Sample Questions
Q1) Marginal cost is the
A)change in average cost when an additional unit of output is produced.
B)additional output when total cost is increased by one dollar.
C)additional cost of producing an additional unit of output.
D)change in the price of inputs if a firm buys more inputs to produce an additional unit of output.
Q2) Refer to Figure 11-1.The marginal product of the 3rd worker is A)57.
B)19.
C)15.
D)11.
Q3) The slope of an isocost line ________ and equals the negative of ________.
A)increases as we move down the line; the ratio of input prices
B)decreases as we move down the line; the ratio of the marginal products
C)is constant; the ratio of input prices
D)is constant; the ratio of the marginal products
Q4) Minimum efficient scale is defined as the level of output at which the short-run average total cost stops decreasing.
A)True
B)False
Page 13
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Refer to Table 12-3.What will Arnie's output be and how much profit will he earn if the market price of basketballs is $5.00?
A)Q = 1; profit = -$10.
B)Q = 3; profit = -$7.50
C)Q = 0; profit = -$10.00
D)Price and profit cannot be determined from the information given.
Q2) A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?
A)The number of firms and the industry's output increase.
B)The number of firms and the industry's output decrease.
C)The number of firms remains constant and the industry's output increases.
D)The number of firms remains constant and the industry's output decreases.
Q3) Refer to Figure 12-4.If the market price is $30, the firm's profit-maximizing output level is
A)0.
B)130.
C)180.
D)240.
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Page 14
Chapter 13: Monopolistic Competition: the Competitive
Model in a
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Sample Questions
Q1) Why are many companies concerned about brand management?
Q2) Which of the following is true of a typical firm in a monopolistically competitive industry?
A)Product differentiation allows a successful firm to emerge as a market leader in the industry.
B)All firms have identical cost structures.
C)The more successful firms have an incentive to merge in order to exert greater market power.
D)Each firm acts independently.
Q3) Refer to Table 13-3.What is the amount of the firm's loss at its optimal output level?
A)$0
B)$41
C)$45
D)$50
Q4) A monopolistically competitive firm will
A)charge the same price as its competitors do.
B)always produce at the minimum efficient scale of production.
C)have some control over its price because its product is differentiated.
D)produce an output level that is productively and allocatively efficient.
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) A consequence of the quota that has been imposed on the importation of sugar into the United States is
A)consumers are protected from eating unsafe products made from cheap imported sugar.
B)competition in the U.S. sugar market is reduced.
C)the cost of producing cereal, chocolate, and candy products in the United States is reduced.
D)the market for sugar in the United States has become monopolistically competitive rather than oligopolistic.
Q2) OPEC periodically meets to agree to restrict the cartel's oil output, and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has
A)a cooperative equilibrium.
B)a noncooperative equilibrium.
C)new potential entrants.
D)a threat of substitute goods.
Q3) In a sequential game, one firm will act first and then other firms will respond.
A)True
B)False
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Page 16
Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) Refer to Figure 15-4.What is the profit-maximizing/loss-minimizing output level?
A)600 units
B)800 units
C)940 units
D)1,160 units
Q2) The ability of a firm to charge a price greater than marginal cost is called
A)monopoly power.
B)price-making power.
C)cost-plus pricing.
D)market power.
Q3) Consider two industries, industry W and industry X.In industry W there are five companies, each with a market share of 20% of total sales.In industry X, there are six companies.One company has a 50% market share and each of the other five firms has a market share of 10%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?
Q4) What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?
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Chapter 16: Pricing Strategy
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Sample
Questions
Q1) Some firms practice odd pricing because
A)they believe that customers will buy a larger quantity with an odd price.
B)it is a way to price discriminate.
C)it is too difficult for sellers to reeducate buyers into accepting even prices.
D)it lowers transactions costs.
Q2) Delaware and North Dakota have identical state gasoline taxes of 23.0 cents per gallon.When added to the federal gasoline tax of 18.4 cents per gallon, the total tax on one gallon of gasoline in these two states is 41.4 cents.On October 19, 2017, the average price of one gallon of regular gasoline was $2.25 in Delaware and $2.33 in North Dakota.Briefly explain whether this is an example of price discrimination.Assume that the gasoline being sold is identical in both states and there is no cost difference in the gasoline.
Sources: gaspricewatch.com and taxfoundation.org
Q3) What is meant by the "law of one price"? In discussing the law of demand, Hubbard and O'Brien claim there has been only one example found of an exception to the law (that is, evidence of an upward-sloping demand curve).Are there exceptions to the law of one price?
Q4) Are restaurant coupons a form of price discrimination? Why or why not?
Q5) What three conditions must hold for a firm to successfully price discriminate?
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Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If hiring another worker would increase output by five units per hour, then to maximize profits the firm should
A)not change the number of workers it currently hires.
B)lay off some of its workers.
C)hire the additional worker.
D)There is not enough information to answer the question.
Q2) The Equal Pay Act of 1963 requires that men and women be given equal pay for equal work in the same establishment.Most people agree that gender discrimination in the workplace is unfair, but many economists have criticized advocates of comparable worth.Is paying the same wages for jobs that have comparable worth mandated by the Equal Pay Act? Why don't most economists support proposals to force employers to pay their male and female employees based on comparable worth rules?
Q3) All of the following will shift the labor supply curve except
A)an increase in labor force participation rate among women.
B)an increase in the average age of retirement.
C)an increase in the wage rate.
D)a change in a country's immigration policy.
Q4) Why are there superstar baseball players but no superstar chiropractors?
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Chapter 18: Public Choice, Taxes, and the Distribution of Income
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Sample Questions
Q1) Absolute poverty measures vary from country to country.For example, in 2017, the poverty line in the United States for a family of four was an annual income of $24,600, but economists often use a much lower threshold income of $1.25 per day when calculating the rate of poverty in poor countries.Using this $1.25-per-day measure of the poverty line, which of the following regions had the largest percentage decrease in the percentage of the population in poverty from 1970 to 2010?
A)Latin America
B)sub-Saharan Africa
C)East Asia
D)the Middle East and North Africa
Q2) The excess burden of a tax
A)measures the efficiency loss to the economy that results from a tax, causing a reduction in the quantity of goods and services produced.
B)is measured by the administrative costs required to implement a tax system.
C)is a measure of the hardship imposed on low-income individuals in a society.
D)is a measure of the foregone consumption as a result of having to pay taxes.
Q3) What is the difference between the voting paradox and the Arrow impossibility theorem?
Q4) What is a Lorenz curve and what is a Gini coefficient?
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