Economic Analysis
Test Preparation
Course Introduction
Economic Analysis provides students with a comprehensive understanding of the fundamental concepts, tools, and techniques used to analyze economic issues in both microeconomic and macroeconomic contexts. The course introduces essential theories such as supply and demand, market structures, consumer and producer behavior, and the impact of government interventions. Students will also explore national income, inflation, unemployment, and fiscal and monetary policy. Through real-world applications, case studies, and problem-solving exercises, the course helps learners develop critical thinking skills necessary for making informed economic decisions in business, policy, and everyday life.
Recommended Textbook
Microeconomics 3rd Australian Edition by Glenn Hubbard
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16 Chapters
3350 Verified Questions
3350 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) What is equity,and how does it differ from efficiency?
Answer: Equity refers to the fair distribution of economic benefits.In economics,efficiency refers to least cost production (productive efficiency)and producing according to human preferences (allocative efficiency).
Q2) The additional cost to a producer of hiring an additional unit of labour is called the marginal cost.
A)True
B)False
Answer: True
Q3) Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers 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
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3
Chapter 2: Choices and Trade-Offs in the Market
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Refer to Figure 2-3.A movement from X to Y
A)could be due to a change in consumers' tastes and preferences.
B)could occur because of an influx of immigrant labour.
C)is the result of advancements in food production technology only,with no change in the technology for plastic production.
D)is the result of advancements in plastic production technology only,with no change in food production technology.
Answer: B
Q2) The natural resources used in production are made available in the
A)goods and services market.
B)product market.
C)government market.
D)factor market.
Answer: D
Q3) Refer to Figure 2-1.Point C is
A)technically efficient.
B)unattainable with current resources.
C)inefficient in that not all resources are being used.
D)the equilibrium output combination.
Answer: B
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) The phrase 'demand has decreased' means that A)a demand curve has shifted to the left.
B)there has been an upward movement along a demand curve. C)there has been a downward movement along a demand curve. D)a demand curve has shifted to the right.
Answer: A
Q2) Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)
Answer: B
Q3) Refer to Figure 3-4.If the price is $15, A)there would be a surplus of 300 units. B)there would be a shortage of 300 units. C)there would be a surplus of 400 units. D)there would be a shortage of 400 units.
Answer: B
Page 5
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Chapter 4: Elasticity: the Responsiveness of Demand and Supply
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226 Verified Questions
226 Flashcards
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Sample Questions
Q1) Refer to Figure 4-5.The section of the demand curve labeled 'A' represents
A)the inelastic section of the demand curve.
B)the unit-elastic section of the demand curve.
C)the elastic section of the demand curve.
D)the perfectly elastic section of the demand curve.
Q2) The midpoint formula is used to measure the elasticity of demand between two points on a demand curve
A)when demand is elastic.
B)in special cases when the percentage change in the quantity demanded is equal to the percentage change in price.
C)to ensure that the elasticity has a negative value.
D)to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.
Q3) If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is
A)horizontal.
B)downward sloping.
C)curvilinear.
D)vertical.
Page 6
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Chapter 5: Economic Efficiency, Government Price Setting and Taxes
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187 Verified Questions
187 Flashcards
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Sample Questions
Q1) Rent control is an example of a price ceiling.
A)True
B)False
Q2) Paul goes to Sportsmart to buy a new tennis racquet.He is willing to pay $200 for a new racquet,but buys one on sale for $125.Paul's consumer surplus from the purchase is A)$325.
B)$200.
C)$125.
D)$75.
Q3) Refer to Figure 5-4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3, A)economic surplus is maximised.
B)not enough consumers want to buy pecans.
C)the quantity supplied is less than the economically efficient quantity.
D)the quantity supplied is economically efficient,but the quantity demanded is economically inefficient.
Q4) What is marginal benefit? Which curve is also referred to as a marginal benefit curve?
Page 7
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Chapter 6: Consumer Choice and Behavioural Economics
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254 Verified Questions
254 Flashcards
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Sample Questions
Q1) Consumers have to make trade-offs in deciding what to consume because A)not all goods give them the same amount of satisfaction.
B)the prices of goods vary.
C)they are limited by a budget constraint.
D)there are not enough of all goods produced.
Q2) Refer to Figure 6-5.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.The income effect of this price change is represented by the movement from
A)A to B.
B)B to C.
C)D to B
D)D to C.
Q3) A curve that shows combinations of consumption bundles that give a consumer the same utility is called
A)a utility curve.
B)an indifference curve.
C)a preference curve.
D)a demand curve.
Q4) Explain the concept of network externalities.
Q5) What is an indifference curve? Why can indifference curves never cross?
Page 8
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Chapter 7: Technology, Production and Costs
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300 Verified Questions
300 Flashcards
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Sample Questions
Q1) In the short run,if average product is at its maximum,then average variable cost is at its minimum.
A)True
B)False
Q2) A curve that shows all the combinations of two inputs,such as labour and capital,that will produce the same level of output is called
A)an isoquant.
B)an isocost line.
C)a budget line.
D)an optimal input combination curve.
Q3) The process a firm uses to turn inputs into outputs of goods and services is called technology.
A)True
B)False
Q4) Refer to Table 7-2.What is the marginal product of the 4th worker?
A)230 bushels
B)57.4 bushels
C)50 bushels
D)12.4 bushels
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Chapter 8: Firms in Perfectly Competitive Markets
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270 Verified Questions
270 Flashcards
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Sample Questions
Q1) If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is
A)$8.
B)$20.
C)$40.
D)$200.
Q2) How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?
Q3) At the profit-maximising level of output for a perfectly competitive firm,
A)price equals marginal cost.
B)average revenue equals average variable cost,and price equals marginal cost.
C)marginal revenue equals marginal cost,and average total cost equals average fixed cost.
D)price equals average revenue,and marginal cost equals average variable cost.
Q4) Refer to Figure 8-7.At price P<sub>3</sub>,the firm would produce
A)Q<sub>2</sub> units.
B)Q<sub>3</sub> units.
C)Q<sub>4 </sub>units.
D)Q<sub>5</sub> units.
Q5) What is meant by the term 'long-run competitive equilibrium'?
Page 10
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Chapter 9: Monopoly Markets
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281 Verified Questions
281 Flashcards
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Sample Questions
Q1) Refer to Table 9-3.If Julie charges $10 per hour,how many hours of pet sitting services will be purchased and by whom?
A)2 hours (1 hour by Cara and 1 hour by Dawn)
B)1 hour by Cara only
C)1 hour by Dawn only
D)3 hours (1 hour each by Arun,Bernice and Cara)
Q2) Whenever a firm can charge a price greater than marginal cost
A)the firm must be a monopolist.
B)there is some loss of economic efficiency.
C)consumers have the ability to choose a close substitute.
D)the firm will earn economic profits.
Q3) Refer to Table 9-3.If Julie charges $10 per hour,what is the value of the consumer surplus received by Dawn?
A)$2
B)$10
C)$12
D)$22
Q4) Explain why the monopolist has no supply curve?
Q5) What is the difference between price discrimination and other forms of discrimination?
Page 11
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Chapter 10: Monopolistic Competition
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253 Verified Questions
253 Flashcards
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Sample Questions
Q1) If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?
A)Demand decreases and becomes less elastic.
B)Demand decreases and becomes more elastic.
C)Demand increases and becomes less elastic.
D)Demand increases and becomes more elastic.
Q2) Refer to Figure 10-12.The diagram depicts a firm
A)in a constant cost industry.
B)in an increasing cost industry.
C)in long-run equilibrium.
D)that is incurring short-run losses.
Q3) Discuss the role of product differentiation and advertising in monopolistic competition.
Q4) What is the profit-maximising rule for a monopolistically competitive firm?
A)to produce a quantity that maximises market share
B)to produce a quantity that maximises total revenue
C)to produce a quantity such that marginal revenue equals marginal cost
D)to produce a quantity such that price equals marginal cost
Q5) What is the difference between the terms 'marketing' and 'advertising'?
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Chapter 11: Oligopoly: Firms in Less Competitive Markets
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) What is an oligopoly? Give two examples of oligopolistic industries in Australia.
Q2) Collusion occurs when
A)a firm chooses a level of output to maximise its own profit.
B)two firms' price and output decisions come into conflict.
C)there is an agreement among firms to charge the same price or otherwise not to compete.
D)firms refuse to follow their price leaders.
Q3) 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.
Q4) Decision trees can only be used to analyse sequential games.
A)True B)False
Q5) In a Nash equilibrium,all players select non-dominant strategies. A)True B)False
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Chapter 12: The Markets for Labour and Other Factors of Production
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253 Verified Questions
253 Flashcards
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Sample Questions
Q1) A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.
A)True
B)False
Q2) Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system,yet many firms continue to pay their workers salaries.List three reasons why a firm would choose a salary system of compensation.
Q3) Refer to Table 12-1.Suppose the output price is $3.If the wage rate is $90,what is the profit-maximising quantity of labour that the firm should hire?
A)7 units
B)5 units
C)4 units
D)3 units
Q4) Firms use information on labour's marginal revenue product to determine
A)how much to produce at each output price.
B)how many workers to hire at each wage rate.
C)how much marginal product to produce at each wage rate.
D)how much labour services to supply at each wage rate.
Page 14
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Chapter 13: International Trade
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Refer to Table 13-2.Select the statement that accurately interprets the data in the table.
A)Sarita has a comparative advantage in baking pies.
B)Gabriel has an absolute advantage in baking cakes.
C)Gabriel has a comparative advantage in baking pies.
D)Gabriel has a comparative advantage in baking pies and baking cakes.
Q2) Refer to Table 13-6.Which country has a comparative advantage in producing hats?
A)Denmark
B)Belize
C)both countries
D)neither country
Q3) 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 Denmark consume?
A)270
B)900
C)930
D)1200
Q4) What is a tariff?
Q5) What is an 'open economy'?
Q6) What is autarky?
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Chapter 14: Government Intervention in the Market
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem.
A)True
B)False
Q2) The market demand for a public good can be determined by
A)adding up the total private benefits and external benefits that each quantity provides the citizens of a country.
B)adding up how much each citizen expects to consume at each possible price.
C)adding up how much each consumer is willing to pay for each unit of the public good.
D)estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.
Q3) 'When it comes to public goods,individuals do not reveal their true preferences because it is not in their self-interest to do so.' Evaluate this statement.
Q4) What is adverse selection?
Q5) Will equilibrium in a market always result in an outcome that is economically efficient? Explain.
Q6) What is rent seeking and how is it related to regulatory capture?
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Page 16
Chapter 15: Externalities, Environmental Policy and Public Goods
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) When the government imposes a tax equal to the external cost of producing a product that causes pollution,the government is said to externalise the externality.
A)True
B)False
Q2) The Coase theorem states that
A)government intervention is always needed if externalities are present.
B)assigning property rights is the only thing the government should do in a market economy.
C)if transactions costs are low,private bargaining will result in an efficient solution to the problem of externalities.
D)a free market equilibrium is the best solution to address externalities.
Q3) Negative externalities and the tragedy of the commons are problems that have a common source.What is this common source?
A)self-interest motives of producers and consumers
B)a lack of concern for human rights
C)a lack of competition
D)a lack of clearly defined and enforced property rights
Q4) How does a positive externality in consumption reduce economic efficiency?
Page 17
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Chapter 16: The Distribution of Income and Social Policy
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Holding all other factors constant,income earned from capital is more unequally distributed than income earned from labour.
A)True
B)False
Q2) If you pay $2000 in taxes on an income of $20 000,and a tax of $3000 on an income of $30 000,then over this range of income the tax is
A)regressive.
B)proportional.
C)progressive.
D)There is insufficient information to answer the question.
Q3) If your income is $92 000 and you pay taxes of $19 475,what is your average tax rate? Show your work.
Q4) Refer to Figure 16-1.Area F + G represents
A)the portion of sales tax revenue borne by consumers.
B)the portion of sales tax revenue borne by producers.
C)the excess burden of the sales tax.
D)sales tax revenue collected by the government.
Q5) What is the difference between the poverty line and the poverty rate?
Q6) Explain the effect of price elasticities of supply and demand on tax incidence.
Page 18
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