Economics for Business Exam Questions
Course Introduction
Economics for Business introduces students to fundamental economic concepts and their real-world applications within the business environment. The course covers both microeconomic and macroeconomic principles, focusing on how markets operate, how consumers and firms make decisions, and the role of government in the economy. Students will explore topics such as supply and demand, cost structures, market competition, pricing strategies, and the impact of economic policies on businesses. Emphasis is placed on developing analytical skills and economic reasoning to solve business problems and make informed managerial decisions.
Recommended Textbook
Microeconomics 19th Edition by Paul A. Samuelson
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Page 2
Chapter 1: The Central Concepts of Economics
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Sample Questions
Q1) If empirical testing verifies a hypothetical implication of a given analysis, then the theoretical approach is verified, as well.
A)True
B)False
Answer: False
Q2) The main difference between a free good and an economic good is that:
A)it is not produced.
B)no one desires any amount.
C)it is not tradable.
D)it is not scarce.
E)none of the above.
Answer: D
Q3) Commonsense knowledge about economics can handicap as it can help.
A)True
B)False
Answer: True
Q4) Economics may be simply defined as the study of money matters.
A)True
B)False
Answer: False
Page 3
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Chapter 2: The Modern Mixed Economy
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Sample Questions
Q1) Capital goods differ from primary factors in that they are evaluated in terms of money.
A)True
B)False
Answer: False
Q2) How goods are produced is determined by:
A)consumer demand.
B)government intervention to force businesses to produce goods cheaply.
C)big business activity.
D)business competition to buy factor inputs and sell goods most cheaply.
E)none of the above.
Answer: D
Q3) By the "invisible hand," Adam Smith meant that although government dominates our economy most of us are not aware of this fact.
A)True
B)False
Answer: False
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Chapter 3: Basic Elements of Supply and Demand Part
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Sample Questions
Q1) An increase in demand means a movement to a higher quantity along a given demand curve.
A)True
B)False
Answer: False
Q2) When a big movement of hogs to market causes pork prices to fall, this will tend to push beef prices down also.
A)True
B)False
Answer: True
Q3) An increase in price will lead to a lower quantity demanded because:
A)suppliers will supply only the smaller amount.
B)some individuals will no longer purchase the good.
C)individuals purchase less of the good.
D)a and b.
E)b and c.
Answer: E
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Page 5
Chapter 4: Supply and Demand: Elasticity and Applications
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Sample Questions
Q1) During the first year that the Salk vaccine for infantile paralysis became available, the quantity produced was too small to inoculate all those in susceptible age groups.Although the cost of production and the price were not particularly high, production could not be expanded rapidly enough to meet the demand.The government therefore intervened to regulate its distribution.What do these facts suggest about the price of Salk vaccine during the first year it was available? It was:
A)at equilibrium and government should not have intervened.
B)above equilibrium and a price ceiling was required.
C)below equilibrium and a price ceiling was required.
D)indeterminate.
E)below equilibrium so there was a shortage
Q2) If a 1 percent change in price causes a 1 percent change in quantity demanded, then demand is unit elastic.
A)True
B)False
Q3) In Figure 4-3 elasticity of supply is greater than the elasticity of demand (in absolute value)at equilibrium.
A)True
B)False
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Page 6
Chapter 5: Demand and Consumer Behavior
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Sample Questions
Q1) The "paradox of value," with respect to prices and consumer purchases, refers to which one of the following?
A)Prices of commodities are not always proportional to the total satisfaction they give us.
B)It is impossible to explain the price of a commodity in terms of either demand factors alone or supply factors alone.
C)It is impossible to explain why people's tastes are what they are, or why tastes vary from one person to the next.
D)Some consumers tend to value commodities according to their price, even to the point of buying more if the price goes up.
E)None of the above.
Q2) Refer to Figure 5-1.What is total demand at P = 3?
A)20
B)25
C)27.5
D)45
E)None of the above
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Page 7
Chapter 6: Production and Business Organization
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Sample Questions
Q1) A different kind of efficiency that arises when a number of different products that can be produced more efficiency together than apart:
A)economies of scope.
B)economies of scale.
C)economies of growth.
D)none of the above.
Q2) History matters in network markets because once consumers become accustomed to certain features, they dislike having to adjust to changes.
A)True
B)False
Q3) Limited liability means that a purchaser of a $10 share must contribute an additional $10 in the event of bankruptcy of the company.
A)True
B)False
Q4) The total product for your farm is the sum of the output for each worker.
A)True
B)False
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Chapter 7: Analysis of Costs
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Sample Questions
Q1) The marginal cost curve can cut the average variable cost curve from below only at its minimum.
A)True
B)False
Q2) Diminishing returns to factors of production cause:
A)diminishing opportunity costs.
B)the ratio of fixed costs to total costs to increase.
C)average fixed costs to decrease.
D)marginal costs to rise.
E)none of the above.
Q3) Because opportunity costs always equal market price, opportunity costs also includes accounting costs.
A)True
B)False
Q4) Net worth on a company's balance sheet is properly described as:
A)the market value of the company itself.
B)the market value of the company's shares.
C)accumulated undistributed profits.
D)capital contributed by the shareholders.
E)total assets minus total liabilities, as shown on the books of the company.
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Chapter 8: Analysis of Perfectly Competitive Markets
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Sample Questions
Q1) An efficient allocation of resources calls for flexible prices.
A)True
B)False
Q2) In the long run, the industry's supply curve may reflect constant, increasing, or decreasing costs.
A)True
B)False
Q3) The shutdown point comes where revenues just cover variable costs.
A)True
B)False
Q4) A tax on the emission of a pollutant from the firms of a competitive industry can be expected to cause the equilibrium quantity demanded and supplied to decline.
A)True
B)False
Q5) For the market whose typical firm is characterized in Figure 8-2, the long-run competitive equilibrium price is $1000.
A)True
B)False
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Chapter 9: Imperfect Competition and Monopoly
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Sample Questions
Q1) A monopoly exists when:
A)a single seller has complete control over the industry.
B)a single seller has no control over the industry.
C)many sellers are in control of the industry.
D)no one controls the industry.
E)none of the above.
Q2) If a firm finds out that its marginal revenue is greater than its marginal cost, it should:
A)increase production and sales.
B)decrease production and sales.
C)encourage the entry of other firms into the market.
D)keep raising its selling price till marginal revenue equals marginal cost.
E)change nothing because profits are maximized.
Q3) If a firm's demand curve is horizontal, then the firm's marginal revenue is:
A)less than the price of the product.
B)equal to the price of the product.
C)greater than the price of the product.
D)greater than, equal to, or less than the price of the product, depending on the particular circumstances.
E)not determinable from the above information.
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Chapter 10: Competition Among the Few
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Sample Questions
Q1) Strategic interaction is a term used to describe the condition in which a firm's business strategy depends upon its competitors' business behavior.
A)True
B)False
Q2) If the market indicated by Figure 10-1 is perfectly competitive, the level of output and price will be, respectively:
A)F, C.
B)H, C.
C)F, B.
D)H, B.
E)A, I.
Q3) A concentration ratio measures a monopolist's production costs as a percentage of firm revenues.
A)True
B)False
Q4) The social loss created by monopoly power depends upon the price elasticity of the monopolist's supply curve.
A)True
B)False
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Chapter 11: Economics of Uncertainty
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Sample Questions
Q1) Which of the following describes the purchasing of a good or asset in one market for immediate resale in another market in order to profit from a price discrepancy?
A)risk adverse.
B)arbitrage.
C)hedging.
D)uncertainty.
E)none of the above.
Q2) The Schumpeterian hypothesis asserts that:
A)the importance of entrepreneurs has been overestimated.
B)innovation is more profitable for firms with large market shares.
C)the deadweight loss of monopolistic competition is outweighed by its external economies.
D)decreasing cost curves are incompatible with innovation.
E)perfect competition is the likely outcome of any market evolution.
Q3) Inappropriability refers to the competition between such rivals as Ford and Chrysler.
A)True
B)False
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Chapter 12: The Labor Market
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Sample Questions
Q1) In a two-factor perfectly competitive economy, the rectangle under the marginal product curve for labor gives land's share of output.
A)True
B)False
Q2) The demand for corn land will be more elastic:
A)the more inelastic is the demand for corn.
B)the more elastic is the demand for corn.
C)if the supply of farm labor is inelastic.
D)the greater the elasticity of supply.
E)if corn land is very scarce.
Q3) You are given the following information with respect to a firm's output position: marginal product of factor A = 4; marginal product of factor B = 2; price of A = $8; price of B = $4.Assume the firm is at its maximum-profit output.Then marginal revenue must be:
A)50 cents.
B)$1.
C)$2.
D)zero
E)indeterminable from information given.
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Page 14
Chapter 13: Land, Natural Resources, and the Environment
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Sample Questions
Q1) Higher wages will tend to eliminate excess demand in labor markets.
A)True
B)False
Q2) Under no circumstances will an elimination of discrimination cause the wage paid to anyone in related labor markets to fall.
A)True
B)False
Q3) Which of the following is not a major cause of wage differentials in the U.S.?
A)Differences in compensation due to workers tastes and values.
B)Non-competing groups in the labor market.
C)Differences in education across workers.
D)Government imposed wage ceilings.
E)All of the above can be expected to create wage differentials.
Q4) Capital, education levels, technology levels, and civil strife have a major affect on supply and demand.
A)True
B)False
Q5) Nominal wages determine how much labor is supplied to the economy.
A)True
B)False
15
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Chapter 14: Capital, Interest, and Profits Part Four: Applications of Economic Principles
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Sample Questions
Q1) A market solution to pollution is the use of tradeable emissions permits.
A)True
B)False
Q2) From the point of view of the whole community, price-determined rent is a payment for a resource which can be used in any industry.
A)True
B)False
Q3) The most important economic function of rental payments for the use of land is to:
A)assure owners of land some return for its use.
B)determine how land will be rationed into different uses.
C)assure an adequate supply of land in the society as a whole.
D)equalize the distribution of factor payments.
E)make sure that there is some land left for future use.
Q4) A renewable resource is one whose services are not replenished.
A)True
B)False
Q5) The supply curve for land is completely inelastic, or vertical.
A)True
B)False
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Chapter 15: Government Taxation and Expenditure
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Sample Questions
Q1) Real interest rate is:
A)the nominal interest rate minus inflation.
B)the interest rate including inflation.
C)not the interest rate.
D)return on investments in terms of real goods.
E)none of the above.
Q2) In a perfectly competitive market, any larger than normal returns to transferable capital are reduced when:
A)the government repeals an excess-profits tax.
B)businesses are able to pay other factors of production less.
C)new firms enter the industry, increasing the supply of the product and lowering product price.
D)old firms leave the industry, decreasing the supply of the product and lowering product price.
E)other factors of production agree to a smaller reward for their contribution to production.
Q3) The nominal interest rate plus the percentage price rise equals the real interest rate.
A)True
B)False
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Page 17
Chapter 16: Efficiency Vsequality: The Big Trade-Off
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Sample Questions
Q1) When we speak of the incidence of a tax, we are:
A)referring to the group upon whom it is directly levied.
B)asking whether that tax is progressive or regressive in nature.
C)measuring the extent to which the tax tends to reduce incentives in the group that pays it.
D)referring to the group that receives the burden of the tax bill, regardless of whether or not it actually makes the money payment to the government.
E)measuring the extent to which the tax brings in a steady amount of money to the government in both prosperity and depression.
Q2) As people's incomes rise, a progressive tax is best described as taking:
A)an increasing amount of tax.
B)the same amount of tax.
C)the same percent of income as tax
D)an increasing percent of income as tax.
E)a decreasing percent of income as tax.
Q3) The cost of all levels of government in the United States has grown more than 400-fold since 1913.
A)True
B)False
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Page 18
Chapter 17: International Trade
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Sample Questions
Q1) Given the social constraint illustrated in Figure 17-4, the redistribution cost associated with perfect equality would, in dollar terms, equal two times the length of AC.
A)True
B)False
Q2) Blacks would not have low per-capita incomes if they were not the last to be hired and the first to be fired.
A)True B)False
Q3) Discrimination has no role in explaining the incidence of poverty in the United States in the 1990s.
A)True
B)False
Q4) The percentage of total income earned by the lowest 20 percent of the population:
A)has fallen in the last ten years.
B)has climbed steadily to 15 percent since 1929.
C)fell to 6 percent during the Johnson Administration.
D)has grown faster than GDP since 1929.
E)none of the above.
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Chapter 18: Overview of Macroeconomics
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Q1) Countries in the European Union (EU):
A)enjoy a free flow of capital among member countries.
B)enjoy a free flow of labor among member countries.
C)abolished their individual national currencies.
D)All of the above.
E)A and B only.
Q2) If the world price in Figure 18-3 were $2.50, what size quota would be required to keep domestic supply at the no-trade levels?
A)0 units.
B)50 units.
C)100 units.
D)150 units.
E)200 units.
Q3) It is only common sense that countries will produce and export goods for which they are uniquely qualified.
A)True
B)False
Q4) Trade promotes specialization.
A)True
B)False
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Chapter 19: Geometrical Analysis of Consumer Equilibrium
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Q1) In Figure 5A-2, starting from the budget constraint AC, if both income and prices are doubled, the household's budget constraint would shift out to EF, and the household could attain a utility level of U(4).
A)True
B)False
Q2) Which of the following statements concerning indifference curves is correct?
A)An indifference curve is the locus of points describing proportional price levels of the two goods.
B)Indifference curves presuppose the measurement of total utility and marginal utility.
C)An indifference curve is the locus of points representing various combinations of two goods about which the consumer is indifferent.
D)Indifference curves presuppose the validity of the "law of diminishing returns."
E)None of the above.
Q3) If your income is halved, your budget line will shift twice as far from the origin in a parallel way.
A)True
B)False
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Chapter 20: Production Cost Theory and Decisions of the Firm
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Sample Questions
Q1) If 1 unit of land and labor are used to make bread (costing a total of $10), while 1 unit of land and 2 units of labor are used to make wine (costing a total of $12), then:
A)the price of labor is $2 and the price of land is $8.
B)the price of land is $2 and the price of labor is $8.
C)the price of each final good is $11.
D)labor will continue to move into wine production until the price of wine declines to $10.
E)no correct numerical answer is stated above.
Q2) At Q = 100 in Figure 7A-2, to be producing at least cost, the ratio of (marginal productivity of land)/(marginal productivity of labor)must be:
A)1.
B)1.5.
C)1.67.
D)2.
E)It cannot be determined from the information given.
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