Economics for Business Final Exam
Course Introduction
Economics for Business explores the fundamental economic concepts and analytical tools essential for effective decision-making in a business context. The course examines both microeconomic and macroeconomic principles, including supply and demand, market structures, production and cost analysis, competition, government intervention, and the impact of economic cycles on business strategy. Through real-world case studies and practical examples, students learn to apply economic reasoning to solve business problems, assess market opportunities, and evaluate the potential impact of economic policies on their organizations. The course is designed to equip future managers and entrepreneurs with the economic insight necessary to succeed in a dynamic global marketplace.
Recommended Textbook
Principles of microeconomics v 3.0 by Rittenberg
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Page 2
Chapter 1: Economics: The Study of Choice
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Sample Questions
Q1) Macroeconomics deals with:
A) bits and pieces of the economy.
B) the question of how a business unit should operate profitably.
C) the analysis of the aggregate values in the economy.
D) ceteris paribus.
Answer: C
Q2) Individuals will usually make choices to minimize the value of some objective.
A)True
B)False
Answer: False
Q3) A hypothesis that has been tested extensively without being rejected and has won widespread acceptance is a:
A) model.
B) constant.
C) variable.
D) theory.
Answer: D
Q4) Distinguish between microeconomics and macroeconomics. Answer: not answered
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Chapter 2: Confronting Scarcity: Choices in Production
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Sample Questions
Q1) The textbook classifies technology as _______ and entrepreneurs as _______ .
A) knowledge; persons who seek profit by finding new ways to organize factors of production
B) capital; labor
C) labor skills; capital
D) a factor of production; a factor of production
Answer: A
Q2) (Exhibit: Sugar and Freight Trains) Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be:
A) 19 tons of sugar.
B) 45 tons of sugar.
C) 80 tons of sugar.
D) 3 freight trains.
Answer: C
Q3) A production possibilities curve measures opportunity cost in dollar terms.
A)True
B)False
Answer: False
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4
Chapter 3: Demand and Supply
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Sample Questions
Q1) (Exhibit: Shifts in Demand and Supply) Assume that the market in Panel (a) is in equilibrium at point M.Compared to the initial equilibrium at point N, what changes could explain what happened in this market?
A) supply decreased
B) demand decreased
C) both demand and supply decreased
D) both demand and supply increased
Answer: B
Q2) If two goods are complements, a fall in the price of one will lead to an increase in demand for the other.
A)True
B)False
Answer: True
Q3) Demand and supply are terms that refer to the behavior of people and firms as they interact in markets.
A)True
B)False
Answer: True
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Chapter 4: Applications of Supply and Demand
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Sample Questions
Q1) Those things held unchanged when an equilibrium price is established:
A) are called demand and supply shifters if a change in one (or more) of them would change demand or supply.
B) include only supply shifters.
C) seldom change, and therefore prices and quantity in most markets are remarkably stable.
D) never change, by definition.
Q2) An important reason for the rapid increase in output in the computer industry after 1980 was:
A) the invention of the microchip.
B) a reduction in the size and cost of computers.
C) a great increase in the number of computer producers.
D) all of the above.
Q3) (Exhibit: Rent Controls) Without rent controls, the equilibrium rent is _______ and the equilibrium quantity is _______ .
A) Rent ; Q
B) Rent ; Q
C) Rent ; Q
D) Rent ; Q
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Page 6
Chapter 5: Elasticity: a Measure of Response
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Q1) If the demand for golf is price elastic and your local public golf course increases the greens fees for using the course, you would expect:
A) a decrease in total revenue received by the course.
B) an increase in total revenue received by the course.
C) no change in total revenue received by the course.
D) an increase in the amount of golf played on the course.
Q2) (Exhibit: Demand and Price Elasticity 2) From the graph it can be seen that, along a given segment of the demand curve, if price falls and total revenue _________, then demand is price elastic.
A) increases
B) decreases
C) stays the same
D) decreases at first and then increases
Q3) (Exhibit: The Demand for Bungalow Bob's Bagels) Demand is price inelastic between:
A) $0.40 and $0.50.
B) $0.50 and $0.60.
C) $0.60 and $0.70.
D) $0.70 and $0.80.
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Chapter 6: Markets, Maximizers, and Efficiency
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Sample Questions
Q1) Whenever a species is threatened with extinction, it is likely that:
A) clearly defined property rights exist.
B) no one has exclusive property rights to it.
C) greedy folks are winning again.
D) it is the result of too much government regulation.
Q2) (Exhibit: The Demand for Golf Balls) Assume that 3 dozen golf balls are purchased for $14 per dozen.Consumer surplus is:
A) $1.
B) $4.
C) $9.
D) $16.
Q3) The market failure of external cost is most likely to result if Peanuts 'R' Us:
A) keeps secret a discovery that excessive consumption of peanut butter causes nearsightedness.
B) discards broken peanut shells onto an adjacent recreational area in its production of peanut butter.
C) is subject to performance standard regulations by the PBRC (Peanut Butter Regulatory Commission).
D) develops a new peanut butter processing machine that enhances competition.
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Page 8
Chapter 7: The Analysis of Consumer Choice
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Q1) (Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point K.Given budget constraint FL, utility can:
A) be increased by consuming more of good A and less of good B.
B) be increased by consuming less of good A and more of good B.
C) be increased by consuming more of both goods.
D) not be increased.
Q2) If the price of a good falls, the consumer will increase the quantity demanded. A)True
B)False
Q3) The quantity demanded of handheld calculators, a normal good, will _______ with a price _______ .
A) increase; increase B) decrease; decrease C) decrease; increase D) increase; change
Q4) The substitution effect indicates that the implicit change in income contributes to the inverse relationship between price and quantity demanded.
A)True B)False
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Chapter 8: Production and Cost
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Sample Questions
Q1) A university that benefits from lower costs per unit as it grows is an example of:
A) economies of scale.
B) diseconomies of scale.
C) increasing opportunity costs.
D) scale reduction.
Q2) If a firm produces 10 units of output and incurs $35 in average total cost and $5 in average fixed cost, average variable cost is:
A) $30.
B) $35.
C) $50.
D) $300.
Q3) When diseconomies of scale outweigh economies of scale, the:
A) long-run average cost curve rises.
B) marginal cost curve declines.
C) average total cost curve declines.
D) average variable cost curve declines.
Q4) In the long run all costs are variable.
A)True
B)False
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Chapter 9: Competitive Markets for Goods and Services
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Sample Questions
Q1) A firm's total revenue in perfect competition is:
A) found by multiplying its output by the price at which it sells that output.
B) a linear, horizontal line.
C) a linear, downward-sloping line.
D) perfectly elastic.
Q2) The primary application of the model of perfect competition is to predict how firms will respond to changes in demand and production costs.
A)True
B)False
Q3) An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):
A) permanent increase in price.
B) economic loss for firms.
C) increase in the quantity supplied in the short run and an increase in market supply in the long run.
D) decrease in firms' marginal revenue.
Q4) The shutdown point is where MC = minimum AVC.
A)True
B)False
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Chapter 10: Monopoly
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Sample Questions
Q1) (Exhibit: Monopoly Model) The profit-maximizing price is the one indicated by the distance:
A) WZ.
B) JD.
C) KE.
D) LF.
Q2) Marginal cost must be less than price at a monopolist's profit-maximizing output.
A)True
B)False
Q3) Monopoly is not only inefficient, but it also tends to create equity problems.
A)True
B)False
Q4) A firm that faces a downward-sloping demand curve:
A) is a perfectly competitive firm.
B) is a price taker.
C) has some monopoly power.
D) cannot sell more at lower prices.
Q5) Why would a monopoly firm never produce in the inelastic portion of its demand curve?
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Chapter 11: The World of Imperfect Competition
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Sample Questions
Q1) If a firm wants to discriminate in regard to prices, it must be a price setter.
A)True
B)False
Q2) (Exhibit: Monopoly Through Collusion) The exhibit illustrates the situation in an industry that consists of two firms facing identical demand curves; the demand curve for each firm is D .Which of the following assumptions is part of the analysis illustrated by the model?
A) The two firms sell differentiated products.
B) The ATC curve of each firm lies exactly twice as high as the MC curve.
C) If the two firms collude in order to maximize their combined economic profits, each firm will operate as if its demand curve is given by D .
D) Both firms have the same marginal revenue curve.
Q3) An industry with two firms is called a duopoly.
A)True
B)False
Q4) Price discrimination is seldom done by the airlines.
A)True
B)False
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Page 13
Chapter 12: Wages and Employment in Perfect Competition
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Q1) If a firm is using a factor of production from a perfectly competitive market such that MFC < MRP, then profit:
A) is maximized.
B) can be increased by using less of the factor.
C) can be increased by using more of the factor.
D) can be increased by increasing the factor price.
Q2) (Exhibit: Wage Determination in Perfect Competition) An increase in the marginal product of labor will result in:
A) an increase in the market supply of labor.
B) an increase in the demand for labor.
C) a decrease in the MRP of labor.
D) a lower wage for labor.
Q3) The condition for hiring factors of production- that is, where MFC = MRP- is analogous to the profit-maximizing output condition:
A) TR = TC.
B) MR = MC.
C) AR = ATC.
D) P = MR.
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Chapter 13: Interest Rates and the Markets for Capital and Natural Resources
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Sample Questions
Q1) Dissaving is negative saving.
A)True
B)False
Q2) The owner of an exhaustible resource should ________ current extraction rate if the expected price increase of the resource is ________ the interest rate.
A) increase; equal to B) increase; greater than C) decrease; less than D) decrease; greater than
Q3) A promise to pay back a certain amount of money at a certain time is:
A) a bond.
B) future value.
C) face value.
D) a maturity date.
Q4) The present value of future payments depends on:
A) the size of the payment.
B) the length of the time period.
C) the interest rate.
D) all of the above.
Page 15
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Chapter 14: Imperfectly Competitive Markets for Factors of Production
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Sample Questions
Q1) Monopsonistic input markets and monopolistic output markets are similar in that both generate:
A) market prices that are not equal to opportunity costs.
B) market prices that are greater than opportunity costs.
C) market prices that are less than opportunity costs.
D) an overproduction of output.
Q2) A market in which there is a single buyer of a good, service, or factor of production is a(n):
A) duopoly.
B) oligopoly.
C) monopoly.
D) monopsony.
Q3) Collective bargaining is the basic process by which unions and management negotiate the conditions of employment.
A)True
B)False
Q4) A monopsony is a market with one seller and many buyers.
A)True
B)False
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Q5) Define and explain the difference between monopoly power and monopsony power.
Chapter 15: Public Finance and Public Choice
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Sample Questions
Q1) Firms that supply a good in an imperfectly competitive private market will produce more of a good than is efficient.
A)True
B)False
Q2) If the purpose of taxation is to raise revenue, would it be better for the government to levy taxes on products whose demand is elastic or inelastic? Explain.Are there any other reasons why governments levy taxes? Explain.
Q3) The property tax is a tax judged only according to the ability-to-pay principle.
A)True
B)False
Q4) The primary source of government revenue is:
A) printing money.
B) borrowing and the resulting deficits.
C) taxes.
D) user fees.
Q5) Tax incidence analysis seeks to determine who sends in the tax payment.
A)True
B)False
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Chapter 16: Antitrust Policy and Business Regulation
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Sample Questions
Q1) The International Monetary Fund was created in 1995 to supervise world trade.
A)True
B)False
Q2) The attempt of regulatory agencies to find market solutions that are economically efficient is explained by:
A) theories of public finance.
B) imperfectly competitive models.
C) the public choice theory of regulation.
D) the public interest theory of regulation.
Q3) In the Brown Shoe case, which involved a merger, the Supreme Court:
A) allowed the merger, even though it felt the resulting firm would be able to undersell its competitors.
B) allowed the merger, because lower shoe prices would have benefited consumers.
C) chose to protect competition and blocked the merger.
D) refused to hear the case and threw it out without issuing any judgment in the matter.
Q4) A merger which combines two or more producers of the same good is called a vertical merger.
A)True
B)False
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Chapter 17: International Trade
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Sample Questions
Q1) In the importing country, the most likely effects of tariffs and/or import quotas is to _______ prices and ________ consumption of the protected goods.
A) raise; reduce
B) raise; raise C) raise; not affect D) reduce; reduce
Q2) (Exhibit: Production Possibilities Curve) If an economy is operating on its production possibilities curve, the law of increasing opportunity costs predicts that:
A) as more tractors are produced, fewer and fewer drill presses must be given up.
B) as more tractors are produced, more and more drill presses must be given up.
C) as more tractors are produced, the same amount of drill presses must be given up.
D) as more drill presses are produced, fewer and fewer tractors must be given up.
Q3) A protectionist policy generally enhances free trade.
A)True
B)False
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Chapter 18: The Economics of the Environment
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Sample Questions
Q1) If the marginal benefit received from pollution is less than its marginal cost, then:
A) society's well-being can be improved if the quantity of pollution increases.
B) society's well-being can be improved if the quantity of pollution decreases.
C) society's well-being cannot be improved by changing the quantity of pollution.
D) the market is producing too little pollution.
Q2) Marketable pollution permits are a(n):
A) tax system for internalizing pollution costs to the market.
B) subsidy system for charging consumers for the use of common property resources.
C) system of voluntary negotiations between polluters and damaged parties.
D) organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period.
Q3) (Exhibit: Efficiency and Pollution) If this market produced _______ units, then _______.
A) 40; MB = MC
B) 30; MB < MC
C) 40; MB < MC
D) 30; MC < MB
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Page 20
Chapter 19: Inequality, Poverty, and Discrimination
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Q1) Over the last two decades, the share of income going to the rich has declined in the United States.
A)True
B)False
Q2) (Exhibit: Income Distribution) Curve B:
A) is called a Lorenz curve.
B) shows that the lowest 20% of the families gets 60% of the income.
C) shows that 60 percent of the families get 40 percent of the income.
D) shows an equal distribution of income.
Q3) A money payment that a recipient may spend as he or she wishes is:
A) the income effect.
B) the wealth effect.
C) noncash assistance.
D) cash assistance.
Q4) (Exhibit: Income Distribution) Curve _______ indicates that the lowest ________ percent of families would receive _______ of the income.
A) B; 40; 40
B) A; 60; 20
C) A; 40; 40
D) B; 80; 80
Page 21
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