Economics for Business Mock Exam
Course Introduction
Economics for Business offers students a foundational understanding of economic principles and how they directly apply to business decision-making. The course explores key concepts such as supply and demand, market structures, pricing strategies, cost analysis, and the influence of government policies on business environments. Students will learn to analyze real-world business problems using economic theory, equipping them with the skills to interpret economic data, forecast market trends, and make informed strategic decisions in various business contexts.
Recommended Textbook
Microeconomics 21st Edition by Campbell McConnell
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Chapter 1: Limits, Alternatives, and Choices
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Sample Questions
Q1) Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as
A) rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.
B) greedy because he is asking for a high wage that some of his neighbors can't afford to pay.
C) selfish because he is asking for a wage that is higher than others might charge.
D) irrational because some neighbors refused his offer.
Answer: A
Q2) The issues of inflation, unemployment, and business cycles are
A) major topics of macroeconomics.
B) not relevant to the U.S. economy.
C) the primary focus of microeconomics.
D) positive economic issues, but not normative issues.
Answer: A
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3
Chapter 2: The Market System and the Circular Flow
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Q1) Which of the following is not one of the five fundamental questions that an economy must deal with?
A) How will the goods and services be produced?
B) Why should the goods and services be produced?
C) Who is to receive the goods and services produced in the economy?
D) In what ways will progress be promoted?
Answer: B
Q2) In a command economy like the old Soviet Union, one is able to improve one's lot and get ahead in society largely through
A) entrepreneurship and risk-taking.
B) innovation and profits.
C) participating in the political hierarchy.
D) getting high prices for one's products and resources.
Answer: C
Q3) Which of the following does not foster innovation and technological advance?
A) competition in markets
B) freedom of choice and enterprise
C) self-interest and personal rewards
D) fear and avoidance of risk
Answer: D
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Chapter 3: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. If X is a normal good, an increase in income will
A) increase D, increase P, and increase Q.
B) increase D, increase P, and decrease Q.
C) increase S, increase P, and increase Q.
D) decrease D, increase P, and increase Q.
Answer: A
Q2) A higher price reduces the quantity demanded for a product because
A) the purchasing power of individuals increases.
B) the financial assets of individuals increase.
C) individuals will buy more of the product and less of its substitutes.
D) individuals can afford less of the product and will switch to substitutes.
Answer: D
Q3) An effective price ceiling will lower the equilibrium price and cause a surplus.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Market Failures: Public Goods and Externalities
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Sample Questions
Q1) Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called A) nonrivalry.
B) nonexcludability.
C) nontaxability.
D) nondiscrimination.
Q2) It has been proposed that a government agency be charged with the task of determining the amount of pollution that the atmosphere (or a body of water) can safely absorb, establish "rights" to this limited amount of pollution, and sell those limited amount of rights to firms. The firms can then buy and sell these rights among themselves later. This approach is known as the
A) taxes and subsidies system.
B) cap-and-trade system.
C) property rights system.
D) market and command system.
Q3) That government that has the smallest budget is the most efficient in the economic sense.
A)True
B)False
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Page 6
Chapter 5: Governments Role and Government Failure
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Q1) When fiscal and monetary policies become highly politicized, these policies tend to A) become more effective at stabilizing the economy.
B) lose any effect at all on the economy.
C) become destabilizing, instead of promoting stability.
D) lead to rising budget surpluses.
Q2) The term government failure refers to the A) large losses suffered by publicly owned water, gas, and electric companies.
B) large number of bankruptcies that have occurred recently among local governments. C) economically inefficient outcomes caused by voting problems or incentive structures in government.
D) inability of government agencies to provide adequate police protection in low-income neighborhoods.
Q3) Government's ability to force people to do things involuntarily is
A) unconstitutional in the United States and other market economies. B) always going to lead to lower economic efficiency.
C) beneficial if it is used to improve economic efficiency.
D) always beneficial in reducing the deadweight loss in the economy.
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Chapter 6: Elasticity
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Sample Questions
Q1) Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that
A) farm products are normal goods.
B) farm products are inferior goods.
C) the price elasticity of demand for farm products is less than 1.
D) the price elasticity of demand for farm products is greater than 1.
Q2) Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded
A) increased by 7 percent.
B) decreased by 7 percent.
C) decreased by 9 percent.
D) decreased by 1.75 percent.
Q3) If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be elastic.
A)True
B)False
Q4) An income elasticity coefficient of 1.8 means the product is a normal good.
A)True
B)False
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Chapter 7: Utility Maximization
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Sample Questions
Q1) Indifference curves and budget lines can be used to derive an individual's demand curve for a product.
A)True
B)False
Q2) Many people do not steal or commit fraud because to them, the resulting feelings of guilt and uneasiness make the
A) marginal utility of the act increase.
B) marginal utility of the act decrease.
C) marginal cost of the act increase.
D) marginal cost of the act decrease.
Q3) When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.
A)True
B)False
Q4) A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.
A)True
B)False
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Chapter 8: Behavioral Economics
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Sample Questions
Q1) When people often blame an "act of nature" or their colleagues for their plans going awry, they are illustrating the cognitive bias known as the overconfidence effect.
A)True
B)False
Q2) Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for the producer, may be explained by consumers' tendency to have the
A) anchoring effect.
B) mental accounting effect.
C) status quo bias.
D) confirmation bias.
Q3) Prospect theory in behavioral economics predicts that as the price of flour increases, bakeries will try to avoid turning off their buyers by
A) increasing the unit prices of their products.
B) reducing the unit sizes of their products.
C) producing more units of their products.
D) passively accepting lower profits.
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Page 10
Chapter 9: Businesses and the Costs of Production
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Sample Questions
Q1) At what point does marginal product equal average product?
A) where average product is equal to its minimum value
B) where average product is equal to its maximum value
C) where marginal product is equal to its minimum value
D) where marginal product is equal to its maximum value
Q2) The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's explicit costs are
A) $286,000.
B) $150,000.
C) $94,000.
D) $156,000.
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Page 11
Chapter 10: Pure Competition in the Short Run
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Q1) If the demand curve faced by an individual firm is downward-sloping, the firm cannot be
A) a monopoly firm.
B) a purely competitive firm.
C) an oligopolistic firm.
D) a monopolistically competitive firm.
Q2) A purely competitive firm does not try to sell more of its product by lowering its price below the market price because
A) its competitors would not permit it.
B) it can sell all it wants to at the market price.
C) this would be considered unethical price chiseling.
D) its demand curve is inelastic, so total revenue will decline.
Q3) In which of the following industry structures is the entry of new firms the most difficult?
A) pure monopoly
B) oligopoly
C) monopolistic competition
D) pure competition
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12
Chapter 11: Pure Competition in the Long Run
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Sample Questions
Q1) In long-run equilibrium under pure competition, all firms will produce at minimum
A) average total cost.
B) marginal cost.
C) total cost.
D) average variable cost.
Q2) When a competitive firm sees losses because the product price falls below the minimum average cost of production at its current plant, it may decide to expand if there are economies of scale.
A)True
B)False
Q3) Which is true of a purely competitive firm in long-run equilibrium?
A) Average fixed cost equals price.
B) Marginal cost equals marginal product.
C) Price equals marginal cost.
D) Average variable cost equals marginal cost.
Q4) The long-run supply curve for a competitive, decreasing-cost industry is downward-sloping.
A)True
B)False
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Chapter 12: Pure Monopoly
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Sample Questions
Q1) Extensive network effects may drive a market toward natural monopoly because consumers tend to choose a common, standard product that everyone else is using.
A)True
B)False
Q2) If a pure monopolist can price discriminate by separating buyers into two or more groups,
A) the marginal revenue curve and the total revenue curve will now coincide.
B) the marginal revenue curve will now shift to a position above the demand curve.
C) the firm will face multiple marginal revenue curves.
D) marginal revenue will become less at each level of output than it would be without price discrimination.
Q3) One feature of pure monopoly is that the demand curve
A) is vertical.
B) is horizontal.
C) slopes upward.
D) slopes downward.
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Chapter 13: Monopolistic Competition
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Sample Questions
Q1) (Consider This) Which of the following statements is most accurate about the difference between goods produced under the old central planning model of the Soviet Union versus those produced by American capitalism?
A) Soviet markets were purely competitive, while U.S. markets were more monopolistically competitive.
B) Soviet production employed mass production techniques, while American capitalism did not.
C) Soviet production put greater emphasis on efficiency, while American capitalism allowed for much more product differentiation.
D) Product differentiation in the Soviet Union was carefully integrated into the central plan, while differentiation in American capitalism occurs haphazardly and with little forethought.
Q2) A significant difference between a monopolistically competitive firm and a purely competitive firm is that the
A) former has fewer barriers to entry into the industry.
B) latter recognizes that price must be reduced to sell more output.
C) latterâ s demand curve is perfectly elastic.
D) latter differentiates its product.
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Chapter 14: Oligopoly and Strategic Behavior
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Sample Questions
Q1) Which of the following is not true of covert collusion?
A) It occurs when formal cartels are not legal.
B) It has been historically referred to as "gentlemen's agreements."
C) Numerous examples of it have been found in the United States.
D) No case of it has been proven in the United States.
Q2) The economic inefficiency in an oligopoly may be reduced by the following, except A) increased competition from foreign producers.
B) limit pricing due to potential entrants.
C) economic profits used to fund technological advance.
D) aggressive advertising by rivals.
Q3) Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?
A) Kellogg's
B) Pittsburgh Plate Glass
C) Ford Motor Company
D) Starbucks Coffee
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Chapter 15: Technology, Rd, and Efficiency
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Sample Questions
Q1) The traditional view of technological advance was that it A) was a random external force to which the economy adjusted. B) arose largely from advances in military-related research. C) was the result of capitalism and the rivalry among firms. D) arose from international trade and the sharing of ideas among nations.
Q2) Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending.
A)True
B)False
Q3) In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods. This would be an example of A) the fast-second strategy.
B) the inverted-U theory. C) creative destruction.
D) venture capital.
Q4) In business, the abbreviation "R&D" refers to recreation and discovery.
A)True
B)False
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Chapter 16: The Demand for Resources
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Q1) Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, the demand for labor
A) will increase.
B) will decrease.
C) may either increase or decrease.
D) will not change.
Q2) A firm is hiring resources X, Y, and Z in the profit-maximizing amounts when
A) \(\text { MRP }_{x} / P_{x} \text { equals } \mathrm{MR} \mathrm{P}_{y} / P_{y} \text { equals } \mathrm{MRP}_{z} / P_{z} \text { equals } 1 \text {. }\)
B) the sum of the MRPs of the three resources is at a minimum.
C) the marginal revenue productivity of all three resources is the same.
D) the marginal revenue product of the last dollar spent on each of the three resources is the same.
Q3) Increased resource productivity will, ceteris paribus, increase a firm's demand for an input.
A)True
B)False
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Chapter 17: Wage Determination
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Sample Questions
Q1) A market where there is only a single buyer is called a(n)
A) monopoly.
B) monopsony.
C) oligopoly.
D) dominant firm.
Q2) Commissions or royalties may be an inexpensive way of reducing shirking on a job when the costs of monitoring work performance are high.
A)True
B)False
Q3) Marginal revenue product (MRP) of labor refers to the
A) increase in total revenue resulting from selling an additional unit of output.
B) amount by which a firm's total resource cost increases when it employs one more unit of labor.
C) increase in total revenue resulting from hiring one more unit of labor.
D) price at which additional units of labor can be employed in a monopsonized labor market.
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Chapter 18: Rent, Interest, and Profit
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Q1) Economic rent refers to the price paid for land and other natural resources that A) are fixed in total supply.
B) vary directly with their market prices.
C) vary inversely with their market prices.
D) are available in nearly unlimited quantities.
Q2) A decrease in the supply of loanable funds would tend to lower the interest rate.
A)True
B)False
Q3) Henry George's single-tax movement was based on the argument that A) the tax structure should consist solely of a highly progressive tax on nonwage incomes.
B) interest is unearned income and should be taxed away by government.
C) in less-developed countries the supply of and demand for land will be such that land will be a free good and therefore capable of bearing sizable taxes.
D) a high tax on land rent is justified because land rent performs no incentive function.
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Chapter 19: Natural Resource and Energy Economics
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Sample Questions
Q1) In the United States and parts of Western Europe, the amount of land covered by forests is increasing.
A)True
B)False
Q2) Linda fishes for mahi mahi at a cost of $10 per ton, while Tessa fishes at a cost of $8 per ton. Both have one 1,000-ton ITQ, and the current market price is $13 per ton. If Linda offered to sell her ITQ to Tessa for $3,000, she and Tessa would
A) make the sale because they're both better off.
B) not make the sale, because Linda is better off and Tessa is not.
C) not make the sale, because Tessa is better of and Linda is not.
D) not make the sale, because neither is better off.
Q3) The primary focus of energy economics is how
A) energy consumption is increasing.
B) energy production is decreasing.
C) people deal with the scarcity of energy.
D) people conserve crude oil for future use.
Q4) The United States is in imminent danger of running out of energy.
A)True
B)False
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Chapter 20: Public Finance: Expenditures and Taxes
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Sample Questions
Q1) Suppose that a $0.75 tax is placed on gasoline. Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?
A) if supply is perfectly inelastic and demand is downward-sloping
B) if demand is perfectly inelastic and supply is upward-sloping
C) if supply is upward-sloping and demand is perfectly elastic
D) The consumer and the seller always share the burden of the tax.
Q2) In the U.S., the progressive income-tax system substantially redistributes income. A)True
B)False
Q3) The more inelastic are demand and supply, the
A) larger is the efficiency loss of an excise tax.
B) smaller is the efficiency loss of an excise tax.
C) higher is the proportion of an excise tax paid by consumers.
D) smaller is the proportion of an excise tax paid by producers.
Q4) "Tax Freedom Day" in the United States typically occurs in mid-July.
A)True
B)False
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22
Chapter 21: Antitrust Policy and Regulation
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Q1) Which of the following is not a true statement about how social regulation differs from industrial regulation?
A) Social regulation applies to many industries across the board, whereas industrial regulation is more specific to one industry.
B) Social regulation intrudes into the day-to-day production processes of companies more so than industrial regulation.
C) Social regulation is enforced by state and local governments, whereas industrial regulation tends to be the domain of the federal government.
D) Social regulation has expanded rapidly during the same period in which industrial regulation has waned.
Q2) Which one of the following is concerned with social regulation?
A) Equal Employment Opportunity Commission
B) Federal Communications Commission
C) Sherman Commission
D) Federal Energy Regulatory Commission
Q3) All price discrimination is deemed illegal in antitrust legislation.
A)True
B)False
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23
Chapter 22: Agriculture: Economics and Policy
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Q1) Farm policy in the United States over the past eight decades has been designed primarily to
A) shift resources from the farm sector to the nonfarm sector.
B) reduce monopoly in the farm sector.
C) enhance and stabilize farm prices and income.
D) produce a strategic reserve of food.
Q2) The Food, Conservation, and Energy Act of 2008 provided farm subsidies in the form of direct payments, countercyclical payments, and marketing loans to farmers.
A)True
B)False
Q3) Because the demand for agricultural products is price-inelastic, price support programs tend to
A) increase farm income.
B) decrease farm income.
C) have no effect upon farm income.
D) cause farm incomes to fluctuate more than they would without such programs.
Q4) About 10 percent of the U.S. labor force is in agriculture.
A)True
B)False
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Chapter 23: Income Inequality, Poverty, and Discrimination
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Q1) The following groups in the U.S. all had higher-than-the-national-average poverty rates in 2014, except
A) households headed by females.
B) foreign-born noncitizens.
C) persons 65 or older.
D) Hispanics.
Q2) The U.S. income-maintenance program consists of two kinds of programs. They are
A) the minimum wage law and Social Security.
B) antidiscrimination law and education and training programs.
C) social insurance and public assistance programs.
D) progressive income taxes and transfer payments.
Q3) Which of the following helps explain growing income inequality in the United States in recent years?
A) reduced immigration
B) increased demand for highly skilled workers
C) the falling labor force participation rate of women
D) increased power of unions
Q4) The U.S. poverty rate was considerably lower in 2014 than in 1960.
A)True
B)False
Page 25
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Chapter 24: Health Care
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Q1) Reasons for the rapid rise in demand for health care despite steeply rising prices include the following, except
A) people regarding health care as an entitlement or a right.
B) imperfect information among consumers of health care.
C) third-party insurance payments shielding consumers from the true cost of health care.
D) high income-elasticity of the demand for health care services.
Q2) An increase in the demand for health care would most likely result from A) healthier lifestyles.
B) an aging population.
C) less health insurance coverage.
D) increased productivity in health care.
Q3) If the provision of medical insurance encourages people to take more health risks because they know they can receive treatment, then health insurance
A) produces an asymmetric information problem.
B) leads to a universal access problem.
C) causes a defensive medicine problem.
D) creates a moral hazard problem.
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Chapter 25: Immigration
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Q1) Illegal immigrants overall contribute more in taxes than they receive in services from state and local governments.
A)True
B)False
Q2) Other things equal, younger workers are more likely to migrate than older workers.
A)True
B)False
Q3) Other things equal, the optimal number of immigrants will be greater, the
A) greater the education and skill level of immigrants.
B) lower the education and skill level of immigrants.
C) higher the unemployment rate of the destination nation.
D) greater the fiscal burden of each immigrant.
Q4) Which of the following is an explicit cost of migration?
A) wages a worker gives up when they leave their home country
B) adapting to a new culture
C) paying application fees
D) the stress of looking for a job in a new country
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Chapter 26: International Trade
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Q1) Excise taxes on imported goods that help shield domestic producers of the good are called
A) protective tariffs.
B) import quotas.
C) revenue tariffs.
D) voluntary export restrictions.
Q2) In comparing a tariff and an import quota, we find that
A) the tariff and quota both generate the same amount of revenue for the U.S. Treasury.
B) the tariff generates revenue for the U.S. Treasury, but the quota does not.
C) the quota generates revenue for the U.S. Treasury, but the tariff does not.
D) neither the tariff nor the quota generates revenue for the U.S. Treasury.
Q3) Which of the U.S. industries below has not seen major shutdowns and layoffs because of free foreign trade?
A) textiles
B) financial services
C) steel
D) apparel
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Chapter 27: The Balance of Payments, Exchange Rates, and Trade Deficits
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Q1) Which one of the following, other things equal, will directly alter the U.S. balance of trade?
A) an increase in the balance on capital account
B) a decrease in U.S. goods exports
C) an increase in net transfers
D) a decrease in U.S. purchases of assets abroad
Q2) In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003?
A) Japan exported much more to the United States during this period than it imported from the United States.
B) Japan greatly increased its purchases of military equipment from the United States during this period.
C) Japan's economy grew far faster than the U.S. economy during this period.
D) Japan's government devalued the yen during this period.
Q3) A current account deficit will reduce U.S. foreign indebtedness.
A)True
B)False
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Chapter 28: The Economics of Developing Countries
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Source URL: https://quizplus.com/quiz/59406
Sample Questions
Q1) One recommended policy that IACs could adopt to help DVCs is to recruit and hire skilled workers from DVCs for businesses in IACs.
A)True
B)False
Q2) One major path that leads to growth in both developing nations (DVCs) as well industrially advanced nations (IACs) is that productive resources must be
A) owned and managed by the public sector.
B) distributed more equitably across business sectors.
C) reallocated to export industries.
D) used more efficiently.
Q3) The poorest 20 percent of the world's population receive what percentage of world income?
A) less than 2 percent
B) about 4 percent
C) around 8 percent
D) close to 10 percent
Q4) One reason why foreign aid is viewed as harmful is that it promotes dependency.
A)True
B)False
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