Introduction to Economics Practice Exam
Course Introduction
Introduction to Economics offers a foundational exploration of the principles that govern how societies allocate scarce resources to meet unlimited wants. Students will gain insights into both microeconomics, which examines the behavior of individuals and firms in making decisions regarding goods and services, and macroeconomics, which studies the overall performance and structure of an economy. The course covers topics such as supply and demand, market equilibrium, the role of government, economic growth, inflation, and unemployment. Through real-world examples and analytical tools, students will develop a basic understanding of how economic theories are applied to address problems and inform policy decisions.
Recommended Textbook
Economics of Social Issues 20th Edition by Ansel Sharp
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15 Chapters
1882 Verified Questions
1882 Flashcards
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Chapter 1: Alleviating Human Misery: The Role of Economic Reasoning
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The bow shape of the production possibilities curve reflects
A) The opportunity cost concept
B) The concept of increasing opportunity costs
C) The concept of diminishing marginal returns
D) The marginal social cost/marginal social benefit principle
E) None of the above
Answer: B
Q2) Mary Ann's straight line PPC indicates that the opportunity cost of coconut cream pies is
A)Increasing
B)Decreasing
C)Constant
D)100
E)0
Answer: C
Q3) The fundamental economic problem is how to make money.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Economic Systems, Resource Allocation, and
Social Well-Being: Lessons From Chinas Transition
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) As consumer incomes rise,the demand curve for Good X shifts to the right.Given this,Good X must be
A)Produced by a competitive firm
B)A high quality product
C)A substitute good
D)A normal good
E)An inferior good
Answer: D
Q2) In a market economy,
A)Resources are allocated by the private parties who own the resources
B)Resources are allocated by the various local,state,and federal planning committees and zoning commissions
C)Shortages never exist
D)Surpluses never exist
E)Both c and d
Answer: A
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Chapter 3: Government Control of Prices in Mixed Systems:
Who Are the Winners and Losers
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Which of the following represents the demand curve for labor for a firm?
A)The MR curve
B)The MP curve
C)The MRP curve
D)The MC curve
E)None of the above
Answer: C
Q2) Which of the following is true of the minimum wage?
A)It has significantly reduced poverty in the United States
B)A worker earning the minimum wage will keep a family of three out of poverty
C)It results in a much more equal distribution of income in the United States
D)Unemployment rates are unaffected by the minimum wage
E)None of the above is true
Answer: E
Q3) Limited amounts of capital eventually lead to diminishing returns to labor.
A)True
B)False
Answer: True
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Chapter 4: Pollution Problems: Must We Foul Our Own Nests
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) The optimum level of pollution is zero.
A)True
B)False
Q2) Costs incurred by the producer to buy or hire resources are called
A)Implicit costs
B)Explicit costs
C)Opportunity costs
D)Total costs
E)Marginal costs
Q3) To date,there has been no formal use of pollution rights markets.
A)True
B)False
Q4) Complete elimination of pollution would only make economic sense if the cost to eliminate the last unit of pollution is less than the benefit from its elimination.
A)True
B)False
Q5) Implicit costs are opportunity costs.
A)True
B)False
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Chapter 5: Economics of Crime and Its Prevention: How
Much Is Too Much
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) The opportunity cost of jail time is what you could have done had you not been in jail.
A)True
B)False
Q2) Economics explains the decision to participate in criminal activities most often in the case of
A)Violent crimes
B)Crimes of passion
C)Murder
D)Trafficking in illegal substances
E)Vandalism
Q3) Which of the following is most likely a public good?
A)A college education
B)A smoke detector
C)Smallpox immunization
D)Elementary education
E)Space exploration
Q4) The ultimate economic goal of crime prevention is complete suppression of crimE. A)True
B)False
Page 7
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Chapter 6: The Economics of Education: Crisis and Reform
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) According to the Census Bureau,high school graduates can expect to earn how much during their working years?
A)$45,000
B)$1.2 m
C)$2.1 m
D)$2.5 m
E)$4.4 m
Q2) As the number of years of education increases,the spillover benefits will
A)Increase
B)Decrease
C)Stay the same
D)Become negative
E)None of the above
Q3) Without public schools,there would be no K-12 education.
A)True
B)False
Q4) MSB of education = MPB + positive externalities.
A)True
B)False
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Chapter 7: Poverty Problems and Discrimination: Why Are
so Many Still so Poor
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Sample Questions
Q1) According to recent studies,which of the following programs is most likely to pull the average poor family above the official poverty threshold?
A)Earned Income Tax Credit (EITC)
B)Temporary Assistance for Needy Families (TANF)
C)Supplemental Security Income
D)Aid to Families with Dependent Children (AFDC)
E)The Job Training Partnership Act (JTPA)
Q2) Skill levels vary among individuals because of
A)Differences in location
B)Differences in education and training
C)The industry the person works in
D)The capital labor ratio in the economy
E)All of the above
Q3) The incidence of poverty is highest among
A)Black families
B)Families headed by a female
C)Young families
D)White families
E)Small families
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Chapter 8: The Economics of Monopoly Power: Can Markets
Be Controlled
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Unlike in competition,the monopolist is driven by a desire to maximize profit.
A)True
B)False
Q2) If this industry changes from pure competition to monopoly,output changes from
A)X<sub>4</sub> to X<sub>1</sub>
B)X<sub>4</sub> to X<sub>2</sub>
C)X<sub>2</sub> to X<sub>4</sub>
D)X<sub>3</sub> to X<sub>2</sub>
E)X<sub>2</sub> to X<sub>3</sub>
Q3) Shortages are important evidence that firms are exercising monopoly power.
A)True
B)False
Q4) Ford Motors more closely resembles a monopoly than does your local electric company.
A)True
B)False
Q5) Licensing of M.D.'s has nothing to do with the fact that they are among the economy's highest paid professionals.
A)True
B)False
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Chapter 9: The Economics of Professional Sports: What Is the Real Score
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Tickets and broadcast rights to baseball games are bought and sold in the product market.
A)True
B)False
Q2) If a cartel discovers that its marginal cost is greater than marginal revenue,the cartel should
A)Increase production
B)Shut down
C)Reduce production
D)Hire fewer workers
E)Increase the number of cartel members
Q3) Over the past twenty years,free agency in professional sports has
A)Increased the monopsonistic power of leagues and caused salaries to stagnate
B)Reduced the bargaining power of players and raised owner profits
C)Reduced the monopsonistic power of leagues and caused salaries to rise
D)Improved the economic position of owners by increasing the competition for good players
E)Had little effect on the sports industry
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Chapter 10: Competition in the Global Market-Place: Should
We Protect Ourselves From International Trade
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Why is international trade important? International trade
A)Increases the variety and availability of consumer goods in an economy
B)Expands the production possibilities of a nation's economy
C)Increases an economy's GDP
D)Allows nations to specialize in the production of goods according to comparative advantage
E)Does all of the above
Q2) Which of the following statements about NAFTA is FALSE?
A)NAFTA is a free trade zone and not a customs union
B)Canada,Mexico,and the U.S.are the only three members of NAFTA
C)It is difficult to empirically measure the economic effects of NAFTA on the U.S.economy
D)In the long run,NAFTA will increase the number of low-paid jobs in the U.S
E)NAFTA is based on the belief that nations,in the aggregate,gain economically from free international trade
Q3) Trade between individuals in two different countries would not occur unless both parties believed that it made them better off.
A)True
B)False
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Chapter 11: Economic Growth:
Bumpy
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) The straight line on the graph represents
A)An economic expansion
B)An economic contraction
C)A business cycle
D)A long-run growth trend
E)A boom period
Q2) What was the first theory put forth by an economist to explain the phenomena of business cycles?
A)Inventory theory
B)Schumpeter's theory of innovation
C)Real business cycle theories
D)Theory of expectations
E)Jevons' sunspot theory
Q3) The last depression experienced by the U.S.economy occurred
A)During the 1970s
B)In 1982
C)During the 1930s
D)Between 1974-1975
E)In 1990
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Chapter 12: Money,Banking and the Financial System: Old
Problems With New Twists
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Sample Questions
Q1) Assets that are "marked to market" will be priced at
A)Their original purchase price
B)Their original purchase price less the depreciation of the asset
C)A price that is equal to the original purchase price plus the rate of inflation
D)A price that is based upon the asset's current market value
E)A price determined in the stock market
Q2) The key to the Federal Reserve's control over the money supply is its ability to create money by making loans.
A)True
B)False
Q3) If the reserve ratio is 10% and a new demand deposit of $10,000 is made,what is the maximum deposit creation possible?
A)$1,000
B)$9,000
C)$10,000
D)$90,000
E)$100,000
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Chapter 13: Unemployment and Inflation:
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Sample Questions
Q1) Which of the following statements concerning the circular flow is FALSE?
A)The circular flow of economic activity shows how the overall economy operates
B)The circular flow emphasizes the independence of economic variables
C)There are two circular flows involved in the economy
D)The circular flow shows that real income is determined by physical goods and services produced in the economy
E)None of the above
Q2) If inflation is not observable in the form of rising prices,it is called
A)Suppressed
B)Repressed
C)Deflation
D)Dynamic
E)None of the above
Q3) Inflation means that prices are too high.
A)True
B)False
Q4) Frictional unemployment is involuntary.
A)True
B)False
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Chapter 14: Government Spending,Taxation,and the
National Debt: Who Wins and Who Loses
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Since 2004,the highest personal income tax bracket has been
A)10%
B)15%
C)25%
D)28%
E)35%
Q2) Vertical equity implies that
A)People in different states should pay the same taxes
B)People with comparable incomes should pay the same taxes
C)People in different economic circumstances should pay different amounts
D)Taxes should rise as the size of your family increases
E)Taxes should be based upon how tall the taxpayer is
Q3) Government expenditures have grown faster than the GDP since 1958,representing about fifty percent of GDP today.
A)True
B)False
Q4) There are currently 14 tax brackets ranging from 11% to 50%.
A)True
B)False
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Chapter 15: Social Security and Medicare: How Secure Is Our
Safety Net for the Elderly
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124 Verified Questions
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Sample Questions
Q1) If medical care is provided free of charge,what quantity will be demanded?
A)0
B)2,000
C)2,800
D)4,000
E)An infinite amount
Q2) Empirical studies indicate that Social Security has
A)Increased the level of personal savings
B)Had a neutral effect on the level of personal savings
C)Reduced the level of personal savings
D)Increased the number of older workers
E)Raised the average age at which workers choose to retire
Q3) The largest social insurance program in the United States is
A)Temporary Assistance for Needy Families
B)Social Security
C)Medicaid
D)Federal Flood Insurance
E)Job Corps
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