Course Introduction
Survey of Economics Exam Practice
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Survey of Economics provides students with a comprehensive introduction to the fundamental principles of both microeconomics and macroeconomics. The course explores topics such as supply and demand, market structures, consumer behavior, production and costs, as well as national income, unemployment, inflation, fiscal and monetary policy, and international trade. Designed for students from a variety of disciplines, this course emphasizes the practical application of economic concepts to current events and everyday decision-making, equipping learners with critical thinking skills and a solid understanding of how economic forces shape societies and influence global events.
Recommended Textbook
Economics USA 8th Edition Edition by
Nariman Behravesh
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28 Chapters
1971 Verified Questions
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Page 2
Chapter 1: What is Economics
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Sample Questions
Q1) Answers to economic issues that depend on an individual's values or preferences are called ________ economics.
A) positive
B) passive
C) normative
D) mechanical
E) comparative
Answer: C
Q2) Economists generally classify economic resources into what three categories?
A) men, money, and machines
B) savings, spending, and investment
C) land, labor, and capital
D) physical, human, and technological
E) employed, unemployed, and free
Answer: C
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Page 3
Chapter 2: Markets and Prices
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Sample Questions
Q1) In the diagram,movement toward equilibrium would cause the
A) supply curve to shift to the right and the demand curve to shift to the left.
B) actual price to fall below $10 and the quantity supplied and demanded to fall.
C) actual price to remain the same but the supply to drift to the left as producers cut down on production.
D) actual price to rise above $10 and the quantity demanded to fall.
E) actual price to fall below $10, the quantity supplied to fall, and the quantity demanded to rise.
Answer: E
Q2) There is neither excess supply nor excess demand when A) actual price equals equilibrium price.
B) the quantity supplied plus the quantity demanded equals total output.
C) price equals quantity.
D) surpluses equal shortages.
E) the number of buyers equals the number of sellers.
Answer: A
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4
Chapter 3: The Business Firm: Organization,motivation,and
Optimal Input Decisions
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Q1) An important distinction between corporate and unincorporated businesses is that
A) corporations have unlimited life, while unincorporated businesses are limited to the life spans of their owners.
B) income earned by corporations is not subject to the double taxation of unincorporated businesses.
C) corporations are subject to reorganization when major stockholders withdraw.
D) corporations have more trouble raising large sums of money than unincorporated businesses.
E) corporations issue common stock, while unincorporated businesses issue preferred stock.
Answer: A
Q2) Costs are clearly minimized for a given level of output as long as the firm A) uses inputs that do not exhibit declining productivity.
B) pays the same price for all of its inputs.
C) is not able to increase output by substituting a dollar's worth of input A for a dollar's worth of input B, or vice versa.
D) can increase output without increasing its cost.
E) equates the marginal products of both inputs A and B.
Answer: C
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Chapter 4: Getting Behind the Demand and Supply Curves
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Q1) If burgers cost $1.75,fries cost $0.75,and shakes cost $1,a utility-maximizing teenager with $6 to spend on lunch will buy
A) 0 burgers, 0 fries, and 6 shakes.
B) 0 burgers, 4 fries, and 3 shakes.
C) 1 burger, 3 fries, and 2 shakes.
D) 2 burgers, 2 fries, and 1 shake.
E) 3 burgers, 1 fries, and 0 shakes.
Q2) From the schedule,it is possible to calculate
A) marginal cost.
B) average variable cost.
C) average fixed cost.
D) total variable cost.
E) profit.
Q3) In a market economy,consumer purchases depend on their A) costs and what they can charge.
B) production decisions.
C) income, tastes, and market prices.
D) expenses, supply, and levels of activity.
E) past outlook and state of technology.
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Page 6
Chapter 5: Market Demand and Price Elasticity
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Q1) The relatively small shift of the demand curve over the 40 years can be attributed to the fact that
A) the quantity of food demanded does not vary much with the price of food because food is a necessity.
B) consumption of food per capita faces natural limits and hence responds by only a small amount to changes in per capita income.
C) farmers have only limited control over their outputs.
D) there has been rapid technological change in agriculture.
E) poor climatological conditions led to decreasing harvests.
Q2) The expression "the farmer is a price taker,not a price maker," refers to the fact that A) the market demand curve for food is perfectly elastic.
B) demand for agricultural products has declined steadily throughout the twentieth century.
C) prices of farm goods are generally set by government.
D) in perfect competition, no one producer can control prices.
E) shifts in the demand and supply for farm products have little impact on farm prices.
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Chapter 6: Economic Efficiency,market Supply,and Perfect Competition
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Q1) If a perfectly competitive firm in the short run can sell its output at $2.50 per bushel and it has an average variable cost of $1.75 per bushel and a marginal cost of $0.85 per bushel,it should
A) expand output.
B) raise its price.
C) cut output to zero.
D) advertise.
E) do nothing at all; it is currently maximizing profits.
Q2) If demand for the product increases to Demand ,the market achieves its short-run equilibrium position where the
A) market price is 0A.
B) market price is 0B.
C) market price is 0C.
D) industry output rate is 0X.
E) industry output rate is 0Y.
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Page 8
Chapter 7: Monopoly and Its Regulation
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Q1) The monopolist can set a price well above the competitive supply and demand level by
A) advertising to expand the market.
B) pushing the supply curve as far to the right as it will go.
C) restricting output.
D) using technology to speed production.
E) setting price equal to average cost.
Q2) The profit of a monopolist facing a downward-sloping demand curve typically
A) rises steadily as the monopolist increases the price.
B) rises steadily as the monopolist reduces the price.
C) first rises as the monopolist reduces the price, then falls.
D) first falls as the monopolist reduces the price, then rises.
E) rises regardless of the direction of the price change.
Q3) If a firm's demand curve slopes downward,the firm's
A) marginal revenue will rise as price is cut.
B) marginal revenue will always be less than price.
C) total revenue will fall steadily as price is cut.
D) demand will be less than marginal revenue.
E) price will exceed total revenue.
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Page 9
Chapter 8: Monopolistic Competition,oligopoly,and Antitrust Policy
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Sample Questions
Q1) A process by which oligopolists coordinate their behavior without resorting to outright collusion is called price
A) discrimination.
B) escalation.
C) stabilization.
D) reform.
E) leadership.
Q2) U.S.antitrust laws and their enforcement
A) reflect the principle that free markets cannot remain competitive.
B) have led to government price setting in many industries.
C) attempt to maintain the status quo.
D) have led to the elimination of market concentration in the United States.
E) affect business judgment when courses of action are being considered.
Q3) A cartel is
A) a formal collusive arrangement among firms.
B) found most of the time in monopolistic competition.
C) usually exempt from antitrust laws in the United States.
D) easier to maintain as the number of firms involved increases.
E) unlikely to occur in international markets.
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Chapter 9: Pollution and the Environment
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Q1) In commenting on the problems of implementing the provisions of the Clean Air Act for Los Angeles,EPA director William Ruckelshaus noted that
A) Los Angeles really did not have a pollution problem and that implementing the act would be burdensome.
B) under provisions of the act, the EPA was not allowed to take the economic costs imposed by the act into consideration.
C) it would require taking only 10 percent of the cars in the region off the highway and that people were unwilling to make even this small sacrifice.
D) the Los Angeles pollution was created by activities taking place outside the region and thus not covered by the provisions of the law.
E) the Clean Air Act dealt only with industrial pollution and that the problem in Los Angeles was caused by automobiles.
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11
Chapter 10: The Supply and Demand for Labor
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Q1) The purpose of the Landrum-Griffin Act is to
A) outlaw the closed shop.
B) eliminate the checkoff system.
C) ban yellow dog contracts.
D) make it an unfair labor practice for employers to refuse to bargain collectively with unions representing a majority of their workers.
E) protect the rights of individual union members from abuse by union leaders.
Q2) Unions regularly encourage Congress to reduce both immigration and working hours because unions want to
A) shift the supply curve for labor to the left.
B)shift the demand curve for labor to the right.
C) promote the unemployment of nonunion members.
D) encourage the importation of consumer goods from abroad.
E) stimulate the introduction of labor-saving machinery.
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Chapter 11: Interest,rent,and Profit
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Sample Questions
Q1) If the permanent annual rate of return on an asset that costs $20,000 is 8 percent,then each year the owner of the asset will earn
A) $20,000.
B) $16,000.
C) $4,000.
D) $1,600.
E) $800.
Q2) In the 1990s,thousands of new companies were formed to take advantage of the A) pure rate of interest.
B) single-tax movement.
C) Internet.
D) investment tax credit program.
E) anti-usury laws.
Q3) The demand curve for loanable funds slopes downward to the right because A) there are more projects that are profitable at low than at high rates of interest.
B) firms borrow money only when interest rates are low.
C) an increase in the supply of loanable funds generally raises interest rates.
D) the lower the asset's rate of return, the higher the interest rate.
E) money is not as profitable when its price is high.
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Page 13
Chapter 12: Poverty,income Inequality,and Discrimination
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Q1) Which of the following is an INCORRECT statement about the Social Security program?
A) The Social Security tax is levied on wages up to an annual cap or maximum.
B) The Social Security tax is regressive.
C) The Social Security program is like an ordinary insurance program, in that the program's assets are sufficient to finance all the benefits promised.
D) Participation in the program is mandatory.
E) Monthly Social Security benefits depend on the number of years one has worked as well as one's average monthly earnings.
Q2) By the Social Security Administration's definition,the number of poor people in the United States in 2011 was around ________ million.
A) 2
B) 14
C) 46
D) 58
E) 75
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14
Chapter 13: Economic Growth
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Sample Questions
Q1) According to Malthus,if subsistence is 150 bushels of wheat per worker,the equilibrium labor force would be ________ million.
A) 0.5
B) 1.0
C) 1.5
D) 2.0
E) 2.5
Q2) According to economist Edward Denison,about one-half of the growth in the U.S.output for the period 1929 to 1969 was the result of
A) increases in population.
B) increases in government spending.
C) surpluses in the balance of payments.
D) increased capital investment.
E) increased output per unit of input.
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Chapter 14: Public Goods and the Role of the Government
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Sample Questions
Q1) If external diseconomies exist in an industry,the
A) market price is too high and should be reduced.
B) industry is producing a public good.
C) socially optimal output level is below the equilibrium output level.
D) industry is perfectly competitive.
E) industry demand curve should be increased and the industry should be subsidized.
Q2) If the supply curve is vertical and the demand curve slopes downward,the imposition of a sales tax will
A) shift entirely to the buyer.
B) fall more heavily on the buyer.
C) be equally shared by the buyer and seller.
D) fall more heavily on the seller.
E) shift entirely to the seller.
Q3) Which of the following is the best example of a public good?
A) a hamburger
B) an automobile
C) a parade
D) an upholstered chair
E) a model airplane kit
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Page 16
Chapter 15: National Income and Product
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Q1) If the ratio of the value of a set of goods expressed in current dollars to their value expressed in constant dollars is 1.54,prices on average must have risen by ________ percent.
A) 154
B) 100
C) 54
D) 46
E) 1.54
Q2) To deflate,one must
A) multiply the price ratio by 100.
B) divide the current dollar values by the price index.
C) subtract the constant dollar values from the current dollar values.
D) add the price index in the current year to the price index in the base year.
E) find the difference between the values of two different sets of goods in a given year.
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17
Chapter 16: Business Fluctuations and Unemployment
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Sample Questions
Q1) Which of the following best defines the difference between a recession and a depression?
A) The terms are synonymous; there is no difference at all.
B) A depression is the correct term for recession experienced on a worldwide scale.
C) A depression is a period of economic hardship, while a recession generally is not.
D) A depression is a long, very severe recession.
E) A depression means potential GDP is falling. In a recession, only the actual GDP is falling.
Q2) In the U.S.economy,each percentage point change in the unemployment rate is equivalent to ________ million people.
A) 8
B) 5.1
C) 3.2
D) 1.5
E) 0.5
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18
Chapter 17: The Determination of National Output and the Keynesian Multiplier
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Sample Questions
Q1) One minus the marginal propensity to consume equals
A) the average propensity to consume.
B) the multiplier.
C) the marginal propensity to save.
D) the expected rate of return.
E) disposable income.
Q2) The equilibrium value of GDP is ________ billion.
A) $1,740
B) $1,800
C) $1,860
D) $1,920
E) $1,980
Q3) The additional amount a family spends on consumption from an additional dollar of disposable income is called the
A) saving function.
B) marginal propensity to save.
C) multiplier.
D) marginal propensity to consume.
E) average propensity to consume.
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Chapter 18: Fiscal Policy and National Output
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Q1) When a prospering economy began to show signs of hitting a slump,President Eisenhower,despite diverse suggestions from all sides,held the tax rate stable and,in effect,did nothing.In hindsight,most economists of the 1990s agree that Eisenhower's strategy
A) led to a long period of economic stagnation during the 1950s.
B) was hopelessly naive; a tax increase would have been the right move.
C) would have been enhanced by increased government spending and more attention to balancing the budget.
D) represented a tragic return to the old, worn theories of classical economics.
E) was right given the effects of automatic stabilizers on the economy.
Q2) Using the spending and taxing powers of government to stabilize the economy is called fiscal
A) fitness.
B) policy.
C) federalism.
D) finance.
E) reserve.
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Chapter 19: Inflation
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Q1) Germany's decision after World War I to print more money rather than tax its citizens to pay reparations resulted in
A) runaway inflation that totally destroyed Germany's middle class.
B) severe creeping inflation that took several years to control.
C) decreased inflation.
D) a mild, temporary inflation that actually boosted economic production.
E) the value of the mark rising relative to the U.S. dollar.
Q2) The redistributive effects of high inflation rates tend to favor
A) the saver who keeps money in a cookie jar.
B) those who work under long-term contracts.
C) no one because the prices of goods and services rise.
D) pensioners and others who live on fixed incomes.
E) speculators in assets such as land, art, and bullion.
Q3) Runaway inflation
A) is less damaging to an economy than creeping inflation.
B) means that real income rises more rapidly than money income.
C) increases the value of money quickly and thoroughly.
D) results from rapidly escalating the amount of money being printed.
E) makes it less likely that people will engage in speculation.
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Page 21
Chapter 20: Money and the Banking System
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Q1) The liabilities of a commercial bank include
A) loans.
B) time and demand deposits.
C) net worth.
D) deposits at the Federal Reserve Bank.
E) shares of stock.
Q2) The multiple by which the commercial banking system can expand the money supply is equal to the reciprocal of the
A) marginal propensity to save.
B) discount rate.
C) rate of inflation.
D) rate of unemployment.
E) legal reserve ratio.
Q3) A bank participates in the creation of money when it
A) adds to its required reserves.
B) receives a deposit of currency.
C) raises its interest rates.
D) becomes a member of the Federal Reserve System.
E) lends its excess reserves.
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Page 22
Chapter 21: The Federal Reserve and Monetary Policy
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Q1) The Federal Reserve Bank's exercising control over the quantity of money and interest rates is called
A) fiscal policy.
B) commercial banking.
C) monetary policy.
D) functional finance.
E) incomes policy.
Q2) Increasing bank reserves would be an appropriate measure
A) during a recession.
B) to balance the government budget.
C) to contain strong inflationary pressures.
D) to promote an increased level of business borrowing.
E) to increase the M1 money supply.
Q3) The power to decide on the amount of government securities the Fed should buy or sell at any given time rests with the
A) Federal Open Market Committee.
B) president of the United States.
C) chairperson of the Federal Reserve Board.
D) secretary of the Treasury.
E) Council of Economic Advisers.
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Chapter 22: Supply Shocks and Inflation
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Q1) Wage and price controls and incomes policies are
A) techniques used to increase aggregate demand without increasing aggregate supply.
B) methods used by government to try to reduce inflation without increasing unemployment.
C) examples of discretionary monetary policies.
D) currently in effect in the U.S. economy.
E) key elements of President Roosevelt's New Deal.
Q2) Labor's ability to increase nominal wage rates
A) decreases as labor's power and influence increase.
B) increases as government policy focuses on maintaining stable prices.
C) is unaffected by the amount of idle productive capacity.
D) is greatest when the government attempts to reduce the unemployment rate below the natural rate.
E) is greatest when there is perfect competition in labor markets.
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24
Chapter 23: Productivity,growth,and Technology Policy
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Q1) Which of the following government policies discourages technological innovation?
A) research and development tax credits
B) expansion of relevant work in government laboratories
C) grants and contracts from government agencies to support civilian technology
D) measures to reduce after-tax costs of plant and equipment
E) encouragement of higher rates of inflation to promote rising profits
Q2) In a 1999 study,Professor Robert Gordon showed that the gains in productivity during the 1990s
A) were nonexistent when adjusted for changes in the unemployment rate.
B) occurred primarily in the traditional manufacturing sector.
C) were due entirely to gains in the high-tech sector.
D) were in line with the earlier results of a Federal Reserve Bank study.
E) matched the performance of the economy during the 1970s and 1980s.
Q3) As compared to earlier years,the rate of growth of labor productivity in the United States from the 1970s through the mid-1990s
A) increased dramatically.
B) increased slightly.
C) slowed considerably.
D) increased in the 1970s and declined in the late 1980s.
E) remained constant.
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Chapter 24: Surpluses,deficits,public Debt,and the Federal Budget
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Q1) Balancing the government's budget over the course of each business cycle
A) results in a stable economy at all times.
B) does not take into account the fact that the size of the deficits needed to reduce unemployment may not equal the size of the surpluses needed to moderate subsequent inflation.
C) guarantees a steady decrease in the national debt.
D) is a policy biased in favor of reducing unemployment at the cost of allowing persistent inflation.
E) is called functional finance.
Q2) According to the textbook discussion,the principal way in which one generation can impose a debt burden on succeeding generations is by
A) using up some of the nation's productive capacity.
B) engaging in war.
C) failing to balance the budget.
D) maintaining stable price levels.
E) failing to pay off the national debt.
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Chapter 25: Monetary Policy,interest Rates,and Economic Activity
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Q1) The money supply exerts an influence on GDP and thus on unemployment by affecting
A) the volume of government tax revenues.
B) total intended spending.
C) the rate of change in labor force participation.
D) the profitability of banking institutions.
E) the mix between currency and demand deposits.
Q2) Which of the following best describes the equation of exchange?
A) GDP = PQ
B) MV = PQ
C) MQ = GDP
D) MP = VQ
E) GDP = V/Q
Q3) The crude quantity theory is a useful predictor of long-term trends in A) government spending.
B) taxes.
C) price levels.
D) unemployment.
E) business expectations.
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Chapter 26: Controversies Over Stabilization Policy
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Q1) An unfavorable supply shock
A)shifts aggregate demand to the right.
B) shifts aggregate supply to the right.
C) shifts aggregate demand to the left.
D) shifts aggregate supply to the left.
E) has no effect on either aggregate supply or aggregate demand, only on the quantities supplied and demanded.
Q2) The new classical macroeconomists stress that output fluctuations and unemployment
A) result from random errors and cannot be minimized by government stabilization policies.
B) require rational government actions to reduce the gap between actual and potential output.
C) will disappear if most large industries are nationalized.
D) are absent in a free market capitalist economy.
E) can be minimized if all sectors of the economy rationally expect high rates of inflation.
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28
Chapter 27: International Trade
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Q1) If a country is absolutely more efficient than any other country in producing everything,then it would
A) simply export goods and services and import money.
B) not trade with others because there would be no benefit in doing so.
C) still benefit that nation to specialize and trade those goods in which it possesses a comparative advantage.
D) make it unnecessary for other nations to produce anything for themselves.
E) represent a refutation of the concept of comparative advantage.
Q2) Cash rebates,tax exemptions,preferential financing,and insurance arrangements are all examples of
A) prohibitive tariffs.
B) voluntary quotas.
C) export subsidies.
D) terms of trade.
E) bilateral accommodations.
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29
Chapter 28: Exchange Rates and the Balance of Payments
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Q1) According to economist Richard Gill,the gold standard
A) would never lead to a balance between imports and exports under normal conditions.
B) was doomed to failure because there was not enough gold in the world.
C) in effect gave the world a single common currency.
D) may be appropriate for a single country but was too complex for use in a world of many different currencies.
E) leads inevitably to international inflation.
Q2) In the long run,under a system of flexible exchange rates
A) countries' gold revenues will be proportional to their trade balances.
B) the exchange rate between any two currencies will reflect price level differences between the two countries.
C) currency markets will no longer play an important role in international trade.
D) most countries will have balance-of-trade surpluses.
E) the foreign currency reserves of all countries will approach zero.
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