Survey of Economics
Final Exam Questions
Course Introduction
Survey of Economics provides an introduction to the fundamental principles of both microeconomics and macroeconomics. The course explores key topics such as supply and demand, market equilibrium, the role of government in the economy, consumer behavior, production and costs, as well as national income, inflation, unemployment, and fiscal and monetary policies. Students gain an understanding of how economic systems function, how economic decisions are made by individuals and firms, and the impact of economic policies on society. This course is designed for students from a variety of disciplines who seek a broad overview of economic concepts and their applications to real-world issues.
Recommended Textbook Essentials of Economics 4th Edition by R. Glenn Hubbard
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Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) The additional cost to a producer of hiring an additional unit of labour is called the marginal cost.
A)True
B)False
Answer: True
Q2) What does making 'how much' decisions involve?
A) Calculating the total benefits of the activity and determining if you are satisfied with that amount
B) Calculating the total costs of the activity and determining if you can afford to incur that expenditure
C) Calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity
D) Determining the additional benefits and the additional costs of that activity
Answer: D
Q3) The term 'market' refers to trading arrangements by which buyers and sellers come together.
A)True
B)False
Answer: True
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Chapter 2: Choices and Trade-Offs in the Market
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Sample Questions
Q1) What is true about the slope of a production possibility frontier?
A) It has no economic relevance or meaning.
B) It is always constant.
C) It is always varying.
D) It measures the opportunity cost of producing one more unit of a good.
Answer: D
Q2) Refer to Figure 2.3.A movement from ________ could occur because of an influx of immigrant labour.
A) W to V
B) X to W
C) W to Z
D) Y to W
Answer: C
Q3) Refer to Table 2.8.What is Scotland's opportunity cost of producing one guitar?
A) 0.25 motorcycle
B) 4 motorcycles
C) 12 motorcycles
D) 16 motorcycles
Answer: A
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) Danielle Ocean pays for monthly pool maintenance for her home swimming pool.Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals.How is the market for pool maintenance services affected by this?
A) There is an increase in the supply of pool maintenance services.
B) There is a decrease in the demand for pool maintenance services.
C) There is a decrease in the quantity of pool maintenance services supplied.
D) There is a decrease in the supply of pool maintenance services.
Answer: D
Q2) Which of the following is a common mistake consumers commit when they make decisions?
A) They take into account non-monetary opportunity costs but ignore monetary costs.
B) They are overly pessimistic about their future behaviour.
C) They fail to ignore sunk costs.
D) They sometimes value fairness too much.
Answer: C
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Chapter 4: Elasticity: The Responsiveness of Demand and Supply
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Sample Questions
Q1) Consider the following pairs of items:
A.shampoo and conditioner
B.iPhones and earbuds
C.a laptop computer and a desktop computer
D.beef and pork
E.air travel and weed killer
Which of the pairs listed will have a positive cross-price elasticity?
A) a and b only
B) c and d only
C) e only
D) a, b, and c only
Q2) Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5,use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.
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Chapter 5: Economic Efficiency,government Price Setting and Taxes
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Sample Questions
Q1) Refer to Figure 5.1.If the market price is $1.50,what is Arnold's consumer surplus?
A) $1.50
B) $2.25
C) $3.00
D) $4.75
Q2) Refer to Table 5.4.If a minimum wage of $11.50 an hour is mandated,the quantity of labour supplied is ________.
A) 40 000
B) 570 000
C) 610 000
D) 1 180 000
Q3) Suppose the demand curve for a product is vertical and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,_________.
A) sellers bear the entire burden of the tax
B) buyers bear the entire burden of the tax
C) the tax burden will be shared equally between buyers and sellers
D) buyers share the burden of the tax with the government
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Page 7
Chapter 6: Technology,production and Costs
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Sample Questions
Q1) Refer to Table 6.7.The marginal cost per unit of production when the firm produces 100 lanterns is _________.
A) $420
B) $32
C) $11.1
D) $8.1
Q2) Refer to Figure 6.3.Which of the following statements correctly describes the curves in the figure?
A) The marginal product of labour curve is represented by curve A and the average product of labour curve is represented by curve B.
B) The marginal product of labour curve is represented by curve B and the average product of labour curve is represented by curve A.
C) Curve A could represent either the average product curve or the marginal product curve. Curve B represents the total product curve.
D) Curve B could represent either the average product curve or the marginal product curve. Curve A represents the total product curve.
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Chapter 7: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) The supply curve of a perfectly competitive firm in the short run is
A) the firm's average variable cost curve.
B) the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve.
C) the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve.
D) the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.
Q2) How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?
Q3) Refer to Figure 7.8.What is total cost at the profit-maximising output level?
A) $4800
B) $3300
C) $2500
D) $1800
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Page 9
Chapter 8: Monopoly Markets
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Sample Questions
Q1) Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change:
A) Price will be higher, output will be lower and the deadweight loss will be eliminated.
B) Consumer surplus will be smaller, producer surplus will be greater and there will be a reduction in economic efficiency.
C) Price will be higher, consumer surplus will be greater and output will be greater.
D) Consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus.
Q2) A monopolist's profit-maximising price and output correspond to the point on a graph
A) where average total cost is minimised.
B) where total costs are the smallest relative to price.
C) where marginal revenue equals marginal cost.
D) where price is as high as possible.
Q3) Unlike a perfect competitor,a monopolist faces the market demand curve.
A)True
B)False
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Chapter 9: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Occupational licensing is an example of an entry barrier that improves a country's standard of living.
A)True B)False
Q2) If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.
A)True B)False
Q3) The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm ______.
A) expands its marketing budget
B) adopts new technologies that enable it to lower its cost of production
C) expands its product offerings to appeal to a wider range of consumers
D) reduces its price to expand its market
Q4) When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.
A)True B)False
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Chapter 10: The Markets for Labour and Other Factors of Production
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Sample Questions
Q1) Wage differences among workers of different races and gender could be due to all of the following except
A) differences in preferences for jobs.
B) differences in work experience.
C) differences in education.
D) labour unions.
Q2) What is the firm's gain in profit from hiring another worker?
A) The marginal revenue product of the extra worker
B) The difference between marginal revenue product and the wage of the worker
C) The extra output of the extra worker
D) The reduction in costs from hiring another worker
Q3) A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labour.
A)True
B)False
Q4) What is personnel economics?
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Chapter 11: Government Intervention in the Market
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Sample Questions
Q1) If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems,the insurance company is trying to reduce
A) the problem of adverse selection.
B) the moral hazard problem.
C) sunk costs.
D) asymmetric information.
Q2) How does a public good differ from a quasi-public good? In your answer give an example of each type of good.
Q3) The 'tragedy of the commons' refers to the phenomenon where A) individuals are free riders.
B) people overuse a common resource.
C) people do not internalise an externality.
D) there is rivalry in consumption.
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Chapter 12: Social Policy and Inequality
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Sample Questions
Q1) The 'ability-to-pay' principle of taxation is the normative idea that A) an equitable tax system is one in which high-income individuals should bear a greater burden of taxes than low-income individuals.
B) each individual should voluntarily contribute according to her ability to pay taxes. C) progressive taxes are more equitable than regressive taxes.
D) two individuals earning the same income should have equal ability to pay, all else constant.
Q2) Refer to Figure 12.6.If area X = 2060,area Y = 240,and area Z= 2700,calculate the Gini coefficient for Syldavia.
A) 0.05
B) 0.12
C) 0.46
D) 0.85
Q3) When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.
A)True
B)False
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Chapter 13: Gdp: Measuring Total Production, income and Economic Growth
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Sample Questions
Q1) Which of the following is true about 'new growth theory'?
A) It states that the rate of technological change is determined outside the working of the market system.
B) It does not adequately explain the factors that determine productivity.
C) It states that the rate of technological change is unaffected by economic incentives.
D) It states that the rate of technological change is caused by economic incentives.
Q2) Which of the following transactions would take place in the 'underground economy'?
A) Elizabeth tells her mother she's going to work but really goes to see a movie.
B) Paul buys 15 litres of petrol for $1.45 per litre, not realising that 40 cents per litre of that price goes to the government as tax revenue.
C) John makes chain-link belts and necklaces and sells them at a local market for cash to avoid paying taxes.
D) Matt bought an iPhone for $400 but decided to sell it on eBay instead of keeping it.
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Chapter 14: Unemployment and Inflation
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Sample Questions
Q1) Suppose you obtain a fixed interest rate mortgage during a period of relatively high inflation.During the next 10 years,inflation falls.Are you a winner or a loser due to inflation? Explain why.
Q2) The 'inflation rate' is measured as the
A) percentage change in the relevant price index from one time period to another. B) change in the price level between two time periods, multiplied by 100.
C) percentage change in prices in time period 1 minus the percentage change in prices in time period 2, multiplied by 100.
D) price index in time period 2 minus the price index in time period 1.
Q3) With 'cost-push inflation',initially
A) the price level and real GDP both increase.
B) only real GDP changes while the price level remains constant.
C) the price level rises and real GDP declines.
D) All of these options are correct.
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Chapter 15: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what is the growth rate in real GDP between those two years?
A) 2.5 per cent
B) 7.3 per cent
C) 8.0 per cent
D) 10.0 per cent
Q2) What happens during the contraction phase of the business cycle?
A) Production increases
B) Unemployment increases
C) Income increases
D) Employment increases
Q3) The main result of which of the following models is that the quantity of money should be increased at a constant rate?
A) Monetarist model
B) New classical model
C) Real business cycle model
D) New Keynesian model
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Page 17
Chapter 16: Money,banks and the Reserve Bank of Australia
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Sample Questions
Q1) Gold is an example of _______.
A) commodity money
B) fiat money
C) barter money
D) M3
Q2) A 'good' is more likely to be adopted as money in an economy if
A) the federal government declares the good be accepted in payment of debts.
B) the federal government declares that the good is legal tender.
C) the good is backed by gold.
D) all citizens accept the good as a means of payment for transactions and debts.
Q3) If,during a deposit expansion,not all money is re-deposited into the banking system and some leaks out as currency,then the real world multiplier is
A) smaller than 1/RR.
B) larger than 1/RR.
C) equal to 1/RR.
D) not related to 1/RR.
Q4) An economy without money would have no exchanges of goods and services.
A)True
B)False
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Chapter 17: Monetary Policy
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Sample Questions
Q1) What is the function of 'exchange settlement accounts'?
Q2) Falling interest rates can
A) increase a firm's share price, which causes firms to issue more shares and thus increases funds for investment.
B) raise the cost of borrowing for firms and decrease investment.
C) raise the cost of buying new homes and fewer new homes will be purchased. D) lower the cost of buying new homes and fewer new homes will be purchased.
Q3) The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.
A)True
B)False
Q4) A rise in the rate of interest on financial securities will lead to a movement downward along the money demand curve.
A)True
B)False
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Chapter 18: Fiscal Policy
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Sample Questions
Q1) Explain why 'crowding out' might still occur even if the increase in government spending is funded by borrowing on global financial markets.
Q2) During economic contractions,government expenditure automatically __________.
A) falls because of programs such as unemployment benefits
B) rises because of programs such as unemployment benefits
C) falls because of the progressive income tax system
D) rises because of the progressive income tax system
Q3) The 'multiplier effect' is the series of ________ increases in ________ expenditures that result from an initial increase in ________ expenditures.
A) induced; investment; autonomous
B) induced; consumption; autonomous
C) autonomous; consumption; induced
D) autonomous; investment; induced
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Chapter 19: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Which of the following statements is used to justify protectionism?
A) Free trade leads to higher prices for imported goods.
B) Free trade increases employment by protecting domestic firms.
C) A country should not rely on other countries for goods that are critical to its national defence.
D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.
Q2) Refer to Table 19.6.Prior to trade,what was the opportunity cost to produce one hat in Belize?
A) 1/6 of a clock
B) 2/3 of a clock
C) 1.5 clocks
D) 6 clocks
Q3) Anti-globalisation and protectionism are both arguments against free trade.How do these two arguments differ?
Q4) Free trade refers to trade between countries without government restrictions.
A)True
B)False
Q5) What is an 'open economy'?
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Chapter 20: Macroeconomics in an Open Economy
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Q1) Which of the following would cause the change depicted in Figure 20.4? Note that the figure depicts the quantity of euros traded.
A) Australian productivity falls relative to European productivity.
B) Australians decrease their preferences for goods produced in the European Union (EU) relative to Australian goods.
C) The EU increases its quotas on Italian wine.
D) The price level of goods produced in the EU decreases relative to the price level of goods produced in Australia.
Q2) The 'theory of purchasing power parity' implies that:
A) in the long run, the prices of goods in different countries will be the same when measured in a common currency.
B) the prices of goods in different countries are always the same.
C) the nominal exchange rates will equate over time.
D) demand and supply have no influence over the exchange rate.
Q3) Australian currency continues to be backed by the gold standard to this day.
A)True
B)False
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