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Econ Final

68 Questions
Economics Quizzes & Trivia
Questions and Answers
  • 1. 
    Scarcity is
    • A. 

      Best measured in objective terms such as tons or kilowatt hours.

    • B. 

      A problem only in less-developed countries

    • C. 

      A matter of the relationship between resources and human wants

    • D. 

      Important for microeconomics, but not macroeconomics.

  • 2. 
    Karen spends $20 to hire a tutor to help her prepare for her economics final. This expense should be considered part of
    • A. 

      The out-of-pocket cost of her college education

    • B. 

      The opportunity cost of her college education

    • C. 

      Both a and b

    • D. 

      Neither a nor b

  • 3. 
    The study of the factors determining the price of gasoline relative to the price of other fuels would be primarily a concern of
    • A. 

      Macroeconomics

    • B. 

      Microeconomics

    • C. 

      Normative Economics

    • D. 

      Forecasting

  • 4. 
    Policies to control unemployment are primarily a concern of 
    • A. 

      Macroeconomics

    • B. 

      Microeconomics

    • C. 

      Normative Economics

    • D. 

      Econometrics

  • 5. 
    Which of the following is required for every market?
    • A. 

      A written set of rules for buyers and sellers

    • B. 

      An agreed-upon place where buyers and sellers can meet

    • C. 

      A computer for recording transactions

    • D. 

      None of the above

  • 6. 
    Which of the following disciplines relies on theories to explain how facts are related?
    • A. 

      Economics

    • B. 

      Physics

    • C. 

      Medicine

    • D. 

      All of the above

  • 7. 
    Which of the following is an example of normative economics
    • A. 

      The rate of inflation was lower in 2009 than in 2008

    • B. 

      The rate of inflation was below 6 percent per year in 2009

    • C. 

      The rate of inflation should be held below 6 percent regardless of what happens to unemployment

    • D. 

      If the budget deficit is reduced, other things being equal, the rate of inflation will fall.

  • 8. 
    Which of the following would be most likely to cause the production possibility frontier for education and cars to shift outward?
    • A. 

      A reduction in average hours per worker per week

    • B. 

      An increase in the price of energy

    • C. 

      An increase in the economy's stock of capital

    • D. 

      None of the above

  • 9. 
    Investment, as the term is used in economics, means
    • A. 

      Creating money

    • B. 

      Putting money in the bank

    • C. 

      Increasing the economy's stock of capital

    • D. 

      Inventing new ways of doing things

  • 10. 
    Japan can produce a car in 1,000 hours and a computer in 100 hours. Brazil can produce a car in 2,000 hours and a computer in 250 hours. Which of the following statements is correct?
    • A. 

      Brazil has a comparative advantage in computers

    • B. 

      Brazil has a comparative advantage in cars

    • C. 

      Brazil has a comparative advantage in both goods

    • D. 

      Japan has a comparative advantage in both goods

  • 11. 
    An economic policy is said to improve inefficiency if
    • A. 

      It makes at least one person better off

    • B. 

      It makes no one worse off

    • C. 

      It makes at least one person better off and makes no one worse off

    • D. 

      It makes a majority of people better off

  • 12. 
    Which of the following is an illustration of entrepreneurship?
    • A. 

      Starting a new computer company

    • B. 

      Cutting production costs though an improved method of work in an existing facotry

    • C. 

      Opening the first Domino's Pizza franchise in Tokyo

    • D. 

      All of the above

  • 13. 
    A point representing 500 roast turkey dinners and 600 steak dinners lies outside the production possibilty frontier of Joe's Restaurant, given the factors of production and technology available to it. This means that
    • A. 

      The point can be produced if all factors are fully used

    • B. 

      The point cannot possibly be produced given the current available factors of production

    • C. 

      The point can be produced even when some of the factors are idle

    • D. 

      No conclusion can be drawn from the information given

  • 14. 
    Which of the following woudl be an example of "spontaneous order"?
    • A. 

      Coordinating the horn section with the string section in the Cleveland Symphony Orchestra

    • B. 

      Coordinating orders placed by the parts department with work done in the service department in an auto dealership

    • C. 

      Coordinating the number of houses available in Leesburg, Virginia, with the number of people wanting to live in that city

    • D. 

      None of the above

  • 15. 
    If the U.S. were to relax it's immigration restrictions, we might expect
    • A. 

      A shift outward of the nations production possibilities frontier because of an increase in the potential labor force

    • B. 

      A shift inward of the nations production possibilities frontier as unemployment increases.

    • C. 

      No change in the production possibilities frontier.

    • D. 

      An inward shift of the nations production possibilities frontier because of new technology

  • 16. 
    The "other things being equal" clause in the law of demand covers
    • A. 

      Consumer incomes

    • B. 

      The prices of other goods

    • C. 

      Consumer tastes and preferences

    • D. 

      All of the above

  • 17. 
    A rise in the price of coffee is likely to have which of the following initial effects on the market for tea, a subsitute?
    • A. 

      A movement up along the tea demand curve

    • B. 

      A downward movement along the tea demand curve

    • C. 

      A leftward shift in the tea demand curve

    • D. 

      A rightward shift in the tea demand curve

  • 18. 
    If consumer incomes go up, which of the following is initially most likely?
    • A. 

      An upward movement along the demand curve for cars

    • B. 

      A downward movement along the demand curve for cars

    • C. 

      A rightward shift in the demand curve for cars

    • D. 

      A leftward shift in the demand curve for cars

  • 19. 
    Assuming gasoline and tires to be complementary goods, the intial effect on the tire market of an increase in the price of gasoline (other things being equal), would be best described as?
    • A. 

      An increase in the demand for tires

    • B. 

      A decrease in the demand for tires

    • C. 

      An increase in the quantity of tires demanded

    • D. 

      A decrease in the quantity of tires demanded

  • 20. 
    If the price of leather increases, other things being equal, which of the following would be the most likely initial effect?
    • A. 

      A leftward shift of the shoe supply curve

    • B. 

      A rightward shift of the shoe supply curve

    • C. 

      An upward movement along the shoe supply curve

    • D. 

      A decrease int he quantity of tires demanded

  • 21. 
    Market equilibrium
    • A. 

      Is represented graphically by the intersection of the suppky and demand curves

    • B. 

      Is the condition under which the plans of buyers and sellers exactly mesh when tested in the market

    • C. 

      Is the condition under which neither buyers nor sellers have an incentive to change their plans

    • D. 

      Includes all of the above

  • 22. 
    Using Qs to indicate quantity supplied and Qd to indicate quantity demanded, which of the following circumstances would be likely to produce an upward movement of the price of a good?
    • A. 

      Qs=100, Qd=200

    • B. 

      Qs= 100, Qd=100

    • C. 

      Qs=200, Qd=100

    • D. 

      Not enough information given for an answer

  • 23. 
    An increase in the cost of raising hogs, other things being equal, would be likely to affect the price of bacon via
    • A. 

      A leftward shift of the supply curve

    • B. 

      A leftward shift of the demand curve

    • C. 

      A rightward shift of the supply curve

    • D. 

      A rightward shift of the demand curve

  • 24. 
    Assume an increase in the price of beef increases the demand for pork. Restoration of equilibrium in the pork market will require
    • A. 

      A leftward shift of the supply curve

    • B. 

      A rightward shift of the supply curve

    • C. 

      A movement up along the supply curve

    • D. 

      A movement down along the supply curve

  • 25. 
    Suppose hot dogs to be an inferior good. An increase in consumer incomes, other things being equal, is likely to cause which of the following?
    • A. 

      A shift in the demand curve and a higher price

    • B. 

      A shift in the supply curve and a higher price

    • C. 

      A shift in the demand curve and a lower price

    • D. 

      A shift in the supply curve and a lower price

  • 26. 
    If the steelworkers' union negotiates a new contract with sharply higher wages, we would expect, once a new equilibrium is reached in the steel market,
    • A. 

      Shortage of steel

    • B. 

      A decrease in the demand for steel

    • C. 

      A decrease in the price of steel

    • D. 

      A decrease in the quantity of steel demanded

  • 27. 
    During a visit to Havana, Cuba, you notice long lines outside every butcher shop. The most reasonable conclusion to be drawn from this observation is that the
    • A. 

      Meat is very expensive in cuba

    • B. 

      Citizans are insatiable carnivores

    • C. 

      Clerks in cuban stores work very slowly

    • D. 

      Price of meat is held below equilibrium price

  • 28. 
    If the equilibrium price of natural gas is $2.50 per thousand cubic feet and a price ceiling is imposed of $3 per thousand cubic feet, the likely result will be
    • A. 

      A surplus

    • B. 

      A shortage

    • C. 

      A depletion of inventories

    • D. 

      None of the above

  • 29. 
    According to a supply and demand analysis, the likely effect of a minimum wage law would be
    • A. 

      A shortage of jobs for low-skill workers

    • B. 

      A shortage of workers to fill low-skill jobs

    • C. 

      Increased incomes for all low-skill workers

    • D. 

      Decreased incomes for all low-skill workers

  • 30. 
    If the equilibrium price of sugar is 15 cents per pound and government imposes a minimum price of 20 cents per pound, the likely result will be
    • A. 

      A shortage of sugar

    • B. 

      A surplus of sugar

    • C. 

      A depletion of sugar inventories

    • D. 

      None of the above

  • 31. 
    If a firm has total revenues of $100 million, explicit costs of $90 million, and implicit costs of $20 million, its pure economic profit is
    • A. 

      $80 million

    • B. 

      $70 million

    • C. 

      $10 million

    • D. 

      -$10 million

  • 32. 
    Economics profit is calculated as:
    • A. 

      Total revenue minus explicit costs minus implicit costs.

    • B. 

      Total revenue plus explicit costs plus implicit costs.

    • C. 

      Total revenue minus explicit costs

    • D. 

      Total revenue minus implicit costs

  • 33. 
    A firm has total capital of $500 million. The opportunity cost of capital is 12 percent per year. The firm earns an accounting profit of $65 million and has no other implicit costs. Its pure economic profit is
    • A. 

      -$5 million

    • B. 

      $5 million

    • C. 

      $60 million

    • D. 

      $65 million

  • 34. 
    If a firm decided it could save on total cost by unplugging itself from the local electric utility and buying its own generating equipment, we could assume that
    • A. 

      Both its fixed and variable costs would fall

    • B. 

      Both its fixed and variable costs would rise

    • C. 

      Its fixed costs would rise and its variable costs would fall

    • D. 

      Its fixed costs would fall and its variable costs would rise

  • 35. 
    To attract the attention of potential customers, U.S. bank spends $500 to hire a band to play at the opening of a branch at the new Walmart shopping center. With regard to the ongoing operations of the new branch, the cost of hiring the band is considered to be
    • A. 

      An explicit fixed cost

    • B. 

      An implicit fixed cost

    • C. 

      A variable cost

    • D. 

      A sunk cost

  • 36. 
    The law of diminishing returns implies that the marginal physical product curve must 
    • A. 

      Be U-shaped

    • B. 

      Be shaped like an upside-down U

    • C. 

      Have a negative slope throughout its length

    • D. 

      Have a negative slope for at least part of its length

  • 37. 
    If a marginal physical product curve and an average physical product curve were both drawn on a single diagram, 
    • A. 

      The marginal curve would cut the average curve at the minimum point of the latter

    • B. 

      The marginal curve would cut the average curve at the minimum point of the former

    • C. 

      The marginal curve would cut the average curve at the maximum point of the latter

    • D. 

      The marginal curve would cut the average curve at the maximum point of the former

  • 38. 
    Where the marginal cost curve is below the average variable cost curve, 
    • A. 

      The average variable cost curve must have a negative slope

    • B. 

      The marginal cost curve must have a negative slope

    • C. 

      The average variable cost curve must have a positive slope

    • D. 

      The marginal cost curve must have a positive slope

  • 39. 
    The quantity of output where the marginal cost curve stops decrease and begins to increase corresponds with the output where:
    • A. 

      Average variable cost is at a maximum

    • B. 

      Total cost is at a maximum

    • C. 

      Marginal product of labor is at a maximum

    • D. 

      Average product or labor is at a maximum

  • 40. 
    Rising marginal cost of production is due primarily to: 
    • A. 

      Overcrowding in the workplace

    • B. 

      Rising fixed costs

    • C. 

      Rising cost of inputs such as labor

    • D. 

      Too few workers on the production line

  • 41. 
    Which of the following statements is true of MC > ATC?
    • A. 

      MC is falling

    • B. 

      ATC is falling

    • C. 

      ATC is rising

    • D. 

      AVC is falling

  • 42. 
    The long-run average cost curve
    • A. 

      Passes through the minimum points of all short-run average total cost curves

    • B. 

      Passes through the minimum points of all short-run average variable cost curves

    • C. 

      Is the envelope of all short-run average total cost curves

    • D. 

      Is the envelope of all short-run average variable cost curves

  • 43. 
    A firm is said to experience economies of scale over the range of output for which long-run average cost
    • A. 

      Is constant

    • B. 

      Is falling

    • C. 

      Is rising

    • D. 

      Economies of scale are not related to long-run average cost

  • 44. 
    The minimum efficient scale for a firm is the level of output at which 
    • A. 

      Economies of scale cease

    • B. 

      Diseconomies of scale cease

    • C. 

      Short-run average variable cost first exceeds long-run average cost

    • D. 

      None of the above

  • 45. 
    Which of the following is a source of diseconomies of scale?
    • A. 

      As a firm expands it's output labor begins to specialize

    • B. 

      As a firm expands it finds itself depending more on hierarchical means of coordinating it's employees' activities

    • C. 

      Individual employee incentives become clearer

    • D. 

      Individual departments and divisions tend to work more as a team

  • 46. 
    Which of the following is not characteristic of perfect competition?
    • A. 

      Many firms, each of which is small

    • B. 

      A homogeneous product

    • C. 

      An intense climate of rivalry among entrepreneurs

    • D. 

      Free entry and exit

  • 47. 
    Which of the following markets can contain a number of firms producing differentiated products?
    • A. 

      Monopoly

    • B. 

      Monopolistic competition

    • C. 

      Perfect competition

    • D. 

      None of the above

  • 48. 
    A perfectly competitive firm sells its output for $50 a unit. At 1,000 units of output, marginal cost is $40 and is increasing, average variable cost is $35, and average total cost is $60. To maximize short-run profit, what should the firm do?
    • A. 

      Increase output

    • B. 

      Decrease output but not shut down

    • C. 

      Maintain its current rate of output

    • D. 

      Shut down

  • 49. 
    Which of the following market structures is likely to have the most barriers to entry?
    • A. 

      Perfect competition

    • B. 

      Monopolistic competition

    • C. 

      Oligopoly

    • D. 

      Monopoly

  • 50. 
    A perfectly competitive firm sells its output at $40 per unit. At 100 units of output, it has an average total cost of $40. Marginal cost is equal to average total cost at that point. To maximize profit, what should the firm do?
    • A. 

      Increase output

    • B. 

      Decrease output

    • C. 

      Maintain its current rate of output

    • D. 

      Insufficient information is given for an answer to be reached.

  • 51. 
    A perfectly competitive firm's short-run supply curve is best described as
    • A. 

      Its marginal cost curve

    • B. 

      The upward-sloping portion of its marginal cost curve

    • C. 

      The upward-sloping part of its marginal cost curve lying above average variable cost

    • D. 

      The upward-sloping part of its marginal cost curve lying above average total cost

  • 52. 
    If a perfectly competitive firm is operating at a point where marginal cost and product price are between average variable cost and average total cost, its accounting profit must be
    • A. 

      Positive

    • B. 

      Zero

    • C. 

      Negative

    • D. 

      It is impossible to determine from the information given

  • 53. 
    Assume that a variable input price, such as labor wages, rises. What will be the short-run impact on the market price for firms in a perfectly competitive industry?
    • A. 

      Increase

    • B. 

      Decrease

    • C. 

      It could rise or fall

    • D. 

      There will be no change in price in the short-run

  • 54. 
    Assume that a fixed cost, such as property taxes, increases for firms in a perfectly competitive industry. What will be the short-run impact on the output level of individual firms?
    • A. 

      Increase

    • B. 

      Decrease

    • C. 

      Output could either rise or fall

    • D. 

      There will be no change in output in the short-run

  • 55. 
    A firm in a perfectly competitive industry that wants to maximize profits will produce at an output level where:
    • A. 

      ATC = P

    • B. 

      ATC = MC

    • C. 

      MR = MC

    • D. 

      MR = MPL

  • 56. 
    In long-run equilibrium for a perfectly competitive firm, ATC equals:
    • A. 

      Price

    • B. 

      MR

    • C. 

      MC

    • D. 

      All of the above

  • 57. 
    If there is an increase in demand for the product of a perfectly competitive industry
    • A. 

      Firms already in the industry will, for a time, earn pure economic profits

    • B. 

      New firms will be attracted to the industry

    • C. 

      Economic profits eventually return to zero

    • D. 

      All of the above will occur

  • 58. 
    If there is an increase in demand in a perfectly competitive industry
    • A. 

      New firms will be attracted to the industry because of economic profits

    • B. 

      Existing firms in the industry can temporarily increase their output, but long-run output may not increase by as much

    • C. 

      Resources will leave other industry as they move into this industry

    • D. 

      All of the above

  • 59. 
    Firms in a competitive industry are said to be price takers because:
    • A. 

      Their output relative to the market is very small

    • B. 

      Legal restrictions force them to take the market price rather than set their own

    • C. 

      Prices are often laying all over the ground and they can simply take as many as they want

    • D. 

      Their output relative to the market is very large thus they can force other firms to take their price

  • 60. 
    At the market equilibrium in a perfectly competitive market, consumer surplus is
    • A. 

      As large as possible

    • B. 

      Exactly the same as the value of producer surplus

    • C. 

      Zero

    • D. 

      Smaller that optimal size

  • 61. 
    A monopoly that is protected by legal restrictions on competition known as a(n)
    • A. 

      Open monopoly

    • B. 

      Closed monopoly

    • C. 

      Natural monopoly

    • D. 

      Simple monopoly

  • 62. 
    Which of the following is true of a perfect competitor but not of a pure monopolist?
    • A. 

      The firm is a price taker

    • B. 

      The firm maximizes profit by setting marginal cost equal to marginal revenue

    • C. 

      The firm may have to shut down in the short run if price does not cover average cariable cost

    • D. 

      The firm can earn a pure economic profit in the short run if demand conditions are favorable, but economic profits cannot be earned in the long run.

  • 63. 
    If a pure monopolist can sell 100 units of output at $50 per unit and 101 units of output at $49.99 per unit, marginal revenue in that range of output is approximately
    • A. 

      -10 cents per unit

    • B. 

      -$10 per unit

    • C. 

      $39.90 per unit

    • D. 

      $49.90 per unit

  • 64. 
    A monopolist than wants to maximize profits should produce where:
    • A. 

      MC =ATC

    • B. 

      MC = MR

    • C. 

      MR = AVC

    • D. 

      AVC =AR

  • 65. 
    If a monopolist is operating at a point where its marginal revenue curve is less than marginal cost but P is greater than AVC, the firm should do which of the following?
    • A. 

      Increase output

    • B. 

      Shut down

    • C. 

      Maintain that rate of output

    • D. 

      Insufficient information is given for an answer to be reached

  • 66. 
    At an output of 100 units, a monopolist's marginal cost is $33, its marginal revenue is $33, its average variable cost is $30, and its average total cost is $38. To maximize profit or minimize loss in the short run, what should the firm do?
    • A. 

      Produce more than 100 units of output

    • B. 

      Produce exactly 100 units of output

    • C. 

      Shut down

    • D. 

      Insufficient information is given for an answer to be reached

  • 67. 
    Which of the following is true about a simple monopolist in long-run equilibrium?
    • A. 

      It will always exactly break even

    • B. 

      It must break even or it will leave the market

    • C. 

      It will always earn a pure economic profit

    • D. 

      It can never earn a pure economic profit

  • 68. 
    A limit pricing strategy implies charging a price that is less than the 
    • A. 

      Short-run marginal cost

    • B. 

      Long-run average cost

    • C. 

      Short-run average variable cost

    • D. 

      Short-run profit-maximizing price