Deck 1: Economics for Business

Question 1

The opportunity cost of producing an extra apple is equal to _____.

A) the market price of the apple
B) what must be given up in order to produce the extra apple
C) the amount of time and effort that it takes to produce the apple
D) the difference in the price of the apple last year and the price this year

Answer 1

what must be given up in order to produce the extra apple

Question 2

To deal with the problem of scarcity, every society must:

A) place a limit on human needs and wants.
B) reduce the quantity of resources that are allocated to production.
C) distribute income equally among all its citizens.
D) make choices about what is to be produced, how and for whom.

Answer 2

make choices about what is to be produced, how and for whom.

Question 3

How is a recession likely to be represented using the production possibility frontier for an economy?

A) By an outward shift of the production possibility frontier
B) By a point above the production possibility frontier
C) By a point under the production possibility frontier
D) By a point on the production possibility frontier

Answer 3

By a point under the production possibility frontier

Question 4

Which of the following topics would be studied under microeconomics?

A) The level of national unemployment.
B) The growth rate of GNP.
C) The effects of aggregate in?ation.
D) The pro?t-maximizing behaviour of a ?rm.

Question 5

Which of the following statements best describes microeconomics?

A) Microeconomics studies GDP with a focus on 'sustainable economic growth'.
B) Microeconomics would study the factors that cause a recession and how to remedy it.
C) Microeconomics focusses on the behaviour of ?rms or consumers in the economy.
D) Microeconomics studies aggregate variables such as in?ation, unemployment, and GDP.

Question 6

Which of the following pertains to macroeconomics?

A) Consumer preferences.
B) Factors causing a recession.
C) Price elasticity of demand.
D) Pro?t-maximising output of a ?rm.

Question 7

The production possibility frontier shows _____.

A) the various combinations of labor and capital that can be used to produce a good at a given wage and rent
B) the different combinations of inputs that can be used to produce a given good
C) the total quantity of land available in an economy
D) the maximum number of products that can be produced by an economy with the given

Question 8

_____ provide(s) companies with ?nancial backing that enables risk taking and the pursuit of pro?ts.

A) Enterprise
B) Shareholders
C) Labour
D) The government

Question 9

The production possibility frontier has a negative slope because _____.

A) operating at a point on the frontier is not optimal
B) resources are in?nite while human wants are limited
C) it exhibits increasing opportunity costs
D) the costs of production are very high

Question 10

_____ is the factor of production comprising oil, gas, base metals and other minerals.

A) Labour
B) Land
C) Enterprise
D) Capital

Question 11

A point beyond the production possibility frontier:

A) shows the current level of production in the economy.
B) is less e?cient than any point below the frontier.
C) cannot be attained, given the current level of resources and technology.
D) indicates a lower level of production than any point below the frontier.

Question 12

If a society is moving along its production possibility frontier, then _____.

A) the production process is becoming increasingly ine?cient
B) it is giving up more of some goods to produce other goods
C) more of all goods are being produced
D) some of its resources are unemployed

Question 13

Opportunity cost can be de?ned as _____.

A) the cost of production that remains ?xed even as more output is produced
B) the pro?ts earned from selling a particular good
C) the bene?ts forgone from the next best alternative
D) the variable costs of producing a good

Question 14

Which of the following statements best describes macroeconomics?

A) It is the study of the economy as a whole.
B) It is the study of the costs and revenues of a single ?rm.
C) It studies the behaviour of individuals, ?rms or consumers.
D) It studies market structures like monopoly.

Question 15

Using all its resources, an economy can produce either 200 computers or 800 chairs. If the economy produces 200 computers, its opportunity cost of producing these 200 computers is _____.

A) 200 chairs
B) zero
C) 800 chairs
D) 600 chairs

Question 16

A single point on a production possibility frontier will show _____ in an economy.

A) who receives the output produced
B) which combinations of output are e?ciently produced
C) what the level of in?ation is
D) whether resources are scarce or abundant

Question 17

The problem of scarcity implies that _____.

A) resources that can meet human wants are ?nite
B) human needs are limited
C) both human wants and resources are limited
D) both human wants and resources are in?nite

Question 18

The central problem in economics is that of:

A) guaranteeing an equal standard of living for every citizen in the country.
B) allocating scarce resources such that society's unlimited wants are satis?ed in the best
C) deciding whether a country should adopt a command economy or a market economy.
D) ensuring that each individual contributes equally to production activities in the economy.

Question 19

Which of the following pertains to microeconomics?

A) The human development index and quality of life in a country.
B) The level of in?ation and employment in an economy.
C) The shifts in the aggregate supply and aggregate demand curves in the economy.
D) The change in the supply of a good based on a change in costs.

Question 20

If previously unemployed factors of production are utilized, _____.

A) the economy moves along the production possibility frontier
B) the production possibility frontier shifts outward to the extent of the output that is
C) the production possibility frontier is not affected
D) the economy will move from a point below the production possibility frontier to a point on

Question 21

The assumption that ?rms are pro?t-maximizers is a simpli?cation because:

A) ?rms are only interested in maximizing revenue.
B) ?rms do not mind high employee attrition rates.
C) different groups within a ?rm have different interests.
D) ?rms need not pay high dividends to shareholders.

Question 22

Which of the following is likely to happen as economies grow faster?

A) A fall in expenditure on research and development.
B) A movement away from an agrarian economy.
C) A decline in the levels of power consumption.
D) A fall in the provision of ?nancial credit.

Question 23

An economy is said to be well-endowed with capital if it has _____.

A) large tracts of agricultural land
B) rigid labour laws
C) well-developed infrastructure
D) a large population

Question 24

Which of the following is likely to be true in markets that are not highly competitive?

A) The costs of production for a single ?rm are likely to be low.
B) The level of price competition is likely to be less severe.
C) It is likely that there is a large number of ?rms in the market.
D) The pro?ts earned by ?rms in this market is likely to be low.

Question 25

Other things remaining unchanged, which of the following are likely to increase a ?rm's pro?ts?

A) An increase in the market price for its product.
B) An increase in the salaries paid to employees.
C) An increase in the dividends paid to shareholders.
D) An increase in the cost of capital.

Question 26

How is an increase in taxes likely to affect a ?rm's pro?tability?

A) A higher tax rate will lead to lower revenues and pro?ts.
B) An increase in the tax rate will increase the demand for the ?rm's products.
C) A higher tax rate increases costs and lowers pro?ts.
D) With a higher tax rate, the market price of the good is likely to fall.

Question 27

In a planned economy, _____.

A) the market allocates resources to the production of various goods and services
B) the private sector and government jointly decide the allocation of resources
C) ?rms and producers determine how resources are allocated
D) the government determines the allocation of resources

Question 28

In a _____, prices transmit information between buyers and sellers.

A) market economy
B) welfare state
C) socialist economy
D) command economy

Question 29

In country X, goods like bread and milk are provided by the market while healthcare is provided by the government. In other words, country X is a _____.

A) market economy
B) command economy
C) mixed economy
D) democratic republic

Question 30

The essential difference between a command economy and a market economy lies in _____.

A) consumption patterns
B) resource ownership
C) natural endowments
D) demographic features

Question 31

Suppose that in the production of good X, a signi?cant quantity of pollution is generated. The government is likely to _____.

A) provide subsidies to ?rms that produce good X
B) restrict imports of good X
C) set a minimum price below which good X cannot be sold
D) impose taxes on good X

Question 32

The market directs an economy's resources towards the production of those goods where the _____.

A) maximum price that consumers are willing to pay is low
B) maximum price that consumers are willing to pay is less than the minimum price at which
C) maximum price that consumers are willing to pay is more than the minimum price at which ?rms are willing to sell
D) minimum price at which ?rms are willing to sell is high

Question 33

The economy's ability to provide ?nancial support to business and enterprise is measured by _____.

A) the total quantity of land under housing
B) the numbers of individuals with a basic education
C) well-functioning stock markets and banking sectors
D) the number of international airports

Question 34

Which of the following is true of a market economy?

A) The price mechanism operates freely without any government intervention.
B) Consumers are free to purchase all that they want at the price established by the
C) Most of the productive resources in the economy are owned and operated by government agencies.
D) A central agency collects data on consumer preferences and allocates resources

Question 35

The economy's access to skilled and productive labour can be measured by examining data on _____.

A) the number of males and females in the adult labour force
B) the absolute size of the population
C) the number of people who are between the ages of 16 to 60 in the country
D) the number of individuals gaining a university-level education

Question 36

The advantage that a market economy has over a planned economy is the _____.

A) structured approach towards the development of infrastructure
B) e?cient provision of public and merit goods
C) absence of the price mechanism
D) e?cient exchange of information between consumers and ?rms

Question 37

Other things remaining unchanged, which of the following is likely to reduce a ?rm's pro?ts?

A) An increase in the quantity of the good sold.
B) An decrease in the tax rates.
C) An increase in the costs of transportation.
D) A decrease in the interest rate paid on loans.

Question 38

Which of the following is an example of a macroeconomic factor that affects a ?rm's pro?ts?

A) The economy is hit by a recession.
B) A new ?rm enters the market and the market price falls.
C) The ?rm acquires a key input supplier.
D) The ?rm undertakes a massive advertising campaign to increase sales.

Question 39

The size of _____ as a percentage of gross domestic product can be used to measure the planned side of an economy.

A) private investment
B) government expenditure
C) the money supply
D) foreign direct investment

Question 40

Which of the following statements is true?

A) Firms that maximize revenues are likely to be pro?table, irrespective of their costs.
B) Many ?rms operate internationally to gain access to newer markets and revenue streams.
C) Competition in the domestic market reduces when foreign ?rms enter the market.
D) Governments should provide grants to ?rms that produce goods that generate pollution.

Question 41

Which of the following is a normative statement?

A) British society is becoming increasingly multicultural.
B) The American economy faced a subprime mortgage crisis in 2007-08.
C) According to O?ce for National Statistics in March 2015 the employment rate in UK was 73.3%.
D) The government should provide every citizen with a minimum level of income.

Question 42

For a given set of variables, the geometric mean is calculated by:

A) adding the variables and then dividing the sum by n (n = the number of variables).
B) ?nding the product of all the variables and then calculating the nth root.
C) adding the variables and then calculating the nth root.
D) ?nding the product of all the variables and then dividing by n.

Question 43

Knowledge-based economies are likely to spend more on _____.

A) agricultural loans
B) research and development
C) unemployment bene?ts
D) social security payments

Question 44

A country that is heavily reliant on capital machinery in the production process will have _____.

A) a relatively higher proportion of land being used for agriculture
B) a relatively larger absolute population size
C) relatively low levels of power consumption
D) a relatively lower labour participation rate

Question 45

For a non-linear curve, the gradient is equal to zero _____ of the curve.

A) at the positively sloped portion
B) at the negatively sloped portion
C) at the turning point

Question 46

Models are useful to economists in their analysis because models _____.

A) use terms and phrases that are particular to economics
B) are normative in nature
C) help organize and clarify the thought process behind a problem
D) incorporate all the complexities of a real-world economy

Question 47

Economists make abstract assumptions about reality in theories and models in order to _____.

A) provide a precise and accurate explanation of behavior
B) simplify the real world and predict behavior
C) assert and represent particular beliefs
D) incorporate all the details of real-world economic problems

Question 48

The differential of the equation P = 10 + 3Q - Q2 is _____.

A) 2 - 3Q
B) 3 + 2Q
C) 3 - 2Q
D) 2 + 3Q

Question 49

An economy is considered energy-intensive if _____.

A) its annual consumption of energy is low
B) it exports more energy than it uses
C) it does not import or export energy
D) it is very reliant on energy imports

Question 50

Which of the following is true of normative economics?

A) It is an objective method of analysis that is based on facts.
B) It prescribes policies based upon personal value judgments.
C) It is a scienti?c approach to the study of economic events.
D) It is based on a technical understanding of economic problems.

Question 51

Suppose that the Retail Price Index is equal to 87 for 2015. If the base index (2012) had a value of 100, which of the following is likely to be true?

A) On average, prices rose by 13 per cent since 2012.
B) All prices fell by 13 per cent since 2012.
C) All prices rose by 87 per cent since 2012.
D) An average, prices fell by 13 per cent since 2012.

Question 52

Which of the following is likely to be true of an economy that has a very high labour participation rate?

A) There is a high level of unemployment in the economy.
B) The levels of literacy in the economy are likely to be low.
C) The economy is likely to be highly reliant on labour to generate economic growth.
D) The economy has a large working age population.

Question 53

Given an equation Q = 20 - 3P, which of the following statements is likely to be true?

A) A plot of the equation will result in a graph with a positive slope.
B) A positive relationship exists between P and Q.
C) Every time P increases by one unit, Q falls by three units.
D) P and Q exhibit a non-linear relationship.

Question 54

The weights assigned to the components in the Retail Price Index are based on _____.

A) the importance of the component in the average household's consumption
B) the retail prices of the goods
C) past trends in the prices of the goods
D) the total number of components that are used to compute the index

Question 55

Which of the following is true of time series data?

A) Time series data are used very infrequently in economic analysis.
B) Time series data measures a variable for different individuals at a point in time.
C) Time series data combines panel data with cross-sectional data.
D) Time series data measures a given variable at different points in time.

Question 56

Suppose that a positive relationship exists between two variables x and y. This means that _____.

A) a change in x will not cause a change in y
B) as the value of x increases, the value of y decreases
C) as the value of x increases, the value of y also increases
D) both x and y change at the same rate

Question 57

Given the variables X and Y, which of the following ratios will give the gradient of a line in a graph?

A) ?Y/?X
B) ?X/?Y
C) X/Y
D) Y/X

Question 58

Which of the following is true of an economic model or theory?

A) Since models do not contain all the complexities of the real world, they are not an effective tool of analysis.
B) Models are a simple analysis of the central, or essential, issues pertaining to an economic
C) Economic models and theories are normative in nature.
D) The use of economic models complicates the analysis of simple economic problems.

Question 59

As a subject, positive economics _____.

A) is the technical and objective pursuit of economic understanding
B) seeks to assert particular beliefs based on religion, race and economic background
C) attempts to provide solutions to questions that are di?cult to answer
D) studies questions that are value laden and subjective

Question 60

Given the equation B = 12 - 2A + X2, which of the following is likely to be true?

A) The variables B and X exhibit a linear relationship.
B) The intercept for the curve shown in the equation is 10.
C) The given equation represents a hyperbola.
D) A plot of the equation on a graph will show a U-shape.

Question 61

Agriculture is considered to be a high-value adding activity in a developed economy.

Question 62

When an economy experiences economic growth, its production possibility frontier shifts outward.

Question 63

A country with a high level of research and development as a proportion of GDP is likely to be a knowledge-based economy.

Question 64

Macroeconomics is the study of the level of competition in a market and how firms compete against each other.

Question 65

Although there are diverse groups within a firm that may have different interests, it is fair to view firms as being primarily revenue-maximizing organizations.

Question 66

Gross domestic product (GDP) is a measure of overall economic activity within an economy.

Question 67

Labour is the factor of production that organizes other factors into productive business units.

Question 68

An economy that is producing at a point under or above its production possibility frontier is functioning efficiently.

Question 69

Since every society faces unlimited human wants and limited productive resources, it must choose among alternative combinations of output.

Question 70

Microeconomics is the study of national output, employment and prices.

Question 71

The process of collecting information needed for effective planning is very easy and efficient within a command economy.

Question 72

A tax levied on firms that emit pollution is an example of government intervention in the market in public interest.

Question 73

For a student, the opportunity cost of attending college is the income that she gives up by going to class rather than working.

Question 74

In a market economy, firms move resources into the production of goods for which consumers' willingness to pay is relatively low.

Question 75

Land is a factor of production that is fixed in supply and cannot be produced.

Question 76

If an economy is producing below its production possibility frontier, resources are fully employed.

Question 77

In a command economy, the majority of the resources are privately owned.

Question 78

The labour participation rate for an economy shows the percentage of the total population that is employed.

Question 79

In a market economy, the government sets an economic plan, typically for the next five years.

Question 80

Globalization can reduce costs for firms, but can also result in increased competition.