Quizzes: Economics for MBAs In Tutorial Library

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TITLE: Quizzes: Economics for MBAs

UNIVERSITY / INSTITUTE: The George Washington University



This tutorial has Quizzes 1 to 6 for the course MBAD240 : Economics for MBAs at The George Washington University

Quiz 1:

1. Economics is primarily the study of _________.
a. gold
b. determining what to buy
c. balancing your checkbook
d. the allocation of scarce resources
2. _______is concerned with the behavior of individual entities such as
individuals/households as consumers, firms or enterprises as producers, and
individual markets.
a. Microeconomics
b. Macroeconomics
c International economics
3. An economy which the government decides the answers to the three fundamental
questions of economic organization is called a_________.
a. market economy
b. mixed economy
c. command economy
4. _________ is a fundamental characteristic of a market economy.
a. Trade
b. Private ownership of capital
c. Use of money
d. Use of capital
Please look at Figure 1 and answer questions 5-6.
PPF shift outward
Figure 1
5. Which PPF line represents a higher level of production?
a. A
b. B
6. PPF outward-shifting could possibly be caused by________.
a. the increase of capital investment
b. the increase of the population of the country
c. new natural resources are discovered under the ocean
d. All of the above
7. The concept of opportunity cost is useful _______.
a. only for our understanding of PPF
b. only by professional economists
c. when measured in dollars and cents only
d. in measuring costs in terms of the next-best alternative
8. Goods and services which are not consumed today are called _______.
a. Consumptions
b. Factors of production
c. Investments
d. Capacity of production
9. Which of the following statements is NOT correct?
a. Specialization and free exchange are major characteristics of a modern
market economy.
b. Specialization is impossible without a market for trade.
c. A command economy is one in which the government makes major
decisions about investment, production, and the distribution of the products.
d. In pursuing social interest, people will be guided by an invisible hand to
maximize their personal contribution to the economy.
10. Suppose the PPF of producing a combination of wine and cloth is a straight line. We assume labor is the only input. With a total labor hours of 100 units, 50 bottles of wine could be produced if we put all the labor into wine production, or 100 units of cloth if we only produce cloth. The opportunity cost of producing 10 bottles of Wine is ____ units of cloth.

Quiz 2:

1. A patient must purchase some exact quantity of a particular drug A (no less, no
more) and will pay any price in order to obtain it. Which of the diagrams best
illustrate this demand curve?
a. A
b. B
c. C
d. D
2. Similar to 1, another perfect substitute for drug A appears in the market – drug B.
This patient will choose to purchase B if the price of A is high. Which of the
diagrams best illustrate the consumer’s demand behavior for drug A?
a. A
b. B
c. C
d. D
3. In the table below, a consumer is indifferent between bundles A and B. Based on
the information, which of the following is true?
Market Basket Units of food Units of clothing
A 15 18
B 13 19
C 14 17
Assume both goods are “good”.
a. The consumer must prefer A to C.
b. The consumer must prefer B to C.
c. The consumer must prefer A to C, but not necessarily B to C.
d. Both a and b must be true.
4. If a consumer has $100 per day to spend on product A, which has a unit price of
$7, and product B, which has a unit price of $15, which of the following would be
the slope of her budget line?
a. -7/15 or -15/7
b. .7 or 1.43
c. 7/100 or 100/7
d. none of the above
5. Assume a hypothetical good A, if we increase its unit price from $5 to $6, the
quantity demanded decreases from 50 units to 40. The price elasticity of demand
when p = 5 is____. (Omit the negative sign)
Please answer question 6 by reading figure 2.
Food per period
Clothing per period
Figure 2
6. From Figure 2, the consumer’s equilibrium, which point is preferred by the
a. point a.
b. point e.
7. In the figure below, the decline in consumer surplus resulting from an increase in
price from $5 to $10 is given by the area:
Figure 3
a. FGH
b. CEH
e. DEG
8. Which of the following statements is NOT true about utility theory?
a. Utility means satisfaction or happiness, or the level of satisfaction or
b. Utility is a scientific construct that economists use to understand
consumer’s rational behaviors.
c. Law of diminishing marginal utility captures the diminishing marginal
utility as the amounts of a good consumed increase.
d. Marginal utility is always the same since we pay the same price for a
particular product no matter how many I purchase.
9. Which of the following statements is NOT true about demand?
a. A rise in income will shift the demand curve rightward and increase
b. Price elasticity of demand is defined as the percentage change in quantity
demanded divided by the percentage change in price.
c. The market demand curve for all consumers is derived by adding the
separate demand curve of each consumer vertically.
d. A rise in the price of a substitute good will shift the demand curve
rightward and increase demand.
10. Let ED represent the price elasticity of demand. If ED > 1, we say demand is priceelastic,
at this time, lowering the price will ___ (increase, decreases, does not
change) sales revenue.

Quiz 3:

1. The law of diminishing returns holds that: a. the marginal product of any input should eventually begin to fall as the employment of all inputs increases proportionately. b. the average product of any input must eventually reach a minimum and rise as the employment of all inputs increases proportionately. c. the total product of any input must eventually reach a maximum and fall as the employment of that input increases. d. the marginal product of any input should eventually begin to decline as the employment of that input increases. 2. If the marginal product of an input is positive, but decreasing as more and more of the input is employed, then: a. total product has reached a maximum and is declining. b. average product must be declining. c. total product is increasing but at a slower and slower rate. d. the firm should produce less output. 3. Which of the following is the major disadvantage of a corporation? a. Corporations fail more often than individual proprietorships. b. Corporations are faced with double taxation for shareholders. c. Corporations require a lot of money to get started. d. Corporations are hard to manage because there are often many stock holders. 4. Using three units of labor, the firm can produce 1000 units of the good. Using four units of labor, the firm can produce 1200 units of the good. The MARGINAL product of the fourth unit of labor is: a. 400 b. 1200 c. 600 d. 200 5. Using three units of labor, the firm can produce 1000 units of the good. Using four units of labor, the firm can produce 1200 units of the good. The AVERAGE product of the four units of labor is ____. a. 300 b. 1200 c. 600 d. 200 6. Which of the following statements is true about partnerships and corporations in business organizations?
a. Partnerships are firms owned by two or more individuals, sharing limited liability. b. Corporations represent less efficient business organizations than partnerships. c. Corporations enjoy limited liability and represent an extremely efficient way to engage in business. d. None of the above is true. 7. Which of the following statements is true? a. The long run period is a period in which firms can only adjust production by changing the variable factors of production. b. In the short run period, both variable factors and fixed factors could be changed. c. In the short run, we can adjust the all factors of production in the same proportion and achieve economies of scale. d. The short run is the period of time that is long enough to adjust variable inputs, but too short to allow ALL inputs to be changed. 8. Look at the following table. Labor is the only variable input. What is the marginal product and marginal cost at Q=4 (Q is the amount of output)?
Output (bottles of wine)
labor inputs (workers)
labor wage ($ per worker)
Fixed cost ($)
Total Cost ($)
a. 1/6; $1050
b. 4/21; $1050
c. 4/6; $300
d. 1/6; $300
9. Which of the following statements is NOT true? a. The economist's definition of costs is broader than the accountant's. b. Accounting cost includes not only the obvious out-of-pocket purchases or monetary transactions but also more subtle opportunity costs. c. The opportunity costs are tightly constrained by the bids and offers in competitive markets. d. Price in competitive markets is close to opportunity cost for marketed goods and services. 10. Which of the following statements is NOT true? a. Diminishing returns might not hold for all levels of production.
b. Increasing returns to scale, or economies of scale, are equivalent to decreasing
costs of per unit of output. c. The production function specifies the minimum output that can be produced with a given quantity of inputs.

Quiz 4:

1. Perfectly competitive firms are described as _______ and face _______ demand
a. price-makers; horizontal
b. price-takers; horizontal
c. price-makers; vertical
d. price-takers; vertical
2. The zero-profit point for a firm in a perfectly competitive market will occur
b. MC=AC=P
d. MC=MP
3. Looking at the following figure, which is the shutdown point for a firm in a
perfectly competitive market?
a. point e
b. point f
4. In an unregulated competitive market, supply and demand have been estimated
using regression techniques. Equations representing supply and demand are listed
Demand P = 25 – 0.10Q
Supply P = 4 + 0.20Q
Where P presents unit price in dollars, and Q represents number of units sold per
year. What is annual aggregate consumer surplus?
a. 250
b. 245
c. 490
d. none of above
5. Which of the following is NOT true about a monopoly’s profit-maximizing conditions?
a. MR = MC
b. P > MR
c. P = MC
d. P > AC
6. Which of the following is NOT a source of market imperfection?
a. Large producers are more cost efficient than small producers, therefore they drive out small producers of the market.
b. Barriers to entry.
c. There are many sellers of a homogeneous product in the market.
7. Under monopolistic competition, prices are ______ marginal costs, which lead to ______.
a. above; economic efficiency
b. below, economic efficiency
c. above; economic inefficiency
d. below; economic inefficiency
8. Suppose there is monopoly who has MR=9-Q, MC=2Q. If the market price is P = 7.5, to maximize profits, how many units of product will it produce?
a. 1.5
b. 3.75
c. 3
d. 0
9. Which of the following statements is NOT true?
a. A perfectly competitive firm sells a homogeneous product and is too small
to affect the market price.
b. Competitive firms are assumed to maximize their profits.
c. To maximize profits, the competitive firm will choose an output level at
which price equals the marginal cost of production.
d The competitive firm's equilibrium will come where the rising MC supply
curve intersects its falling demand curve.
10. Which of the following statements is NOT true?
a. Allocative efficiency occurs when there is no way of reorganizing
production and distribution such that everyone's satisfaction can be improved.
b. In a competitive market, our consumers and producers, led by the government, produce efficiency in allocating limited resources through utility and profit maximization.
c. An economy is efficient when no individual can be made better off
without making another individual worse off.
d. Efficiency implies that economic surplus is maximized.

Quiz 5:

1. Which of the following is NOT the function of government in a modern mixed economy? a. Improving economic efficiency. b. Reducing economic inequality. c. Establishing macroeconomic policy to stabilize the business cycle and promote long-term economic growth d. Conducting international economic policy. e. Making production and consumption decisions for firms and households in the society. 2. Tax is part of governments’_______. a. monetary policy. b. fiscal policy. c. antitrust policy. d. foreign exchange policy. 3. Which of the following statements on taxation is NOT true? a. Taxes are the ultimate source for the government expenditure. b. Taxation is a way for the government to reallocate resources in the society. c. Progressive income taxes are a major source of U.S. government tax revenue. d. In the U.S., more than half of the federal government’s tax revenue is collected based on the benefit principle. 4. Which of the following does NOT represent a market failure? a. Imperfect competition such as monopolies. b. Negative externalities such as pollution. c. Insufficient production of public goods, such as highways and national defense. d. Bankruptcies exist in the economy. 5. _______of regulation states that regulation often serves the purpose of actually benefiting regulated firms, whose interests are furthered by exclusion of potential rivals. a. The interest-group theory b. The public-interest theory 6. The Lorenz curve ________; the further away of the actual income distribution curve from the absolute equality curve, the ___the inequality. a. shows the levels of income and wealth inequality in an economy; higher b. shows the level of imports and exports in an economy; lower c. shows the difference between the supply and demand curves at all prices; higher
7. Which of the following is NOT true about the Malthus theory of population? a. The Malthus theory of population rests on the law of diminishing returns. b. According to Malthus, the population could grow so rapidly that there would be not enough space in the world for all the people to stand. c. According to Malthus, technological advance can overcome the impact of an increasing population. 8. Refer to the table below. Which country in the table represents an economy with the highest income inequality based on the Gini index?
a. The United States
b. China c. Japan
d. Mexico 9. Which of the following is NOT true about the U.S tax? a. Marginal tax rates were lowered sharply during the 1980s. b. More than half of federal revenues come from taxes on payrolls or consumption goods. c. The top rates were raised in the Clinton years and then lowered in the Bush fiscal package of 2003. d. Individual income tax is considered progressive tax: the marginal tax rate is higher as people’s income goes higher. 10. Which of the following is NOT true about the U.S. government expenditures? a. The U.S. federal spending is dominated by defense and entitlement programs – income security, social security, and health. b. Government spending today takes approximately half of total national output. c. The federal government concentrates its spending on issues of national concern. d. States and localities generally focus on local public goods.

Quiz 6:

1. According to the mercantilist view of international trade,
a. trade is mutually beneficial.
b. import and export are equally important.
c. export is better than import.
d. countries should not trade at all.
2. According to the Ricardo Model, differences in wage rates between countries reflect
a. the fact that one country may have more powerful union.
b. differences in labor endowments across countries.
c. differences in transportation costs.
d. differences in labor productivity.
3. Assuming that Country A has a comparative advantage in wheat and Country B in wine,
which of the following is true?
a. the price of wheat in country B falls when trade opens between the two countries.
b. the price of wine in country B falls when trade opens between the two countries.
c. the prices of wine and wheat in country B fall when trade opens between the two
4. According to the Heckscher-Ohlin theorem, trade arises due to
a. differences in technology.
b. differences in relative factor endowments and intensities.
c. differences in tastes and preferences.
d. the existence of economies of scale in production.
5. Refer to the graph below. Which line represents the consumption possibilities in Country
I with free trade?
The Ricardo Model: Gains from trade
Consumption and Welfare (Country I)
a. Line 1
b. Line 2
c. Line 3
6. Refer to the following information and answer the question based on the Ricardo model: U.S. U.K. Wheat (bushels/labor hour) 100 40 Cloth (yards/labor hour) 150 30 The U.S. has comparative advantage in
a. cloth.
b. wheat.
c. both wheat and cloth.
d. neither products.
7. Refer to the following information and apply the Heckscher-Ohlin theory to the question: Country A possesses 4,000 units of labor (L) and 4,000 units of capital (K), while Country B possesses 6,000 units of L and 2,000 units of K. At a given wage/rental ratio, both countries use 6 units of L and 12 units of K to produce a specific amount of Commodity X, and 9 units of L and 27 units of K to produce a specific amount of Commodity Y. Assume all the assumptions of the H-O theory hold. Based on the assumptions of the H-O theory, Country B should export a. Commodity Y. b. Commodity X. c. both commodities. d. neither. 8. Intra-industry trade can be explained by a. the Ricardo trade theory. b. the H-O trade theory. c. product differentiation and consumers’ preference for variety. d. protective measures taken by the trading nations. 9. Refer to the following graph. Which of the following is true in a free trade situation for Country 1?
Trade theories 35
The Heckscher-Ohlin (H-O) Model
Effects of Trade on Welfare
Country 1
Y beforetrade
 
 
Y World
 
 
O 600 800
a. Country 1 exports 200 units of X and imports 300 units of Y.
b. Country 1 imports 200 units of X and exports 300 units of Y.
10. Based on the trade theories, which of the following statement is NOT true?
a. Trade occurs because of differences in the availability of factor inputs across
countries and differences in the proportions of those factor inputs used in
producing different products.
b. Trade causes expansion in the export-oriented sector and causes contraction in the
import-competing sector.
c. Trade allows a trading nation to consume beyond its production capacity.
d. Trade benefits everyone or every group within a trading nation.

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