SBU ECO 108 Intro to Economics Practice Mock Exam 2026 with correct answers on the last pages Stony Brook University

SBU ECO 108 Intro to Economics Practice Mock Exam 2026 with correct answers on the last pages Stony Brook University Stony Brook University Intro to Economics Intro to Economics - Practice Mock Exam Pages 39 Total marks 100 Sections 3 Questions 35 Section 1: Multiple Choice Questions 25 questions Section 2: Short Answer Questions 6 questions Section 3: Long Answer Questions 4 questions 50 total marks 30 total marks 20 total marks Name Student id Date Signature How to use this exam 1 Set a timer and complete this practice exam under real exam conditions. No notes or external help. 2 Answer all questions carefully. Review your answers before finishing. 3 Manage your time wisely and ensure you answer all questions before time runs out. Section 1/3 50 Marks total Section 1: Multiple Choice Questions Select the best answer for each question. Each question is worth 2 marks. Question 1–2 Refer to the passage below. Question 1 2 marks Based on the schedule provided, what are the equilibrium price and quantity for this market? ⃝ A $0.80 and 25 units ⃝ B $0.70 and 30 units ⃝ C $0.60 and 35 units ⃝ D $0.90 and 50 units If the government imposes a price floor at $0.80, what will be the resulting market condition? ⃝ A A shortage of 15 units ⃝ B A surplus of 15 units ⃝ C Equilibrium will be maintained ⃝ D A surplus of 30 units Question 3 2 marks Which of the following describes the ’opportunity cost’ of a decision? ⃝ A The monetary price paid for a good ⃝ B The total utility derived from all choices ⃝ C The value of the best alternative given up ⃝ D The cost of production inputs Question 4 2 marks If a country’s production possibilities frontier (PPF) is ’bowed outward,’ it implies that: ⃝ A Opportunity costs are constant ⃝ B The economy is inefficient ⃝ C Resources are specialized and opportunity costs increase ⃝ D Technology is declining Which of the following statements is an example of normative economics? ⃝ A The unemployment rate is currently 4%. ⃝ B Higher interest rates reduce investment. ⃝ C The government should increase the minimum wage to help the poor. ⃝ D Price and quantity demanded are inversely related. Question 6 2 marks A rational consumer will continue to purchase units of a commodity until: ⃝ A Total utility is zero ⃝ B Marginal utility equals the price ⃝ C Marginal utility is maximized ⃝ D The price is higher than total utility Question 7 2 marks If the price of a product increases by 10% and the quantity demanded decreases by 20%, the demand for the product is: ⃝ A Inelastic ⃝ B Unit-elastic ⃝ C Elastic ⃝ D Perfectly inelastic Two products are considered substitutes if their cross elasticity of demand is: ⃝ A Positive ⃝ B Negative ⃝ C Zero ⃝ D Infinite Question 9 2 marks Which of the following is NOT included in the ’Investment’ component of GDP? ⃝ A Purchase of a new factory ⃝ B Purchase of shares of stock in a company ⃝ C Construction of a new residential house ⃝ D Addition to a firm’s inventory Question 10 2 marks Frictional unemployment refers to people who are: ⃝ A Unemployed due to a recession ⃝ B Lacking skills required for available jobs ⃝ C In between jobs or looking for their first job ⃝ D Discouraged and have stopped looking for work The main tool the Federal Reserve uses to influence the money supply is: ⃝ A Changing income tax rates ⃝ B Open market operations ⃝ C Adjusting government spending ⃝ D Printing physical currency Question 12 2 marks An increase in the price of hot dogs causes the demand for mustard to decrease. This suggests that hot dogs and mustard are: ⃝ A Substitutes ⃝ B Complements ⃝ C Inferior goods ⃝ D Normal goods Question 13 2 marks In the long run, an increase in the growth of the money supply will primarily lead to: ⃝ A Higher real GDP growth ⃝ B Higher inflation ⃝ C Lower unemployment ⃝ D Constant nominal interest rates According to the principle of comparative advantage, two people can benefit from trade if: ⃝ A One person is better at everything than the other ⃝ B They both have the same opportunity costs ⃝ C Each specializes in the activity for which they have a lower opportunity cost ⃝ D The government regulates the exchange Question 15 2 marks The ’Law of Diminishing Marginal Utility’ implies that as you consume more of a good: ⃝ A Your total utility decreases ⃝ B The additional satisfaction from the last unit decreases ⃝ C The price of the good increases ⃝ D You will never buy another unit Question 16 2 marks If a firm’s price is higher than its marginal cost, it should: ⃝ A Reduce production ⃝ B Increase production to increase profit ⃝ C Shutdown immediately ⃝ D Increase fixed costs The unemployment rate is defined as the percentage of: ⃝ A The total population that is not working ⃝ B The labor force that is not working ⃝ C Adults who do not have a full-time job ⃝ D People who are receiving government benefits Question 18 2 marks A ’Price Ceiling’ set below the equilibrium price typically results in: ⃝ A A surplus ⃝ B A shortage ⃝ C Increased efficiency ⃝ D Lower production costs Question 19 2 marks Which of these is a ’final good’ in GDP calculation? ⃝ A Wheat sold to a bakery ⃝ B Steel sold to an automaker ⃝ C A laptop computer sold to a student ⃝ D Crude oil sold to a refinery Which concept explains why water (highly useful) is cheaper than diamonds (less useful)? ⃝ A The Water-Diamond Paradox of Marginal Utility ⃝ B The Law of Supply ⃝ C Normative Economics ⃝ D Comparative Advantage Question 21 2 marks In macroeconomics, the ’Real Interest Rate’ is calculated as: ⃝ A Nominal interest rate + Inflation ⃝ B Nominal interest rate - Inflation ⃝ C Investment / Savings ⃝ D GDP growth rate - Unemployment rate Question 22 2 marks The ’Crowding Out’ effect suggests that an increase in government spending share will lead to: ⃝ A An increase in investment share ⃝ B A decrease in interest rates ⃝ C A decrease in the investment share of GDP ⃝ D Higher consumer confidence A shift to the right of the Supply curve for a good could be caused by: ⃝ A An increase in the price of the good ⃝ B An improvement in production technology ⃝ C An increase in the cost of labor ⃝ D A decrease in the number of producers Question 24 2 marks Macroeconomics differs from Microeconomics in that Macroeconomics focuses on: ⃝ A Individual household decisions ⃝ B Profit maximization of a single firm ⃝ C Trends affecting the economy as a whole, such as GDP and inflation ⃝ D The price of a specific agricultural product Question 25 2 marks What was the approximate consumption share of U.S. GDP in 2019? ⃝ A 17.5% ⃝ B 27.5% ⃝ C 68% ⃝ D 50% Section 2/3 30 Marks total Section 2: Short Answer Questions Provide concise answers for each question. Each question is worth 5 marks. Question 26 5 marks Explain why the opportunity cost of going to college often decreases during an economic recession. Question 27 5 marks Differentiate between a ’movement along’ a demand curve and a ’shift’ of the demand curve. What causes each? Define the ’Principle of Increasing Costs’ and explain its relationship to the shape of the Production Possibilities Frontier (PPF). Question 29 5 marks An economy’s real GDP increased by 3% in one year, while its population increased by 2%. Calculate the approximate percentage change in real GDP per capita and explain what this indicates about the average standard of living. Explain the concept of ’Diminishing Marginal Returns’ in production. How does it differ from ’Decreasing Returns to Scale’? Question 31 5 marks Describe the relationship between the price elasticity of demand and total revenue when price increases for an elastic good. Section 3/3 20 Marks total Section 3: Long Answer Questions Answer each question thoroughly. Each question is worth 5 marks. Question 32 5 marks Every economic system must solve three basic questions: What to produce? How to produce? and For whom to produce? Explain how a market system uses prices to answer these questions. Using the concepts of total utility and marginal utility, explain the ’Water-Diamond Paradox’. Why is water cheaper even though it is necessary for life? Describe the tools of monetary policy used by the Federal Reserve and explain how ’expansionary’ monetary policy affects interest rates, investment, and aggregate demand. Explain the concept of ’Efficiency’ as defined by economists. Discuss how unemployment and specialization (comparative advantage) relate to this concept.