(Test Bank) Microeconomics Theory And Applications

Browning,Zupan, 13

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Author(s): Browning, Zupan

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Test Bank for Microeconomics Theory and Applications, 13e Edgar Browning, Mark Zupan (All Chapters ) 1 2. Microeconomics is also known as price theory because : a. everything has a price. b. prices have important effects on individual and firm decisions. c. prices are the only determinant of economic outcomes. d. prices change constantly. Answer: B Difficulty Level: Easy Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory. 3. Which of the following is generally considered a microeconomic question? a. The relationship between the mo ney supply and nominal GDP b. The relationship between the unemployment and inflation c. The impact of a tax cut on public saving d. The effect of anti-discrimination laws on employers’ hiring practices Answer: D Difficulty Level: Easy Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory. Chapter Number: 1 Question Type: Multiple Choice 1. Which of the following is generally considered to be a microeconomic question? a. The relationship between the money supply and nominal GDP b. The responsiveness of aggregate demand to change in government expenditure c.T he relationship between productivity of workers and wages received by them d. The relationship between inflation and unemployment Answer: C Difficulty Level: Medium Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory.2 4. Which of the following economic decisions is not a part of the study of microeconomics ? a. A consumer's decision regarding how much of a good to purchase b. A worker's decision co ncerning which job to take c. A business firm's decision regarding how many machines to purchase d. d. The government's decision regarding the use of monetary or fiscal policy to control increasing prices Answer: D Difficulty Level: Medium Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory. 5. Macroeconomics deals primarily with: a. aggregate economic factors. b. the behavior of rational consumers. c. the role of politics in economics . d. a society’s economic and cultural environment . Answer: A Difficulty Level: Easy Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory. 6. Which of the following best describes the difference between micro and macroeconomics? a. Macroeconomics deals with bigger, more important issues, while microeconomics deals with the smaller, less significant details. b. Macroeconomics studies the actions of large firms while microeconomics studi es the behavior of small firms and individuals. c. Macroeconomics is the study of aggregate factors while microeconomics is the study of individuals and individual firms. d. Macroeconomics studies long -run behavior (one -year or more) while microeconomics studies short -run or immediate behavior. Answer: C Difficulty Level: Easy Section Reference: The Scope of Microeconomic Theory Learning Objective: Convey the scope of microeconomic theory. 3 7. Theory A is considered to be better than Theory B if : a. the assumptions of B are more realistic than the assumptions of A. b. A takes into consideration more facts than B. c. A predicts or explains a certain phenomenon better than B. d. A uses more mathematics than B. Answer: C Difficulty Level: Medium Section Reference: The Nature and Role of Theory Learning Objective: Explain why theory, is essential to understanding and predicting real -world outcomes. 8. Consider the following theory : the more one practices for the SAT test, the higher the person will score. This theory : a. is complete and very useful for high school students. b. is incomplete because it leaves out many other factors that will influence SAT scores. c. is not useful since it is hard to measure practice time. d. is useful because more practice will guarantee higher SAT scores. Answer: B Difficulty Level: Medium Section Reference: The Nature and Role of Theory Learning Objective: Explain why theory, is essential to understanding and predicting real -world outcomes. 9. The test of a theory is whether : a. its assumptions are realistic. b. it predicts the outcomes well. c. it explains the observed data perfectly . d. it incorporates every relevant factor bearing on the analysis. Answer: B Difficulty Level: Easy Section Reference: The Nature and Role of Theory Learning Objective: Explain why theory, is essential to understanding and predicting real -world outcomes. 4 10. In judging the value of a theory, the most important criteria is : a. how realistic or valid the assumptions of the theory are as compar ed to real world circumstances. b. how well the theory predicts that which it is designed to predict. c. how well the theory builds upon the theorists' experiences. d. how simple the theory is for the average people to understand. Answer: B Difficulty Level: Easy Section Reference: The Nature and Role of Theory Learning Objective: Explain why theory, is essential to und erstanding and predicting real -world outcomes. 11. Economic theory: a. can determine which public policy is the most desirable. b. tries to account for all possible influences. c. is a tool for understanding economic relationships. d. uses no assumptions in deriving results. Answer: C Difficulty Level: Easy Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 12. Which of the following is true of p ositive analysis ? a. It draws on accepted bodies of theory and evidence to ascertain the likely cons equences of a policy or action. b. It is always used to evaluate proposed policy changes in the most positive way. c. It is sufficient to determine whether a policy is desirable or undesirable. d. It claims that the impact of policies can not be quantified . Answer: A Difficulty Level: Easy Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 5 13. Value judgments: a. alwa ys produce predictable results. b. are subjective opinions that cannot be proven correct on the basis of objective facts or evidence. c. should be the basis for all serious policy disc ussion s. d. can always be tested and verified using accepted standards of logic and evidence. Answer: B Difficulty Level: Easy Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 14. Positive economic analysis utilizes : a. value judgments of highly trained professional economists. b. economic theories and empirical tests of the theories. c. normative economic theories in arriving at judgments on the suitability of a change in government economic policy. d. the same criteria as normative economics, but does not take into consideration the value judgments of the policy makers. Answer: B Difficulty Level: Medium Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 15. Which of the following is an example of a positive economic statement? a. The distribution of income in the United States should be more equal. b. The after-tax distribution of income is more equal than the pre -tax distribution of income. c. The tax system should be more progressive so that the after -tax distribution of income can be more equal. d. The government should not be involved in the income redistribution schemes. Answer: B Difficulty Level: Medium Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 6 16. Positive economics differs from normative economics in that : a. positive economics involves subjective outcomes. b. positive economics deals with propositions that can be tested. c. normative economics involves economic theory. d. normative economics can be proved correct or incorrect. Answer: B Difficulty Level: Easy Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 17. Which of the following steps in evaluating a public policy is not in the realm of positive analysis? a. Determination of the effects of the policy b. Determination of the magnitudes of the effects c. A judgment that the effects of the policy ar e desirable or undesirable d. Stating a hypothesis based on sound economic theory Answer: C Difficulty Level: Easy Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 18. Which of the following is a positive statement? a. The minimum wage should be raised to $7.50. b. If the military draft were re -instituted, military salaries would probably fall. c. Customers should not be required to show ID to buy alcohol. d. Immigration laws are bad for the economy. Answer: B Difficulty Level: Medium Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 7 19. Which of the following is an example of a normative statement? a. Students who miss more cla sses tend to earn lower grades. b. Students should make better use of their time by attending every class. c. The increasing price of textbooks has caused s tudents to purchase fewer textbooks. d. Increasing government grants and loans to college students have caused tuition fees to rise faster than the rate of inflation. Answer: B Difficulty Level: Medium Section Reference: Positive versus Normative Analysis Learning Objective: Distinguish between positive and normative analyses. 20. If the nominal price of apples has increased by 20 percent over a year in which the average price level has risen by 10 percent, then the real price of apples : a. has increased. b. has stayed the same. c. has decreased. d. cannot be determined without further information . Answer: A Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 21. What does the consumer price index measure? a. The average price of a good over five years b. The change in nominal prices of goods and services c. The change in the value of a currency d. The change in the average price level in the economy Answer: B Difficulty Leve l: Easy Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 8 22. When analyzing events across time, economists measure consumer behavior based on : a. nominal prices. b. real prices. c. complete information about buyer preferences. d. current income . Answer: B Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 23. Suppose the consumer price index was 100 in 2010 and 300 in 20 20. This implies that th e average price level : a. increased by 20 percent during this period . b. increased by 100 percent during this period . c. increased by 200 percent during this period . d. increased by 300 percent during this period . Answer: C Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 24. Suppose the consumer price index was 100 in the year 201 0 and 200 in the year 202 0. If the nomin al price of apples has increased from 100 to 150 over this period , the real price of apples has: a. fallen by 25 percent. b. fallen by 50 percent. c. risen by 50 percent. d. risen by 25 percent . Answer: A Difficulty Level: Hard Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 9 25. The relative price of a good : a. is always measured in current dollars. b. is a measure of the relative share of the consumer's income devoted to its purchase. c. reflects its price compared to prices of other goods . d. is equal to the average price of the good over the last five years. Answer: C Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 26. The real price of a good reflects : a. the purchasing power of consumers. b. its nominal price adjusted for the changing value of money. c. the absolute average price of goods and services. d. the total amount of money in circulation in the economy. Answer: B Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 27. What would be the impact on the real price of automobiles if the nominal price increase s by 60 perc ent over a ten year period? a. The real price will increase by 60 percent . b. The real price will increase, but by less than 60 p ercent. c. The real price will decrease. d. The real price cannot be determined without more information . Answer: D Difficulty Level: Medium Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 10 28. In microeconomics, the term price generally refers to the : a. relative price of an item. b. dollar price of an item. c. absolute price of an item. d. choke price of an item. Answer: A Difficulty Level: Easy Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 29. The _____ is the absolute price of a good or service that has been adjusted for the changing value of money. a. market price b. choke price c. nominal price d. real price Answer: D Difficulty Level: Easy Section Reference: Market Analysis and Real versus Nominal Prices Learning Objective: Differentiate between real and nominal prices. 30. Which of the following is not an assumption usually made about markets and market participants? a. Collective welfare maximization b. Self-interested behavior c. Scarce resources d. Rational behavior Answer: A Difficulty Level: Easy Section Reference: Basic Assumptions about Market Participants Learning Objective: Describe the basic assumptions economists make about market participants. 11 31. “Goal -oriented behavior” can best be described as: a. market participants using complete information to achieve objective ends . b. market participants using available information to achieve their personal aims . c. market participants trying to maximize social welfare . d. all market participants maximizing their efficiency to improve aggregate income . Answer: B Difficulty Level: Medium Section Reference: Basic Assumptions about Market Participants Learning Objective: Describe the basic assumptions economists make about market participants. 32. Which of the following is an assumption usually made about markets and market participants by economists ? a. Market participants are interested in maximizing social welfare . b. Market participants are generally altruist ic. c. Market participants engage in irrational behavior . d. Market participants confront scarce resources . Answer: D Difficulty Level: Easy Section Reference: Basic Assumptions about Market Participants Learning Objective: Describe the basic assumptions economists make about market participants. 33. The assumption of rationality implies that market participants : a. always choose the option with the highest gross benefit. b. assess expected benefits and expected costs. c. do not make decisions under uncertainty. d. do not care about benefits or costs accruing in the future. Answer: B Difficulty Level: Medium Section Reference: Basic Assumptions about Market Participants Learning Objective: Describe the basic assumptions economists make about market participants. 12 34. Petroleum oil is an example of : a. a renewable resource. b. a composit e good . c. a biodegradable resource. d. a scarce resource. Answer: D Difficulty Level: Easy Section Reference: Basic Assumptions about Market Participants Learning Objective: Describe the basic assumptions economists make about market participants. 35. Opportunity cost is the equivalent of : a. explicit cost. b. implicit cost. c. economic cost. d. sunk cost. Answer: C Difficulty Level: Easy Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 36. Opportunity cost is calculated as: a. sunk cost plus implicit cost. b. explicit cost plus economic cost. c. implicit cost plus explicit cost. d. explicit cost plus sunk cost. Answer: C Difficulty Level: Medium Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 13 37. The e xplicit cost of production equals : a. opportu nity cost minus sunk cost. b. implicit cost minus sunk cost. c. economic cost minus opportunity cost. d. opportunity cost minus implicit cost. Answer: D Difficulty Level: Medium Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 38. The opportunity cost of traffic congestion includes : a. lower use of gasoline. b. longer commuting time to work. c. more fuel efficient cars. d. more freeways being built. Answer: B Difficulty Level: Easy Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 39. Which one of the following is not an opportunity cost of owning a house ? a. The mortgage payment made each month to own the house b. The money you would receive from selling your house c. The membership fee paid to join the neighborhood pool d. The property tax es paid to the local government Answer: C Difficulty Level: Medium Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 14 40. Which one of the following represents an economic, but not an accounting, cost of owning a restaurant? a. The interest foregone by the owner on the personal savings invested in the restaurant b. The labor hired used to operate the restaurant c. The linens used to cover tables d. The ingred ients used to prepare the meals Answer: A Difficulty Level: Easy Section Reference: Opportunity Cost Learning Objective: Introdu ce the concept of opportunity cost and explain how economic costs differ from accounting costs. 41. Which of the following is true of sunk costs? a. It is a type of opportunity cost. b. It is a type of implicit cost. c. It should be ignored when making decisions. d. It includes annual costs like payroll, insurance expenses, etc. Answer: C Difficulty Level: Easy Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs. 42. After spending $5 million developing a new drone , you discover that a competitor is about to introduce a new model similar to yours at a lower per unit price. The $5 million development cost: a. should be factored into your decision on whether or not to introduce your new drone . b. should be ignored in your decision on whether or not to introduce your new drone . c. should not be included while determining the opportunity cost of this investment. d. should be considered as a fixed cost for the firm. Answer: B Difficulty Level: Easy Section Reference: Opportunity Cost Learning Objective: Introduce the concept of opportunity cost and explain how economic costs differ from accounting costs.