(Test Bank) Principles of Microeconomics

Case, 13

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1 Copyright © 2020 Pearson Education, Inc. Principles of Microeconomics, 13e (Case/Fair/Oster) Chapter 1 The Scope and Method of Economics 1.1 Why Study Economics? 1) Which of the following is not listed in the book as a reason to study economics? A) to learn a way of thinking B) to understand society C) to be an informed citizen D) to learn how to make lots of money Answer: D Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 2) Among the fundamental concepts in economics is A) opportunity cost. B) marginalism. C) efficient markets. D) all of the above Answer: D Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 3) Which of the following is the best definition of economics? A) the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided B) the study of how consumers spend their income C) the study of how business firms decide what inputs to hire and what outputs to produce D) the study of how the federal government allocates tax dollars Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 2 Copyright © 2020 Pearson Education, Inc. 4) The rise of the modern factory system in England during the late eighteenth and early nineteenth centuries is known as the A) Great Migration. B) Industrial Revolution. C) Wealth of Nations. D) Dark Ages. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 5) Which of the following statements is not correct? A) Economics is a behavioral science. B) In large measure, economics is the study of how people make choices. C) If poverty were eliminated, there would be no reason to study economics. D) Economic analysis can be used to explain how both individuals and societies make decisions. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 6) The study of economics A) is a very narrow endeavor. B) is a way of analyzing decision-making processes caused by scarcity. C) is concerned with proving that capitalism is better than socialism. D) focuses on how a business should function. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 7) Which of the following is not one of the three fundamental concepts of economics? A) profit maximization B) marginalism C) opportunity cost D) the working of efficient markets Answer: A Diff: 1 Topic: Why Study Economics? Skill: Conceptual Learning Outcome: Micro-1 3 Copyright © 2020 Pearson Education, Inc. 8) Suppose that you purchased a ticket to a jazz festival for $100 from an online ticket broker. Once you arrived at the festival, you discovered that parking costs you an additional $15. In this situation, the additional $15 you pay for parking is an example of A) an economic loss. B) opportunity cost. C) marginal cost. D) an inefficient cost. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 9) You have decided that you want to attend a costume party as Black Panther. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will cost you $25 more. The marginal cost of completing the costume is A) $15. B) $25. C) $40. D) $65. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 10) The concept of opportunity cost A) is relevant only to economics. B) can be applied to the analysis of any decision-making process. C) applies to consumers but not to firms. D) refers only to actual payments and incomes. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 4 Copyright © 2020 Pearson Education, Inc. 11) Opportunity cost is A) that which we forgo, or give up, when we make a choice or a decision. B) a cost that cannot be avoided, regardless of what is done in the future. C) the additional cost of producing an additional unit of output. D) the additional cost of buying an additional unit of a product. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 12) The reason that opportunity costs arise is that A) an economy relies on money to facilitate exchange of goods and services. B) resources are scarce. C) there are no alternative decisions that could be made. D) people have limited wants. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 13) Which of the following is not an opportunity cost of attending college? A) the tuition you pay B) the income you could have earned if you didn't attend college C) the alternative uses of the time you spend studying D) the cost of the food that you consume while you are attending college Answer: D Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 5 Copyright © 2020 Pearson Education, Inc. 14) If your tuition is $5,000 this semester, your books cost $600, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $3,000 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $5,600. B) $5,900. C) $10,100. D) $11,600. Answer: C Diff: 3 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 15) If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $26,500. B) $26,800. C) $31,000. D) $38,500. Answer: C Diff: 3 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 16) If you own a building and you decide to use that building to open a book store, A) there is no opportunity cost of using this building for a book store because you own it. B) there is an opportunity cost of using this building for a book store because it could have been used in other ways. C) the opportunity costs equal the cost of inventory. D) the only cost relevant to this decision is the price you paid for the building. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 6 Copyright © 2020 Pearson Education, Inc. 17) You own the video game Grand Theft Auto V. The opportunity cost of playing this game for the second time A) is zero. B) is one-half the cost of the game, as this is the second time you have played it. C) is the value of the alternative use of the time you spend playing the game. D) cannot be calculated. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 18) That which we forgo, or give up, when we make a choice or decision is called A) out-of-pocket cost. B) marginal cost. C) real cost. D) opportunity cost. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 19) Economists often refer to risk-free ventures as A) efficient market outcomes. B) profit opportunities. C) those with no opportunity costs. D) break-even propositions. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 20) If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the tenth DVD is A) $4. B) $13. C) $14. D) $130. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical Learning Outcome: Micro-1 7 Copyright © 2020 Pearson Education, Inc. 21) If you eat at a sushi restaurant that charges $20 for its all-you-can-eat sushi special, then the marginal cost of your 10th piece of sushi is A) zero. B) $2. C) $200. D) $2,000. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 22) A market in which profit opportunities are eliminated almost instantaneously is A) a laissez-faire market. B) a capitalist market. C) a socialist market. D) an efficient market. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 23) If information is less costly and more easily available, then usually this A) makes markets more efficient. B) makes markets less efficient. C) increases profit opportunities. D) increases the opportunity cost of acquiring more information. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 24) An efficient market is a market in which A) everyone always gets what they want. B) profit opportunities are eliminated almost instantaneously. C) profits are always very high and persistent. D) opportunity costs are zero. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 8 Copyright © 2020 Pearson Education, Inc. 25) Related to the Economics in Practice on page 3: According to the Economics in Practice, when rains in rural India are plentiful, the opportunity cost of having someone out of the labor force, and therefore unable to work in agricultural production, A) increases. B) decreases. C) remains unchanged. D) is zero, because the person is out of the labor force. Answer: A Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 26) Related to the Economics in Practice on page 3: According to the Economics in Practice, when rural India is suffering from a drought where agricultural output is low, the opportunity cost of having someone out of the labor force, and therefore unable to work in agricultural production, is A) high B) low. C) infinite. D) zero, because the person is out of the labor force. Answer: B Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 27) Related to the Economics in Practice on page 4: According to the Economics in Practice, in terms of wages and job availability, those students graduating during a recession with a degree in economics are ________ those graduating with a degree in sociology. A) better off than B) worse off than C) affected equally to D) There seems to be no correlation between a student's major and wages or employment during a recession. Answer: A Diff: 1 Topic: Why Study Economics?: Economics in Practice Skill: Fact Learning Outcome: Micro-1 9 Copyright © 2020 Pearson Education, Inc. 28) Related to the Economics in Practice on page 6: According to the Economics in Practice, a majority of the $10 retail value of the Barbie doll A) is needed to pay for the cost of the Taiwanese plastic used to make the dolls. B) pays for the Chinese labor used to assemble the doll. C) is captured in the United States. D) goes to the Japanese manufacturer of the hair which is used for the dolls. Answer: C Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Fact Learning Outcome: Micro-1 29) Related to the Economics in Practice on page 6: The opportunity cost to Mattel of having its Barbie doll assembled in China is A) the low wages paid to Chinese workers. B) the $2 export value the doll carries when it leaves Hong Kong. C) the $8 of its $10 retail value which is captured in the United States. D) having the Barbie doll assembled in the next best available location. Answer: D Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 30) The reasons to study economics include which of the following? A) to be an informed citizen B) to understand society C) to learn a way of thinking D) all of the above Answer: D Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 31) Marginalism is A) the best alternative that we forgo when making a decision. B) the study of how societies choose to use scarce resources. C) a market situation in which profit opportunities are eliminated almost instantaneously. D) the process of analyzing the additional costs or benefits arising from a decision. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 10 Copyright © 2020 Pearson Education, Inc. 32) Economics is best defined as the study of A) financial decision making. B) how consumers make purchasing decisions. C) choices made by people faced with scarcity. D) inflation, unemployment, and economic growth. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 33) The Industrial Revolution refers to the rise of the modern factory system in ________ during the late eighteenth and early nineteenth centuries. A) the United States B) England C) France D) Germany Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 34) Which of the following statements is correct? A) Economics is a natural science. B) In large measure, economics is the study of how people make choices. C) If poverty was eliminated there would be no reason to study economics. D) Economic analysis can be used to explain how societies, but not individuals, make decisions. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 35) Economics is the study of A) how to invest in the stock market. B) how society uses limited resources. C) the role of money in markets. D) how government officials decide which goods and services are produced. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 11 Copyright © 2020 Pearson Education, Inc. 36) You decide to go to LEGOLAND after you visit Disneyworld in Orlando. The cost of going to LEGOLAND after you visit Disneyworld is the ________ cost of getting from Disneyworld to LEGOLAND. A) efficiency B) marginal time and money C) opportunity D) profit maximizing Answer: B Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 37) Suppose that you sign up for a one-day cooking class at the local culinary school for $75. Once you arrive at the class, you discover that you must purchase an apron for an additional $5. In this situation, the additional $5 you pay for the apron is an example of A) an inefficient cost. B) marginal cost. C) opportunity cost. D) an economic loss. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 38) You have decided that you want to attend a renaissance fair as King Henry VIII. You estimate that it will cost $80 to assemble your costume. After spending $80 on the costume, you realize that the additional pieces you need will cost you $20 more. The marginal cost of completing the costume is A) $20. B) $60. C) $80. D) $100. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 12 Copyright © 2020 Pearson Education, Inc. 39) You have narrowed down your Friday night plans to either going bowling or playing billiards. If you choose to go bowling, then for you playing billiards is the ________ of going bowling. A) opportunity cost B) marginal cost C) empirical cost D) variable cost Answer: A Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 40) That which we forgo, or give up, when we make a choice or a decision is known as A) equity. B) causation. C) correlation. D) opportunity cost. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 41) Scarce resources give rise to the concept of A) efficient markets. B) opportunity costs. C) laissez-faire. D) positive economics. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro-1 42) Which of the following is an opportunity cost of attending college? A) the cost of your apartment or dorm B) the income you could have earned if you didn't attend college C) the cost of the food that you consume while you are attending college D) the education you gain from attending college Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 13 Copyright © 2020 Pearson Education, Inc. 43) If your tuition is $2,000 this semester, your books cost $400, you can only work 10 rather than 40 hours per week during the 15 weeks you are taking classes and you make $12 per hour, and your room and board is $4,000 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $2,400. B) $2,760. C) $7,800. D) $11,800. Answer: C Diff: 3 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 44) If your tuition is $20,000 this semester, your books cost $2,000, you can only work 10 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $8,000 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $22,000. B) $22,150. C) $28,750. D) $36,750. Answer: C Diff: 3 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 45) If you own a condo and you decide to lease it to your cousin, A) there is no opportunity cost of leasing the condo because you own it. B) there is an opportunity cost of leasing the condo because you could have chosen to live in it. C) there is no opportunity cost of leasing the condo because you collect rent from your cousin. D) the only cost relevant to this decision is the price you paid for the condo. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 14 Copyright © 2020 Pearson Education, Inc. 46) You own Star Wars - The Last Jedi on DVD. The opportunity cost of watching this DVD for the fourth time A) is zero, since you own it. B) is one-fourth the cost of the DVD, as this is the fourth time you have watched it. C) is the value of the alternative use of the time you spend watching the DVD. D) must be the same as the opportunity cost of watching it the first time. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1 47) Opportunity cost is A) what we give up to get something else. B) marginal cost divided by total cost. C) the same as real cost. D) all of the above. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 48) Economists often refer to "good deals" as A) profit opportunities. B) break-even propositions. C) efficient market outcomes. D) those with no opportunity cost. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 49) If you can download 10 ring tones for your cell phone for $10 or you can download 11 ring tones for your cell phone for $10.50, then the marginal cost of the eleventh ring tone is A) $0.50. B) $10.00. C) $10.50. D) $20.50. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 15 Copyright © 2020 Pearson Education, Inc. 50) If you eat at a Las Vegas casino that charges $12 for its all you can eat buffet, then the marginal cost of your third trip to the buffet line is A) zero. B) $4. C) $12. D) $36. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro-1 51) An efficient market is a market A) that deals in unlimited resources. B) in which long-term profits are guaranteed. C) in which profit opportunities are eliminated almost instantaneously. D) in which there are no opportunity costs. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro-1 52) If information is more costly and less easily available, then usually this A) makes markets more efficient. B) makes markets less efficient. C) decreases profit opportunities. D) decreases the opportunity cost of acquiring more information. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro-1