(Test Bank) Principles of Microeconomics

Case,Fair,Oster, 9

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Test Bank

9th Edition

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Test Bank for Principles of Microeconomics, The downloadable file consists of 648 pages, and the total size of the file is 6.13 MB. Purchase now only for highly discounted price.

Author(s): Case, Fair, Oster

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Test Item File to Accompany Principles of Microeconomics Test Item File 2 Ninth Edition by Case/Fair/Oster Prentice Hall c.2009 10/30/08 Contents Chapter 1 The Scope and Method of Economics 1 Chapter 2 The Economic Problem: Scarcity and Choice 29 Chapter 3 Demand, Supply, and Market Equilibrium 55 Chapter 4 Demand and Supply Applications 98 Chapter 5 Elasticity 117 Chapter 6 Household Behavior and Cons umer Choice 135 Chapter 7 The Production Process: The Behavi or of Profit-Maximizing Firms 171 Chapter 8 Short-Run Costs and Output Decisions 207 Chapter 9 Long-Run Costs and Output Decisions 252 Chapter 10 Input Demand: The Labor and Land Markets 292 Chapter 11 Input Demand: The Capital Market s and Investment Decision 323 Chapter 12 General Equilibrium and the Efficiency of Perfect Competition 348 Chapter 13 Monopoly and Antitrust Policy 377 Chapter 14 Oligopoly 425 Chapter 15 Monopolistic Competition 449 Chapter 16 Externalities, Public Goods, Imperf ect Information, and Social Choice 476 Chapter 17 Uncertainty and Asymmetric Information 517 Chapter 18 Income Distribution and Poverty 535 Chapter 19 Public Finance: The Economics of Taxation 563 Chapter 20 International Trade, Comparative Advantage, and Protectionism 592 Chapter 21 Economic Growth in Developi ng and Transitional Economies 628 Chapter 1 The Scope and Method of Economics 1.1 Why  Study Economics? 1 Multiple  Choice 1) The reasons to study economics  include which of the following? A) to be an informed  voter B) to  understand  society and global affairs C) to learn a way of thinking D) all  of the above Answer: D Diff: 1 Topic: Why  Study Economics? Skill: Fact 2) Marginalism  is A) the best alternative  that we forego 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 3) 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: 2 Topic: Why  Study Economics? Skill: Definition 4) 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 15) 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 6) 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: 2 Topic: Why  Study Economics? Skill: Definition 7) Costs that cannot be avoided,  because they have already been incurred  are known as A) differential  costs. B) marginal  costs. C) opportunity  costs. D) sunk  costs. Answer: D Diff: 2 Topic: Why  Study Economics? Skill: Definition 8) Suppose  that two weeks ago you purchased  a ticket to the symphony  for $40. Last week someone  invited you to go camping  on the same night as the symphony  concert. You would much rather go camping  than go to the symphony.  You have tried unsuccessfully  to sell the symphony  concert ticket. Which of the following  statements  regarding  this situation  is correct? A) The $40 symphony  ticket should be irrelevant  in your decision making, because it represents  the marginal  cost of going camping. B) The $40 you paid for the symphony  ticket should be irrelevant  in your decision making, because it is a sunk cost. C) The $40 you paid for the symphony  ticket is relevant to the decision,  as this represents the opportunity  cost of going camping. D) You should base your decision on whether or not going camping  will provide you with more than $40 in satisfaction. Answer: B Diff: 2 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 29) 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: Analytic AACSB: Analytic Skills 10) The concept of opportunity  cost can be applied to the analysis of ________  decision -making processes. A) only economy -wide B) only  global C) only -small -scale D) any Answer: D Diff: 2 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 11) 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: 2 Topic: Why  Study Economics? Skill: Definition 12) 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 13) 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 didnʹt 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 314) 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,  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: Analytic AACSB: Analytic Skills 15) 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,  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: Analytic AACSB: Analytic Skills 16) 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 17) You own The Wedding Crasher 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 418) Opportunity  cost is A) what we give up to get something  else. B) marginal  cost divided by sunk cost. C) the same as real cost. D) all  of the above Answer: A Diff: 1 Topic: Why  Study Economics? Skill: Definition 19) Sunk  costs A) are costs which have been incurred. B) are costs which cannot be avoided but have yet to be incurred. C) the sum of all marginal  costs. D) the sum of all opportunity  costs. Answer: A Diff: 1 Topic: Why  Study Economics? Skill: Definition 20) If you can download  10 ring tones for your cell phone for $10 or you could 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: Analytic AACSB: Analytic Skills 21) 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 is A) zero. B) $4. C) $12. D) $36. Answer: A Diff: 2 Topic: Why  Study Economics? Skill: Analytic AACSB: Analytic Skills 22) 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: 2 Topic: Why  Study Economics? Skill: Definition 523) 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: 3 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 24) The common  way of expressing  the efficient market concept is A)ʺthe only true market is a profitable  market.ʺ B)ʺthereʹs no such thing as a free lunch.ʺ C)ʺonly without government  interference  can a market survive.ʺ D)ʺonce an efficient market, always an efficient market.ʺ Answer: B Diff: 2 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 25) Related  to the Economics  in Practice on p. 6: An example of a sunk cost to Apple in its production  of the iPod is A) the $73 cost of the Toshiba hard drive. B) the cost of conception  and design of the iPod. C) the $80 value -added received by Apple. D) the cost of all of the 451 components  needed to produce the iPod. Answer: B Diff: 2 Topic: Why  Study Economics?:  Economics  in Practice Skill: Conceptual AACSB: Reflective  Thinking 26) Related  to the Economics  in Practice on p. 6: The opportunity  cost to Apple of having its 30-gigabyte  video iPod assembled  in China is A) the low wages paid to Chinese workers. B) the $4 per unit cost of assembly  in China. C) having  the iPod assembled  in the next best available  location. D) the value -added received by Apple. Answer: C Diff: 2 Topic: Why  Study Economics?:  Economics  in Practice Skill: Conceptual AACSB: Reflective  Thinking 62 True/False 1) Resources  are limited in both wealthy and poor societies. Answer: TRUE Diff: 1 Topic: Why  Study Economics? Skill: Fact 2) The value of the best alternative  foregone  is the sunk cost of making a decision. Answer: FALSE Diff: 1 Topic: Why  Study Economics? Skill: Fact 3) Opportunity  costs arise because resources  are limited. Answer: TRUE Diff: 1 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 4) Sunk costs affect marginal  decision making. Answer: FALSE Diff: 2 Topic: Why  Study Economics? Skill: Conceptual AACSB: Reflective  Thinking 5) Sunk costs are those that cannot be recaptured. Answer: TRUE Diff: 1 Topic: Why  Study Economics? Skill: Fact 1.2 The Scope of Economics 1 Multiple  Choice 1) Microeconomics  is best described  as the study of A) the choices made by individual  households,  firms, and governments. B) inflation,  unemployment,  gross national product,  and the nationʹs economy  as a whole. C) how markets interact in the aggregate  economy. D) marginal  changes in the economy. Answer: A Diff: 2 Topic: The  Scope of Economics Skill: Definition 72) Macroeconomics  is best described  as the study of A) very large issues. B) the choices made by individual  households,  firms, and governments. C) the nationʹs economy  as a whole. D) the relationship  between inflation and wage inequality. Answer: C Diff: 2 Topic: The  Scope of Economics Skill: Definition 3) Which  of the following  is a microeconomics  question? A) Is it sensible for a government  to subsidize  tobacco production? B) Why do some countries  grow faster than others? C) Should  Congress  and the president  take action to reduce global warming? D) Should  the government  attempt to influence  the interest rate to lower inflation? Answer: A Diff: 2 Topic: The  Scope of Economics Skill: Conceptual AACSB: Reflective  Thinking 4) Which  of the following  is a macroeconomics  question? A) Should  we have a constitutional  amendment  to balance the federal budget? B) Why does a firm decide to enter a particular  market? C) Should  the government  prevent the merger of two large firms? D) Should  the government  put a tax on alcohol in an attempt to reduce highway  fatalities? Answer: A Diff: 1 Topic: The  Scope of Economics Skill: Conceptual AACSB: Reflective  Thinking 5) We can use macroeconomic  analysis to A) learn how to balance a checkbook. B) study  the choices made by households. C) understand  marginal  changes in the macroeconomy. D) understand  why economies  grow. Answer: D Diff: 1 Topic: The  Scope of Economics Skill: Fact 2 True/False 1) The rate of unemployment  is a topic of microeconomics. Answer: FALSE Diff: 1 Topic: The  Scope of Economics Skill: Conceptual AACSB: Reflective  Thinking 82) The rate of inflation is a topic of macroeconomics. Answer: TRUE Diff: 2 Topic: The  Scope of Economics Skill: Conceptual AACSB: Reflective  Thinking 1.3 The Method of Economics 1 Multiple  Choice 1) Which  of the following  is an example of a normative  question? A) How will an increase in the price of diesel fuel affect truck drivers? B) What fraction of an income -tax rebate check will be spent on consumer  goods? C) Should  the government  provide free prescription  drugs to lower -income citizens? D) How will an increase in the minimum  wage affect migrant workers? Answer: C Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 2) The compilation  of data that describe phenomena  and facts is referred to as A) an economic  model. B) Marxist  ideology. C) a normative  statement. D) descriptive  economics. Answer: D Diff: 2 Topic: The  Method of Economics Skill: Definition 3) The amount of exercise that one gets is an important  factor in the determination  of his general state of health. This is best described  as A) a positive statement. B) Marxist  ideology. C) a normative  statement. D) descriptive  economics. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 4) Opportunity  cost is A) the additional  cost incurred  from the consumption  of one more unit of output. B) the cost involved  when choosing  between alternatives. C) the cost of production  which cannot be recaptured. D) the total cost incurred  from the consumption  of additional  output. Answer: B Diff: 2 Topic: The  Method of Economics Skill: Definition 95) An approach  to economics  that applies statistical  techniques  and data to economic  problems  is called A) Ockham ʹs razor. B) laissez -faire economics. C) positive  economics. D) normative  economics. Answer: C Diff: 1 Topic: The  Method of Economics Skill: Fact 6) Normative  economics A) is the focus of most modern economic  reasoning. B) answers  the question  ʺWhat ought to be?ʺ C) predicts  the consequences  of alternative  actions. D) answers  the question  ʺWhat is?ʺ Answer: B Diff: 1 Topic: The  Method of Economics Skill: Fact 7) Which  of the following  is a question  answered  with normative  economic  reasoning? A) If the college offers free parking for students,  will more students  drive to campus? B) If the college provided  more financial  aid assistance,  would more students  benefit? C) If the college increased  tuition, would class size decline? D) Should  the college cut tuition to stimulate  enrollment? Answer: D Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 8) Which  of the following  is a question  answered  with positive economic  analysis? A) Should  the college offers free parking for students? B) Should  the college provide more financial  aid assistance? C) If the college increased  tuition, will class size decline? D) Should  the college cut tuition to stimulate  enrollment? Answer: C Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 9) The reoccurrence  of contagious  diseases should be significantly  lower in a technically advanced  nation such as the United States. This statement  is best described  as A) a normative  statement. B) a  positive statement. C) a descriptive  economics  statement. D) an  implication  of an efficient market. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 1010) There  is great concern over the fact that global warming  is causing permanent  damage to the global environment.  A study of the costs and benefits of purchasing  carbon offsets to combat global warming  is an example of A) labor economics. B) normative  economics. C) positive  economics. D) laissez -faire economics. Answer: C Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 11) The compilation  of data that describe phenomena  and facts refers to A) descriptive  economics. B) normative  economics. C) laissez -faire economics. D) collective  economics. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Definition 12) An economist  collecting  data on the employment  benefits and salaries in the chemical engineering  industry  is an example of A) descriptive  economics. B) the  fallacy of composition. C) the post hoc fallacy. D) ceteris  paribus. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking Refer to Scenario  1.1 below to answer the questions  that follow. SCENARIO  1.1: A scientist wants to understand  the relationship  between automobile  emissions  and the level of global warming.  The scientist collects data on the volume of automobile  emissions  and the levels of global warming  over time. The scientist concludes  that a 1% increase in automobile  emissions  causes a 0.0003% increase in average global temperatures.  From this information  he concludes  that the automobile emissions  are harmful to the environment  and should be reduced to stop the increase in global temperatures. 13) Refer  to Scenario  1.1. The statement  that a 1% increase in the automobile  emissions  causes a 0.0003% increase in average global temperatures  is an example of A) positive  economics. B) descriptive  economics. C) normative  economics. D) Marxist  economics. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 1114) Refer  to Scenario  1.1. The statement,  ʺautomobile  emissions  are harmful to the environment and should be reduced to stop the increase in global temperatures, ʺ is an example of A) positive  economics. B) descriptive  economics. C) normative  economics. D) Marxist  economics. Answer: C Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 15) Refer  to Scenario  1.1. The process of collecting  data on automobile  emissions  and global warming  levels is an example of A) law and economics. B) economic  history. C) econometrics. D) descriptive  economics. Answer: D Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 16) Refer  to Scenario  1.1. The statement  that an increase in automobile  emissions  causes an increase in global warming  is an example of A) an economic  theory. B) descriptive  reasoning. C) deductive  reasoning. D) normative  economics. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 17) Refer  to Scenario  1.1. A graph of the volume of automobile  emissions  on one axis and the level of average global temperatures  on the other axis is an example of A) an economic  model. B) an  economic  theory. C) a variable theory. D) inductive  reasoning. Answer: A Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 18) By invoking  the assumption  of ceteris paribus , economists A) consider  the impact of all relevant factors. B) hold all variables  constant when analyzing  a model. C) isolate  the impact of one single variable while holding all other variables  constant. D) exclude  irrelevant  detail when analyzing  a model. Answer: C Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 1219) Ockham ʹs razor is the principle  that states A) supply  creates its own demand. B) we must forego something  when making a decision. C) costs which have been incurred  cannot be avoided. D) irrelevant  detail should not be included  in a model. Answer: D Diff: 2 Topic: The  Method of Economics Skill: Definition 20) The phrase ceteris paribus means A)ʺscarcity is a fact of life.ʺ B)ʺall else equal.ʺ C)ʺthere is no such thing as a free lunch.ʺ D)ʺeverything  affects everything  else.ʺ Answer: B Diff: 2 Topic: The  Method of Economics Skill: Definition 21) The Latin phrase ceteris paribus means that when a relationship  between two variables  is being studied A)both are treated as unpredictable. B) neither  of those two variables  is allowed to change. C) all other variables  are held fixed. D) we recognize  that some factors are unknown. Answer: C Diff: 2 Topic: The  Method of Economics Skill: Definition 22) Isabel  noted that whenever  she wore her green contact lenses, the Chicago White Sox would win that evening.  Based on this observation,  she developed  the ʺgreen -eyes -for-White -Soxʺ theory of winning.  It is most likely true that Isabel A) showed  good reasoning  for the reason the White Sox would win. B) committed  the ceteris paribus error. C) committed  the fallacy of composition. D) was too quick to conclude  that correlation  implies causation. Answer: D Diff: 3 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 23) Whenever  a former governor  is elected president,  the unemployment  rate decreases;  whenever a former congressman  is elected president,  the inflation rate increases.  This statement  is an example of A) fallacy  of composition. B) post hoc, ergo prompter hoc fallacy. C)ceteris paribus fallacy. D) fallacy  of inductive  reasoning. Answer: B Diff: 2 Topic: The  Method of Economics Skill: Conceptual AACSB: Reflective  Thinking 13