(Test Bank) Principles of Economics, Australian Edition

Karlan, 2

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Test Bank

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Test Bank for Principles of Economics, Australian Edition, The downloadable file consists of 495 pages, and the total size of the file is 5.9 MB. Purchase now only for highly discounted price.

Author(s): Karlan

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© McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank Chapter 01 Testbank 1. Which of the following statements best describes the study of economics? A. Economics studies how the government handles fluctuation in business cycles. B. Economics studies how individuals and groups manage resources. C. Economics studies how people maximise returns in the stock market. D. Economics studies how governments determine appropriate tax rates. 2. Which of the following could be considered a microeconomic issue? A. Chinese economic growth has declined. B. The Reserve Bank of Australia cuts key interest rates in order to stimulate lending. C. Kmart decides to add more self-checkout machines as the cost of labour rises. D. India experiences a reduction in unemployment after opening its borders to trade. 3. Which of the following could be an example of a question that would be studied in microeconomics? A. Why did our economic growth rate slow down during the 2000s? B. How did the recession end in 2009 if unemployment continued to rise? C. How will the legalisation of marijuana affect the market for cigarettes? D. When should Parliament raise taxes in order to tackle the debt crisis? 4. The Australian Bureau of Statistics releases last quarter’s growth rate in real GDP. This release would most likely have been written by what kind of an economist? A. A monetary economist B. A macroeconomist C. A microeconomist D. A labour economist 5. Which of the following economic decisions would most likely be studied by a macroeconomist? A. Domino’s Pizza decides to provide quantity discounts in order to increase revenue. B. A local entrepreneur decides to open a Subway store in the local Kmart carpark. C. The government of Estonia implements a flat rate personal income tax for all citizens. D. Prices for train fares rise as labour unions negotiate higher wage rates. 6. When we assume that consumers want to pay the lowest price possible, we assume that consumers are: A. cheap. B. deceitful. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank C. rational. D. informed. 7. Scarcity reflects our inability to satisfy wants due to: A. unlimited resources. B. limited resources. C. inefficient political systems. D. unemployed workers. 8. The problem created by ‘scarcity’: A. could be solved if more people worked overtime. B. is not a concern for the top income earners. C. is an individual concern but not a concern on the macro level. D. applies to everyone because it is a fact of life. 9. The problem of having unlimited wants under the constraint of limited resources can describe the problem of: A. opportunity cost. B. sunk costs. C. scarcity. D. the marginal principle. 10. ‘There is no such thing as a free lunch.’ Which economic concept is this statement associated with? A. Maximisation B. Trade-offs C. Basic necessities D. Income effect 11. If Johnny weren’t in economics class this morning, he’d be sleeping. The value Johnny places on sleeping represents his: A. marginal benefit. B. incentives. C. sunk cost. D. opportunity cost. 12. You are shopping at the local shopping centre with an $80 gift voucher. Only three items catch your attention. The items include a Justin Bieber sheet set, a remote control helicopter and an ‘Amazing Ab Belt’. You would be willing to give up $60 for the sheets, $70 for the belt and $80 for the helicopter. Knowing this, you decide to purchase the helicopter. The opportunity cost of the helicopter was: © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank A. $130, the combined value of the alternatives forgone. B. $80, the amount of the gift voucher spent. C. $70, the value of the ab belt. D. $60, the value of the sheets. 13. Judy would like to enjoy freshly grown vegetables from her own garden but also wants her daughter to enjoy summers with a swimming pool in the backyard. Despite having a green thumb, she chooses to use her extra land for a swimming pool. The opportunity cost of the swimming pool is: A. equal to the cost of building and maintaining the pool. B. the value she places on having her own garden. C. the value of watching her daughter grow up enjoying a swimming pool. D. the savings gained by not having to pay for fertiliser and vegetable plants. 14. After purchasing a coffee cup from your local service station for $5.00, you can always refill your cup for $0.50. The marginal cost of your tenth cup of coffee purchased at the service station is: A. $0.50. B. $5.00. C. $10.00. D. $5.50. 15. The extra cost associated with producing or consuming the next unit is called the: A. variable cost. B. marginal cost. C. utility cost. D. sunk cost. 16. Your football team has a commanding lead toward the end of the last quarter, so you suggest to your friend that you leave early to beat traffic. Your friend does not like the idea because he paid $50 to see the game. The $50 already spent on the game is an example of: A. an implicit cost. B. a sunk cost. C. a normal cost. D. a variable cost. 17. Applying for a loan in five-group persons is called: A. family and friends lending. B. party of five lending. C. group responsibility. D. pooling. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank 18. Which of the following is a positive incentive? A. A credit card offers 0 per cent balance transfer rates for someone to open an account. B. McDonalds decides to offer a white chocolate mocha. C. A school teacher decides to retire and focus on gardening. D. A business decides to leave the industry. 19. An incentive is: A. the marginal cost of engaging in a course of action. B. the marginal benefit of engaging in a course of action. C. something that causes people to behave in a certain way by changing the trade-offs they face. D. rational behaviour that involves thinking on the margin. 20. The cafe down the road announces a ‘buy one get one free’ brekkie roll deal. This is an example of: A. the use of incentives. B. a macroeconomic decision. C. hoarding scarce resources. D. how people assess the health benefit of fast-food breakfast. 21. Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials. The government’s decision to offer low tax rates to entrepreneurs is: A. providing room for an economic expansion. B. providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth. C. providing a disincentive, in the hopes that more entrepreneurs will avoid risk and not grow. D. providing a disincentive, in the hopes that entrepreneurs will not get into tax default after assuming too much risk. 22. Which of the following is an example of a disincentive? A. The police post mugshots of all recent arrests online to discourage potential law breakers. B. You offer workers a bonus if they sell 100 widgets per month. C. A local gym offers a weight loss competition and the winner earns a free trip to Fiji. D. Your lecturer offers to edit your paper before it’s graded if you turn it in early. 23. ‘Late registration will result in an additional $30 fee.’ This is an example of: A. trade-off. B. a disincentive. C. marginal cost. D. group responsibility. 24. The idea of efficiency is used to address which of the following questions? © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank A. What are the wants and constraints of those involved? B. What are the trade-offs? C. How will others respond? D. Why isn’t everyone already doing it? 25. A resource is anything that: A. can be touched and can be used to produce something of value. B. is a natural gift from nature, excluding human talents. C. has been used to create a good or service. D. can be used to make something of value. 26. The use of resources in the most productive way possible to produce the goods and services that have the greatest total economic value to society is called: A. allocation optimisation. B. efficiency. C. sustainability. D. economic quantity. 27. If people have never implemented an idea that you believe offers substantial opportunity: A. you should seek a low interest loan immediately in order to launch your product. B. you should conclude people are irrational. C. your evaluation might be missing something and you should carefully revisit the first three economists’ questions. D. you should conclude that you are being irrational. 28. If your idea has not been implemented yet, but actually does offer a profitable opportunity, it is likely an example of: A. innovation. B. market failure. C. intervention. D. goals other than profit. 29. If an idea has not been implemented because a monopoly producer has placed a barrier to entry, the circumstances are not normal due to: A. innovation. B. market failure. C. intervention. D. goals other than profit. 30. Economic analysis requires us to combine: A. unlimited resources with limited wants. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank B. theory with observations. C. developed and developing nations. D. normative and positive. 31. When two variables have been observed to have a tendency to occur at the same time, we can say there is ____________ but not necessarily ____________. A. causation; correlation B. correlation; causation C. positivity; causation D. normality; correlation 32. ‘Which came first, the chicken or the egg?’ This question seeks to address the common fallacy of __________ in the context of correlation and causation. A. reverse causality B. omitted variables C. linear relationships D. comparative analysis 33. A relationship between two events, where one event occurring brings about the other, is best described as: A. a pattern. B. a trend. C. causation. D. correlation. 34. ‘More people purchase lip balm when the weather forecast predicts a windy week ahead.’ This statement implies that: A. buying lip balm causes it to be windy. B. people plan on kissing more on windy days. C. buying lip balm is correlated with the announcement of a windy week. D. the weather channel is getting a kickback from the makers of lip balm. 35. When the price of milk rises, there is no change in the amount of dog food purchased. This is an example of: A. indifference trade-off between the two goods. B. the interaction between two correlated goods. C. two items that are uncorrelated. D. the value people place on dogs versus milk. 36. As the prices of Doritos rise, salsa sales tend to fall. This is an example of: A. a positive correlation. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank B. inferior goods. C. two uncorrelated events. D. a negative correlation. 37. The Geelong Cats have won 90 per cent of their last 20 games played under a full moon. This means: A. the weather affects how they play. B. there is a positive correlation between their play and the occurrence of a full moon. C. that full moons cause the team to play better. D. that causation can be found between the two events. 38. One of the most basic models of the economy is: A. real GDP per capita. B. the labour force survey. C. the consumer expenditure model. D. the circular flow model. 39. The two most important actors of the economy are: A. land and capital. B. households and firms. C. firms and government. D. exports and imports. 40. Households are vital to the circular flow model in what two ways? A. They supply factors of production and purchase goods and services. B. They export goods and services and import goods and services. C. They vote for political officers and pay taxes. D. They facilitate exchange between consumers and firms. 41. Which actor in the circular flow model buys or rents land, labour and capital? A. Firms B. Households C. Markets for factors of production D. Government 42. Which actor in the circular flow model is on the supply side of the factor market? A. Firms B. Households C. Market for goods and services D. Government © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank 43. The two flows, or things being exchanged, in the circular flow model are: A. inputs and outputs. B. imports and exports. C. inputs/outputs and money. D. land and labour. 44. Which type of statement is most likely to include the word ‘should’? A. Positive statement B. Normative statement C. Fair statement D. Factual statement 45. A normative statement is generally based upon: A. data that can be tested. B. a factual claim. C. moral beliefs. D. scientific fact. 46. Which of the following is an example of a positive statement? A. The state government should allocate more funds toward education. B. Teachers should be paid higher salaries. C. Individuals with a bachelor’s degree earn higher average incomes than those with only a high school certificate. D. The consumption of marijuana is unacceptable and should never be legally allowed in a society. 47. Which of the following is an example of a normative statement? A. HECS debts are rising. B. Twenty-seven per cent of Australians have a bachelor’s degree. C. The average income of a university graduate exceeds that of the average high school graduate. D. State governments should pay for the first two years of college at public institutions. 48. Which of the following is an example of a positive statement? A. The A-League should have adopted a knockout system 10 years ago. B. An increase in minimum wages results in higher teenage unemployment. C. Teachers should be allowed to carry tasers into the classroom. D. Cats are better pets than dogs. 49. A statement that ‘a hair stylist should not have to obtain a cosmetology license’ is an example of what kind of statement? A. Uninformed © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank B. Biased C. Positive D. Normative 50. Which of the following is an example of a normative statement? A. Tom recently graduated with an Honours degree in economics. B. Refugees should be allowed into Australia. C. The cost of basic health insurance rose from the previous year. D. The minimum wage in Australia is $18.93 per hour. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank Chapter 01 Testbank Key 1. Which of the following statements best describes the study of economics? A. Economics studies how the government handles fluctuation in business cycles. B. Economics studies how individuals and groups manage resources. C. Economics studies how people maximise returns in the stock market. D. Economics studies how governments determine appropriate tax rates. Ans: B AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 2. Which of the following could be considered a microeconomic issue? A. Chinese economic growth has declined. B. The Reserve Bank of Australia cuts key interest rates in order to stimulate lending. C. Kmart decides to add more self-checkout machines as the cost of labour rises. D. India experiences a reduction in unemployment after opening its borders to trade. Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 3. Which of the following could be an example of a question that would be studied in microeconomics? A. Why did our economic growth rate slow down during the 2000s? B. How did the recession end in 2009 if unemployment continued to rise? C. How will the legalisation of marijuana affect the market for cigarettes? D. When should Parliament raise taxes in order to tackle the debt crisis? Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 4. The Australian Bureau of Statistics releases last quarter’s growth rate in real GDP. This release would most likely have been written by what kind of an economist? A. A monetary economist B. A macroeconomist © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank C. A microeconomist D. A labour economist Ans: B AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 5. Which of the following economic decisions would most likely be studied by a macroeconomist? A. Domino’s Pizza decides to provide quantity discounts in order to increase revenue. B. A local entrepreneur decides to open a Subway store in the local Kmart carpark. C. The government of Estonia implements a flat rate personal income tax for all citizens. D. Prices for train fares rise as labour unions negotiate higher wage rates. Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 6. When we assume that consumers want to pay the lowest price possible, we assume that consumers are: A. cheap. B. deceitful. C. rational. D. informed. Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 7. Scarcity reflects our inability to satisfy wants due to: A. unlimited resources. B. limited resources. C. inefficient political systems. D. unemployed workers. Ans: B AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank 8. The problem created by ‘scarcity’: A. could be solved if more people worked overtime. B. is not a concern for the top income earners. C. is an individual concern but not a concern on the macro level. D. applies to everyone because it is a fact of life. Ans: D AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 9. The problem of having unlimited wants under the constraint of limited resources can describe the problem of: A. opportunity cost. B. sunk costs. C. scarcity. D. the marginal principle. Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.1 Explain the economic concept of scarcity. Topic: The basic insights of economics 10. ‘There is no such thing as a free lunch.’ Which economic concept is this statement associated with? A. Maximisation B. Trade-offs C. Basic necessities D. Income effect Ans: B AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Easy Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 11. If Johnny weren’t in economics class this morning, he’d be sleeping. The value Johnny places on sleeping represents his: A. marginal benefit. B. incentives. C. sunk cost. D. opportunity cost. Ans: D © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 12. You are shopping at the local shopping centre with an $80 gift voucher. Only three items catch your attention. The items include a Justin Bieber sheet set, a remote control helicopter and an ‘Amazing Ab Belt’. You would be willing to give up $60 for the sheets, $70 for the belt and $80 for the helicopter. Knowing this, you decide to purchase the helicopter. The opportunity cost of the helicopter was: A. $130, the combined value of the alternatives forgone. B. $80, the amount of the gift voucher spent. C. $70, the value of the ab belt. D. $60, the value of the sheets. Ans: C AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Hard Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 13. Judy would like to enjoy freshly grown vegetables from her own garden but also wants her daughter to enjoy summers with a swimming pool in the backyard. Despite having a green thumb, she chooses to use her extra land for a swimming pool. The opportunity cost of the swimming pool is: A. equal to the cost of building and maintaining the pool. B. the value she places on having her own garden. C. the value of watching her daughter grow up enjoying a swimming pool. D. the savings gained by not having to pay for fertiliser and vegetable plants. Ans: B AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 14. After purchasing a coffee cup from your local service station for $5.00, you can always refill your cup for $0.50. The marginal cost of your tenth cup of coffee purchased at the service station is: A. $0.50. B. $5.00. C. $10.00. D. $5.50. Ans: A © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank AACSB: Reflective Thinking Blooms: Comprehension Difficulty: Medium Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 15. The extra cost associated with producing or consuming the next unit is called the: A. variable cost. B. marginal cost. C. utility cost. D. sunk cost. Ans: B AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Easy Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 16. Your football team has a commanding lead toward the end of the last quarter, so you suggest to your friend that you leave early to beat traffic. Your friend does not like the idea because he paid $50 to see the game. The $50 already spent on the game is an example of: A. an implicit cost. B. a sunk cost. C. a normal cost. D. a variable cost. Ans: B AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Medium Learning Objective: 1.2 Explain the economic concepts of opportunity cost and marginal decision making. Topic: The basic insights of economics 17. Applying for a loan in five-group persons is called: A. family and friends lending. B. party of five lending. C. group responsibility. D. pooling. Ans: C AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Easy Learning Objective: 1.3 Explain the economic concept of incentives. Topic: The basic insights of economics 18. Which of the following is a positive incentive? A. A credit card offers 0 per cent balance transfer rates for someone to open an account. © McGraw-Hill Australia Karlan, Principles of Economics 2e Chapter 01 Testbank B. McDonalds decides to offer a white chocolate mocha. C. A school teacher decides to retire and focus on gardening. D. A business decides to leave the industry. Ans: A AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Easy Learning Objective: 1.3 Explain the economic concept of incentives. Topic: The basic insights of economics 19. An incentive is: A. the marginal cost of engaging in a course of action. B. the marginal benefit of engaging in a course of action. C. something that causes people to behave in a certain way by changing the trade-offs they face. D. rational behaviour that involves thinking on the margin. Ans: C AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Easy Learning Objective: 1.3 Explain the economic concept of incentives. Topic: The basic insights of economics 20. The cafe down the road announces a ‘buy one get one free’ brekkie roll deal. This is an example of: A. the use of incentives. B. a macroeconomic decision. C. hoarding scarce resources. D. how people assess the health benefit of fast-food breakfast. Ans: A AACSB: Reflective Thinking Blooms: Knowledge Difficulty: Medium Learning Objective: 1.3 Explain the economic concept of incentives. Topic: The basic insights of economics 21. Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials. The government’s decision to offer low tax rates to entrepreneurs is: A. providing room for an economic expansion. B. providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth. C. providing a disincentive, in the hopes that more entrepreneurs will avoid risk and not grow. D. providing a disincentive, in the hopes that entrepreneurs will not get into tax default after assuming too much risk. Ans: B