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Test Bank for Microeconomics: Principles, Applications and Tools, 10th Edition

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    Microeconomics: Principles, Applications and Tools Tenth Edition Arthur O’Sullivan Steven M. Sheffrin Stephen J. Perez Test Bank 1 for M i croeconomics: Principles, Applications and Tools Brian Rosario

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    1 Microeconomics: Principles, Applications, and Tools, 10e ( O'Sullivan/Sheffrin/Perez ) Chapter 1 Introduction: What Is Economics? 1.1 What Is Economics? 1) Economics is best defined as the study of: A) financial decision - making. B) how consumers make purchasing deci sions. C) the choices made by people faced with scarcity. D) inflation, unemployment, and economic growth. Answer: C Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Mic ro - 1: Identify the basic principle s of economics and explain how to think like an economist 2) 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 offic ials decide which g oods and servic es are produced. Answer: B Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economis t 3) Scarcity can best be defined as a situation in which: A) there are no buyers willing to purchase what sellers have produced. B) there are not enough goods to satisfy all of the buyers' demand. C) the resources we use to produce goods and services are limited. D) there is more than en ough money to satisfy consumers' wants. Answer: C Diff: 1 Topic: What Is Economics? Skill: Defini tion AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an econ omist

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    2 4) An a rrangement that allows buyers and sellers to exchange things is called: A) a contract. B) a market. C ) money. D) efficient. Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify th e basic principles of economics and explain how to think like an economist 5) Because resources are limited: A) only the very wealthy can get everything they want. B) firms will be forced out of business. C) the availability of goods will b e limited but t he availability of services will not. D) people must make choices. Answer: D Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explai n how to think like an economist 6) A trade - off refers to: A) allowing the government and other organization s to choose for us. B) sacrificing one thing for another. C) deciding who consumes the products produced in an economy. D) holding other variables fixed. Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist

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    3 7) Resources are all of the following ex cept : A) unlimi ted and in abundance. B) the things we use to produce goods and services. C) limited in quantit y and can be used in different ways. D) scarce and therefore require choices to be made. Answer: A Diff: 1 Topic: What Is Economics? Skill: Con ceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 8) The knowledge and skills acquired by a worker through education and experience is a description of whi ch factor of pr oduction? A) physical capital B) human capital C ) labor D) entrepreneurship Answer: B Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics a nd explain how to think like an economist 9) The physical and mental effort people use to produce goods and services is a description of which factor of production? A) physical capital B) human capital C) labor D) entrepreneurship Answer: C Diff: 1 Topic : What Is Econ omics? Skill: Definition AACSB: Reflective Thi nking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist

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    4 10) The effort used to coordinate the factors of production is a descri ption of: A) ph ysical capital. B) human capital. C) labor. D) entrepreneurship. Answer: D Diff: 1 Topic: What Is Economics? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think li ke an economist 11) All of the following ar e considered natural resources except : A) a coral reef. B) gold. C) labor. D) a redwood forest. Answer: C Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micr o - 1: Identify the basic principles of econom ics and explain how to think like an economist 12) Normative economics: A) is the focus of most modern economic reasoning. B) answers the question "What ought to be?" C) predicts the consequences of alternative actions. D) answers the question "What is?" Answer: B Diff: 1 Topic: Positive versus Normative Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how t o think like an economist

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    5 13) Which of the following is an example of a normative question? A) How will an increase in the inheritance tax affect tax revenues? B) What fraction of an income tax cut will be spent on imported goods? C) Should Florida imple ment a state in come tax to reduce its deficit? D) How will an increase in unemployment benefits affect the unemployment rate? Answer: C Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Mi cro - 1: Identify the basic principles of economics and explain how to think like an economist 14) Which of the following is a question answered with positive economic analysis? A) Should the colle ge reduce tuition for out - of - state residents? B) Should the college charge higher tuition for part - time students? C) If the college increased its eligibility requirements for enrollment, will class sizes decline? D) Should the college eliminate its athleti c program to cut its costs? Answer: C Diff: 2 Topic: Posit ive versus Norm ative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 15) Which of the following is a question answered with normative economic reaso ning? A) If the college offers free textbooks for students, will more students read their textbooks? B) If the college provided less financial aid for out - of - state students, would more in - state students benefit? C) If the college increased i ts enrollment r equiremen ts, would class size decline? D) Should the college increase tuition to fund its athletic programs? Answer: D Diff: 2 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micr o - 1: Identify t he basic principles of economics and explain how to think like an economist

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    6 16) The 3 key economic questions include all of the following except : A) "what products do we produce?" B) "how do we produce these products?" C) "where should the se products be produced?" D) "who consumes the products?" Answer: C Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain ho w to think like an economist 17) Deciding how a society's products are distributed among its citizens answers the economic question of: A) "who consumes the products produced?" B) "what products will be produced?" C) "where will the product s be consumed?" D) "how w ill the products be produced?" Answer: A Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics a nd explain how to think like an economist 18) Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of: A) "who consumes the products produced?" B) "what produ cts will be produced?" C) "where will the pro ducts be consum ed?" D) "how will the products be produced?" Answer: D Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micr o - 1: Identify the basic principles of economi cs and explain how to think like an economist

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    7 19) Deciding if a power company will generate electricity from wind power or coal answers the economic question of: A) "who consumes the products produced?" B) "wha t products will be produced?" C) "where will the products b e consumed?" D) "how will the products be produced.?" Answer: D Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Learning Outcom e: Micro - 1: Identify the basic principles o f economics and explain how to think like an economist 20) An economic model is a: A) realistic version of an economic environment. B) detailed version of an economic issue. C) fictional representation of an entire economy. D) simplified representation of an economic en vironment. Answer: D Diff: 1 Topic: Economic Models Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of e conomics and explain how to think like an economist 21) Economic models are u sed to: A) expl ain every detail of an economic theory. B) explore decision making by individuals, firms and other organizations. C) build physical renditions of government constr uction projects. D) represent the complexities of economic environments. Answe r: B Diff: 1 T opic: Economic Models Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to thi nk like an economist

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    8 22) Talking about alternatives is the first step in a p rocess that hel ps us make better choices about how we use our resources. Answer: TRUE Diff: 1 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like a n economist 23) In the past few centuries, choices have led to a substantial decline in the standards of living around the globe. Ans wer: FALSE Diff: 1 Topic: What Is Economics? Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identi fy the basic principles of economics and explain how to think like an economist 24) Scarcity is a situation in which resources are un limited in quantity and can be used in different ways. Answer: FALSE Diff: 1 Topic: What Is Economics? Sk ill: Definitio n AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 25) Positive economics answers the question, "What ought to be?" Normative economics predicts th e consequences of alternative actions, answering the questions, "What is ?" or "What will be ?" Answer: FALSE Diff: 1 Topic: Positive versus Normativ e Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic pr inciples of eco nomics and explain how to think like an economist

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    9 26) Normative economics answers the question, "What ought to be?" Positive economic s predicts the consequences of alternative actions, answering the questions, "What is ?" or "What will be ?" Answer: TRUE Diff: 1 Topic: Positive versus Normative Analysis Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 27) Most modern economic ana lysis is normat ive in nature, but involves questions with positive aspects. Answer: FALSE Diff: 1 Topic: Positive versus Normative Analysi s Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics an d explain how t o think like an economist 28) Economists will always reach the same conclusion in their positive analyses. Answer: FALSE Di ff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: M icro - 1: Identif y the basic principles of economics and explain how to think like an economist 29) One of the key economic questions is "where should products be produced?" Answer: FALSE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who ? Skill: Conce ptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 30) One of the key economic questions is "who consumes the products?" Answer: TRUE Diff: 1 Topic: The Thr ee Key Economic Questions: What, How, and Who? Skill: Concep tual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist

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    10 31) An economic model is a detai led version of an economic environment. Answer: FALSE Diff: 1 Topic: The T hree Key Economic Questions: What, How, and Who? Skill: Definition AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain h ow to think lik e an economist 32) Economic models explore decision making b y individuals, firms and other organizations. Answer: TRUE Diff: 1 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual AACSB: Reflective Thinking Lea rning Outcome: Micro - 1: Identify the basic principles of economics and expl ain how to think like an economist 33) Would an economist consider clean air a scarce resource? Explain. Answer: Yes, because the air has alternative uses. We can choose to use i t to either bre athe or to undertake activities that pollute it. The more we want to breathe clean air the more we must limit the production of pollutants. The more we pollute the air the less we can breathe clean air. Diff: 2 Topic: What Is Economics? Ski ll: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 34) List and briefly describe the five factors of production. Answer: Natural resources — those re sources provide d by nature. Labor — the physical and mental effort used b y people to produce goods and services. Physical capital — the infrastructure, equipment, machines and structures used to produce goods and services. Human capital — the knowledge and skill s obtained by w orkers through education and experience. Entrepreneurshi p — the organizing and coordination of the other four factors of production needed to produce and sell products. Diff: 2 Topic: What Is Economics? Skill: Conceptual AACSB: Reflective T hinking Learnin g Outcome: Micro - 1: Identify the basic principles of ec onomics and explain how to think like an economist

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    11 35) Give an example of something that is scarce in your life and explain the choices you've made because of scarcity. Answer: Respo nses are numero us and will vary by students. Diff: 1 Topic: What Is Eco nomics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 36) Positive e conomic analysi s answers what question? Answer: Positive economic analy sis answers the question "what is" or "what will be." Diff: 1 Topic: Positive versus Normative Analysis Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Iden tify the basic principles of economics and explain how to think like an economist 37) Normative economic analysis answers what question? Answer: Normative economic analysis answers the question "what ought to be." Diff: 1 Topic: Positive versus Normativ e Analysis Skil l: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 38) Richard runs a pizza delivery restaurant. List the three basic types of decisio ns studied in e conomics and give an ex ample from Richard's restaurant. Answer: How to produce? With what resources will the pizzas be produced? What to produce? What sorts of pizza do people order? Who consumes the products? Which people decided to come t o the restauran t on a given day? Diff: 2 Topic: The Three Key Economic Questions: What, How, and Who? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an ec onomist

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    12 1.2 Economic Analysis and M odern Problems 1) According to the Texas Transportation Institute, the typical U.S. commuter wastes approximately how much time per year due to traffic congestion? A) 47 hours B) 22 hours C) 42 hours D) 96 hours Answ er: C Diff: 1 Topic: Economic View of Traffic Congestion Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 2) In the U.S., which of the foll owing go vernment progra ms assist workers find jobs when they lose their jobs due to trade? A) Trade Adjustment Assistance program B) Social Security C) workers' compensation D) Obamacare Answer: A Diff: 1 Topic: Trade - offs from International Trade Skill: Fact A ACSB: Analytic al Thinking Learning Outcome: Micro - 5: List ways in which governments intervene in markets and explain the consequences of such intervention 3) When Canada buys lemons from Mexico instead of growing lemons in heated greenhouses, A) Canadia n consumers wil l gain because lemon prices will drop. B) Canadian lemon producers will gain because lemon prices will drop. C) Canadian consumers will gain because lemon prices will rise. D) Mexican lemon producers will lose because lemon prices in Canada will rise. Answ er: A Diff: 1 Topic: Trade - offs from International Trade Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 3: Discuss different types of market systems and the gains that can be made from trade

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    13 4) When countr ies tra de with each ot her, does it result in a gain for everybody? A) No. Producers of a good that is imported would be hurt. B) No. Consumers of a good that is imported would be hurt. C) No. Producers of a good that is exported would be hurt. D) Yes. All pro ducers and cons umers from both exporting and importing countries will gain. Answer: A Diff: 1 Topic: Trade - offs from International Trade Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 3: Discuss different types of ma rket systems and the gains t hat can be made from trade 5) The financial crisis and recession which began in 2007: A) impacted only high - income countries. B) did not impact the United States. C) impacted many countries in the world. D) impacted only low - in come countrie s. Answer: C D iff: 1 Topic: Economic View of the Managing the U.S. Economy Skill: Fact AACSB: Reflective Thinking Learning Outcome: Macro - 1: Define macroeconomics and identify its basic concerns 6) To combat the financial crisis and rece ssion which b egan in 2007, g overnments worldwide made it: A) easier for firms and households to borrow money for investment and consumer goods. B) easier for other countries to borrow money for infrastructure projects. C) easier for firms to pay their taxe s by providin g a tax amnesty . D) easier for workers to purchase health insurance through their employers. Answer: A Diff: 1 Topic: Economic View of the Managing the U.S. Economy Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Macro - 12: Explain how m onetary policy influences interest rates, aggregate demand, real GDP and inflation 7) Congestion taxes tend to cause an increase in traffic volume during rush hours. Answer: FALSE Diff: 1 Topic: Economic View of Traffic Congestion Skill: Conceptual AAC SB: Reflective Thinking Learning Outcome: Micro - 5: List ways in which governments intervene in markets and explain the consequences of such intervention

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    14 8) Economic expansion and growth are the only objectives t hat U.S. policymakers consider when they i mplement tax, s pending and financial policies that affect the U.S. economy. Answer: FALSE Diff: 1 Topic: Economic View of the Managing the U.S. Economy Skill: Conceptual AACSB: Reflective Thinking Learning Outc ome: Macro - 1: Define macroeconomics and i dentify its bas ic concerns 1.3 The Economic Way of Thinking 1) Who is associated with the following summary of the economic way of thinking: "The theory of economics does not furnish a body of settled conclusio ns immediately acceptable to policy. It is a method rathe r than a doctrine, an apparatus of the mind, a technique of thinking which helps its processer draw correct conclusions." A) John Maynard Keynes B) Alfred Marshall C) Adam Smith D) President Harry Tr uman Answer: A Diff: 1 Topic: The Econom ic Way of Think ing Skill: Fact AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics and explain how to think like an economist 2) To make things simpler and focus attention on what really matters, economists: A) use assumpt ions. B) ignore all variables. C) think at the margin. D) respond to inc entives. Answer: A Diff: 1 Topic: Use Assumptions to Simplify Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1: Identify the basic principles of economics an d explain how to think like an economist

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