Test Bank for Survey of Economics: Principles, Applications, and Tools, 8th Edition

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Survey of Economics:Principles, Applicationsand ToolsEighth EditionArthur O’SullivanSteven M. SheffrinStephen J. PerezTest Bank for Survey ofEconomics:Principles,Applications and ToolsBrian Rosario

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1Survey of Economics: Principles, Applications, and Tools, 8e(O'Sullivan/Sheffrin/Perez)Chapter 1Introduction: What Is Economics?1.1What Is Economics?1) Economics is best defined as the study of:A) financial decision-making.B) how consumers make purchasing decisions.C) the choices made by people facedwith scarcity.D) inflation, unemployment, and economic growth.Answer: CDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist2) 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: BDiff: 1Topic: What Is Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist3) 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 arelimited.D) there is more than enough money to satisfy consumers' wants.Answer: CDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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24) An arrangement that allows buyers and sellers to exchange things is called:A) a contract.B) a market.C) money.D) efficient.Answer: BDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist5) Because resources are limited:A) only the very wealthy can get everything they want.B) firms will be forcedout of business.C) the availability of goods will be limited but the availability of services will not.D) people must make choices.Answer: DDiff: 1Topic: What Is Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist6) A trade-off refers to:A) allowing the government and other organizations to choose for us.B) sacrificing one thing for another.C) deciding who consumes the productsproduced in an economy.D) holding other variables fixed.Answer: BDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearningOutcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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37) Resources are all of the followingEXCEPT:A) unlimited and in abundance.B) the things we use to produce goods and services.C) limited in quantity and can be used in different ways.D) scarce and therefore require choices to be made.Answer: ADiff: 1Topic: What Is Economics?Skill:ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics andexplain how tothink like an economist8) The knowledge and skills acquired by a worker through education and experience is adescription ofwhich factor of production?A) physical capitalB) human capitalC) laborD) entrepreneurshipAnswer: BDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist9) The physical and mental effort people use to produce goods and services is a description ofwhich factor of production?A) physical capitalB) human capitalC) laborD) entrepreneurshipAnswer: CDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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410) The effort used to coordinate the factors of production is a description of:A) physical capital.B) human capital.C) labor.D) entrepreneurship.Answer: DDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist11) All of the following are considered natural resources EXCEPT:A) a coral reef.B) gold.C) labor.D) a redwood forest.Answer: CDiff: 1Topic: What Is Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist12) 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: BDiff: 1Topic: Positive versus Normative AnalysisSkill: DefinitionAACSB: Reflective ThinkingLearningOutcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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513) 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 fractionof an income tax cut will be spent on imported goods?C) Should Florida implement a state income tax to reduce its deficit?D) How will an increase in unemployment benefits affect the unemployment rate?Answer: CDiff: 1Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome:Micro-1: Identify the basic principles of economics and explain how tothink like an economist14) Which of the following is a question answered with positive economic analysis?A) Should the college 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 athletic program to cut its costs?Answer: CDiff: 2Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist15) Which of the following is a question answered with normative economic reasoning?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-statestudents benefit?C) If the college increased its enrollment requirements, would class size decline?D) Should the college increase tuition to fund its athletic programs?Answer: DDiff: 2Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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616) 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 shouldthese products be produced?"D) "Who consumes the products?"Answer: CDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist17) Deciding how a society's products are distributed among its citizens answers the economicquestion of:A) "Who consumes the products produced?"B) "What products will be produced?"C) "Where will the products be consumed?"D) "How will the products be produced?"Answer: ADiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist18) Deciding if a company will produce automobiles by robotics or manual labor answers theeconomic question of:A) "Who consumes the products produced?"B) "What products will be produced?"C) "Where will theproducts be consumed?"D) "How will the products be produced?"Answer: DDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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719) Deciding if a power companywill generate electricity from wind power or coal answers theeconomic question of:A) "Who consumes the products produced?"B) "What products will be produced?"C) "Where will the products be consumed?"D) "How will the products be produced.?"Answer: DDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist20) An economic model isa:A) realistic version of an economic environment.B) detailed version of an economic issue.C) fictional representation of an entire economy.D) simplified representationof an economic environment.Answer: DDiff: 1Topic: Economic ModelsSkill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist21) Economic models are used to:A) explain every detail of an economic theory.B) explore decision making by individuals, firms and other organizations.C) build physical renditions of government construction projects.D) represent the complexities of economic environments.Answer: BDiff: 1Topic: Economic ModelsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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822) Talking about alternatives is the first step ina process that helps us make better choicesabout how we use our resources.Answer: TRUEDiff: 1Topic: What Is Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothinklike an economist23) In the past few centuries, choices have led to a substantial decline in the standards of livingaround the globe.Answer: FALSEDiff: 1Topic: What Is Economics?Skill: FactAACSB: Reflective ThinkingLearning Outcome: Micro-1:Identify the basic principles of economics and explain how tothink like an economist24) Scarcity is a situation in which resources are unlimited in quantity and can be used indifferent ways.Answer: FALSEDiff: 1Topic: What Is Economics?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist25) Positive economics answers the question, "Whatoughtto be?" Normative economicspredictsthe consequences of alternative actions, answering the questions, "Whatis?" or "Whatwill be?"Answer: FALSEDiff: 1Topic: Positive versus Normative AnalysisSkill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basicprinciples of economics and explain how tothink like an economist

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926) Normative economics answers the question, "Whatoughtto be?" Positive economicspredicts the consequences of alternative actions, answering the questions, "Whatis?" or "Whatwill be?"Answer: TRUEDiff: 1Topic: Positive versus Normative AnalysisSkill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1:Identify the basic principles of economics and explain how tothink like an economist27) Most modern economicanalysis is normative in nature, but involves questions with positiveaspects.Answer: FALSEDiff: 1Topic: Positive versus Normative AnalysisSkill: FactAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economicsand explain how tothink like an economist28) Economists will always reach the same conclusion in their positive analyses.Answer: FALSEDiff: 1Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome:Micro-1: Identify the basic principles of economics and explain how tothink like an economist29) One of the key economic questions is, "Where should products be produced?"Answer:FALSEDiff: 1Topic: The Three Key Economic Questions: What, How, andWho?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist30) One of the keyeconomic questions is, "Who consumes the products?"Answer: TRUEDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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1031) An economic model is a detailed version of an economic environment.Answer: FALSEDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: DefinitionAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist32) Economic models explore decision making by individuals, firms and other organizations.Answer: TRUEDiff: 1Topic: The Three Key Economic Questions: What, How, and Who?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist33) Would an economist consider clean air a scarce resource?Explain.Answer: Yes, because the air has alternative uses. We can choose to use it to either breathe or toundertake activities that pollute it. The more we want to breathe clean air the more we must limitthe production of pollutants. The more we pollute the air the less we can breathe clean air.Diff: 2Topic: What Is Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist34) List andbriefly describe the five factors of production.Answer: Natural resources—those resources provided by nature. Labor—the physical andmental effort used by people to produce goods and services. Physical capital—the infrastructure,equipment, machines andstructures used to produce goods and services. Human capital—theknowledge and skills obtained by workers through education and experience.Entrepreneurship—the organizing and coordination of the other four factors of productionneeded to produce and sellproducts.Diff: 2Topic: What Is Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist

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1135) Give an example of something that is scarce in your life and explain the choices you've madebecause of scarcity.Answer: Responses arenumerous and will vary by students.Diff: 1Topic: What Is Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist36) Positive economic analysis answers what question?Answer: Positive economic analysis answers the question "what is?" or "what will be?"Diff: 1Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1:Identify thebasic principles of economics and explain how tothink like an economist37) Normative economic analysis answers what question?Answer: Normative economic analysis answers the question "what ought to be?"Diff: 1Topic: Positive versus Normative AnalysisSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist38) Richard runs a pizza delivery restaurant. List the three basic types of decisions studied ineconomics and give an example 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 tocome to the restaurant on a given day?Diff: 2Topic: The Three Key Economic Questions: What, How, and Who?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink likean economist

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121.2Economic Analysis and Modern Problems1) According to the Texas Transportation Institute, the typical U.S. commuter wastesapproximately how much time per year due to traffic congestion?A) 47 hoursB) 22 hoursC) 42 hoursD) 96 hoursAnswer: CDiff: 1Topic: Economic View of Traffic CongestionSkill: FactAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist2) In the U.S., which of the following government programs assist workersfind jobswhen theylose their jobs due to trade?A) Trade Adjustment Assistance programB) Social SecurityC) workers' compensationD) ObamacareAnswer: ADiff: 1Topic: Trade-offs from International TradeSkill: FactAACSB: Analytical ThinkingLearning Outcome: Micro-5: List ways in which governmentsintervene in markets and explainthe consequences of such intervention3) When Canada buys lemons from Mexico instead of growing lemons in heated greenhouses:A) Canadian consumers will gain because lemon prices will drop.B) Canadian lemon producers willgain 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.Answer: ADiff: 1Topic: Trade-offs from International TradeSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-3: Discuss different types of market systems and the gains that can bemade from trade

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134) When countries trade with each other, does it result in a gain for everybody?A) No. Producers of a goodthat 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 producers and consumers from both exporting and importing countries will gain.Answer: ADiff: 1Topic: Trade-offs from International TradeSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-3: Discuss different types of market systemsand the gains that can bemade from trade5) 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-income countries.Answer: CDiff: 1Topic: Economic View of the Managing the U.S. EconomySkill: FactAACSB: Reflective ThinkingLearning Outcome: Macro-1: Define macroeconomics and identify its basic concerns6) To combat the financial crisis and recession whichbegan in 2007, governments worldwidemade 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 taxes by providing a tax amnesty.D) easier for workers to purchase health insurance through their employers.Answer: ADiff: 1Topic: Economic View of the Managing the U.S. EconomySkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Macro-12: Explain howmonetary policy influences interest rates, aggregatedemand, real GDP and inflation7) Congestion taxes tend to cause an increase in traffic volume during rush hours.Answer: FALSEDiff: 1Topic: Economic View of Traffic CongestionSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-5:List ways in which governments intervene in markets and explainthe consequences of such intervention

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148) Economic expansion and growth are the only objectives that U.S. policymakers consider whentheyimplement tax, spending and financial policies that affect the U.S. economy.Answer: FALSEDiff: 1Topic: Economic View of the Managing the U.S. EconomySkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Macro-1: Define macroeconomics andidentify its basic concerns1.3The Economic Way of Thinking1) Who is associated with the following summary of the economic way of thinking: "The theoryof economics does not furnish a body of settled conclusions immediately acceptable to policy. Itis a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helpsits processer draw correct conclusions."A) John Maynard KeynesB) Alfred MarshallC) Adam SmithD) President Harry TrumanAnswer: ADiff: 1Topic: The Economic Way of ThinkingSkill: FactAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principles of economics and explain how tothink like an economist2) To make things simpler and focus attention on what really matters, economists:A) use assumptions.B) ignore all variables.C) think at the margin.D) respond to incentives.Answer: ADiff: 1Topic: Use Assumptions to SimplifySkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1: Identify the basic principlesof economics and explain how tothink like an economist

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