TEST BANK
Principles of Economics, 3rd Edition
By Betsey Stevenson, Justin Wolfers
TU
TO
R
G
U
R
U
, Table of Content
Part I: Foundations of Economics
Chapter 1: The Four Core Principles of Economics
Chapter 2: Demand and Consumer Choice
Chapter 3: Supply and Producer Choice
Chapter 4: Equilibrium: Where Supply Meets Demand
Part II: Analyzing Markets
Chapter 5: Elasticity: Measuring Responsiveness
Chapter 6: Taxes, Price Controls, and Quantity Regulations
Chapter 7: Welfare Economics: Evaluating Market Efficiency and Market Failure
Chapter 8: Comparative Advantage and Gains from Trade
Part III: Applications and Policy Issues
TU
Chapter 9: International Trade
Chapter 10: Externalities and Public Goods
Chapter 11: The Labor Market
Chapter 12: Why Wages Vary: Workers, Jobs, Institutions, and Discrimination
Chapter 13: Inequality, Poverty, and Social Insurance
Part IV: Industrial Organization and Business Strategy
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Chapter 14: Market Structure and Degrees of Market Power
Chapter 15: Entry, Exit, and Long-Run Profitability
Chapter 16: Price Discrimination and Sophisticated Pricing Strategies
Chapter 17: Economics of Strategic Management
Part V: Advanced Decisions
Chapter 18: Game Theory and Strategic Choices
Chapter 19: Decisions Involving Private Information
R
Chapter 20: Decisions Involving Uncertainty
Part VI: Macroeconomic Foundations and the Long Run
Chapter 21: Sizing Up the Economy Using GDP
G
Chapter 22: Economic Growth
Chapter 23: Unemployment
Chapter 24: Inflation and Money
U
PART VII: Micro Foundations of Macroeconomics
Chapter 25: Consumption and Saving
Chapter 26: Investment
Chapter 27: The Financial Sector
R
Chapter 28: International Finance and the Exchange Rate
Part VIII: The Business Cycle
Chapter 29: Tracking the Business Cycle
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Chapter 30: Linking Interest Rates and Output Using IS-MP Analysis
Chapter 31: The Phillips Curve and Inflation
Chapter 32: The Fed Model: Putting the Pieces Together
Chapter 33: Aggregate Demand and Aggregate Supply
Part IX: Macroeconomic Policy
Chapter 34: Monetary Policy
Chapter 35: Government Spending, Taxes, and Fiscal Policy
, classmerit.com — The Marketplace to Buy and Sell Study Materials
Name: Class: Date:
Chapter 1
1. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least
profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two
plans. Plan A keeps one location open with certainty. Plan B has a one-in-three chance of saving all three
locations but a two-in-three chance of saving no locations. The second consultant also offers two plans. Plan C
will result in losing two locations with certainty. Plan D has a two-in-three chance of losing all locations but a one-
in-three chance of losing no locations. If the franchisee chooses Plan A, she should also choose Plan:
a. No plan results in the same outcome as Plan A.
TU
b. B.
c. C.
d. D.
ANSWER: c
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2. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to four of his least profitable
locations. He meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A
will result in losing two locations with certainty. Plan B has a three-in-four chance of losing all locations but a one-
in-four chance of losing no locations. The second consultant also offers two plans. Plan C keeps two locations
open with certainty. Plan D has a one-in-four chance of saving all four locations but a three-in-four chance of
R
saving no locations. If the franchisee chooses Plan B, he should also choose Plan:
a. No plan results in the same outcome as Plan B.
b. B.
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c. C.
d. D.
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ANSWER: d
3. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
R
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least
profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two
plans. Plan A will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all
U
locations but a one-in-three chance of losing no locations. The second consultant also offers two plans. Plan C
keeps one location open with certainty. Plan D has a one-in-three chance of saving all three locations but a two-
in-three chance of saving no locations. If the franchisee applies the cost-benefit principle, which combination of
plans reflects a consistent decision?
a. Plan C and Plan A
b. Plan B and Plan A
c. Plan D and Plan A
d. Plan C and Plan B
ANSWER: a
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Chapter 1
4. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must
decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign
will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,000 for the entire
campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill.
You'll also pay an employee $340 per month to work some of the hours you normally work while you manage the
campaign. Would it be better to hire a professional rather than doing the campaign yourself?
a. Yes, because your economic surplus is $220.
b. Yes, because your full set of costs is only $540.
TU
c. No, because the benefit of not having to do it yourself is greater than the cost of the professional.
d. No, because you can increase your economic surplus if you do it yourself.
ANSWER: a
5. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must
TO
decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign
will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,200 for the entire
campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill.
You'll also pay an employee $320 per month to work some of the hours you normally work, while you manage
the campaign. If you hire the professional, your total benefit would be all the money you avoid spending on doing
the campaign yourself. What is the total benefit of hiring the professional?
R
a. $1,160
b. $200
G
c. $320
d. $960
ANSWER: a
U
6. Your $10 donation to a charity provides one blanket to an unhoused person. Given that you followed the Rational
Rule for Consumers in the transaction, you can conclude that your willingness to pay for this type of generosity is
R
at least:
a. $1.
b. $5.
U
c. $8.
d. $10.
ANSWER: d
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Principles of Economics, 3rd Edition
By Betsey Stevenson, Justin Wolfers
TU
TO
R
G
U
R
U
, Table of Content
Part I: Foundations of Economics
Chapter 1: The Four Core Principles of Economics
Chapter 2: Demand and Consumer Choice
Chapter 3: Supply and Producer Choice
Chapter 4: Equilibrium: Where Supply Meets Demand
Part II: Analyzing Markets
Chapter 5: Elasticity: Measuring Responsiveness
Chapter 6: Taxes, Price Controls, and Quantity Regulations
Chapter 7: Welfare Economics: Evaluating Market Efficiency and Market Failure
Chapter 8: Comparative Advantage and Gains from Trade
Part III: Applications and Policy Issues
TU
Chapter 9: International Trade
Chapter 10: Externalities and Public Goods
Chapter 11: The Labor Market
Chapter 12: Why Wages Vary: Workers, Jobs, Institutions, and Discrimination
Chapter 13: Inequality, Poverty, and Social Insurance
Part IV: Industrial Organization and Business Strategy
TO
Chapter 14: Market Structure and Degrees of Market Power
Chapter 15: Entry, Exit, and Long-Run Profitability
Chapter 16: Price Discrimination and Sophisticated Pricing Strategies
Chapter 17: Economics of Strategic Management
Part V: Advanced Decisions
Chapter 18: Game Theory and Strategic Choices
Chapter 19: Decisions Involving Private Information
R
Chapter 20: Decisions Involving Uncertainty
Part VI: Macroeconomic Foundations and the Long Run
Chapter 21: Sizing Up the Economy Using GDP
G
Chapter 22: Economic Growth
Chapter 23: Unemployment
Chapter 24: Inflation and Money
U
PART VII: Micro Foundations of Macroeconomics
Chapter 25: Consumption and Saving
Chapter 26: Investment
Chapter 27: The Financial Sector
R
Chapter 28: International Finance and the Exchange Rate
Part VIII: The Business Cycle
Chapter 29: Tracking the Business Cycle
U
Chapter 30: Linking Interest Rates and Output Using IS-MP Analysis
Chapter 31: The Phillips Curve and Inflation
Chapter 32: The Fed Model: Putting the Pieces Together
Chapter 33: Aggregate Demand and Aggregate Supply
Part IX: Macroeconomic Policy
Chapter 34: Monetary Policy
Chapter 35: Government Spending, Taxes, and Fiscal Policy
, classmerit.com — The Marketplace to Buy and Sell Study Materials
Name: Class: Date:
Chapter 1
1. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least
profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two
plans. Plan A keeps one location open with certainty. Plan B has a one-in-three chance of saving all three
locations but a two-in-three chance of saving no locations. The second consultant also offers two plans. Plan C
will result in losing two locations with certainty. Plan D has a two-in-three chance of losing all locations but a one-
in-three chance of losing no locations. If the franchisee chooses Plan A, she should also choose Plan:
a. No plan results in the same outcome as Plan A.
TU
b. B.
c. C.
d. D.
ANSWER: c
TO
2. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to four of his least profitable
locations. He meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A
will result in losing two locations with certainty. Plan B has a three-in-four chance of losing all locations but a one-
in-four chance of losing no locations. The second consultant also offers two plans. Plan C keeps two locations
open with certainty. Plan D has a one-in-four chance of saving all four locations but a three-in-four chance of
R
saving no locations. If the franchisee chooses Plan B, he should also choose Plan:
a. No plan results in the same outcome as Plan B.
b. B.
G
c. C.
d. D.
U
ANSWER: d
3. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in
R
breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least
profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two
plans. Plan A will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all
U
locations but a one-in-three chance of losing no locations. The second consultant also offers two plans. Plan C
keeps one location open with certainty. Plan D has a one-in-three chance of saving all three locations but a two-
in-three chance of saving no locations. If the franchisee applies the cost-benefit principle, which combination of
plans reflects a consistent decision?
a. Plan C and Plan A
b. Plan B and Plan A
c. Plan D and Plan A
d. Plan C and Plan B
ANSWER: a
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Name: Class: Date:
Chapter 1
4. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must
decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign
will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,000 for the entire
campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill.
You'll also pay an employee $340 per month to work some of the hours you normally work while you manage the
campaign. Would it be better to hire a professional rather than doing the campaign yourself?
a. Yes, because your economic surplus is $220.
b. Yes, because your full set of costs is only $540.
TU
c. No, because the benefit of not having to do it yourself is greater than the cost of the professional.
d. No, because you can increase your economic surplus if you do it yourself.
ANSWER: a
5. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must
TO
decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign
will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,200 for the entire
campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill.
You'll also pay an employee $320 per month to work some of the hours you normally work, while you manage
the campaign. If you hire the professional, your total benefit would be all the money you avoid spending on doing
the campaign yourself. What is the total benefit of hiring the professional?
R
a. $1,160
b. $200
G
c. $320
d. $960
ANSWER: a
U
6. Your $10 donation to a charity provides one blanket to an unhoused person. Given that you followed the Rational
Rule for Consumers in the transaction, you can conclude that your willingness to pay for this type of generosity is
R
at least:
a. $1.
b. $5.
U
c. $8.
d. $10.
ANSWER: d
CopyrightMacmillan
Copyright Macmillan Learning.
Learning. Powered
Powered by Cognero.
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