ECON MICRO 5th Edition by William A. McEachern - Test Bank

,Name Clas Dat
: s: e:

Chapter 01: The Art and Science of Economic Analysis
True / False

1. Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy
unlimited wants.
a. True
b. False
ANSWER: True

2. Economics studies how decision makers use scarce resources to satisfy unlimited wants.
a. True
b. False
ANSWER: True

3. In economics, money is an example of capital.
a. True
b. False
ANSWER: False

4. Profit is the payment received by resource owners for the use of their capital.
a. True
b. False
ANSWER: False

5. Rent is the payment received by resource owners for the use of their natural resources.
a. True
b. False
ANSWER: True

6. An economist would classify 100 shares of the Apple Computers stock as capital.
a. True
b. False
ANSWER: False

7. Profit is the payment made for land resources.
a. True
b. False
ANSWER: False

8. Resources are used only in the production of goods, not services.
a. True
b. False
ANSWER: False

9. Considering both product markets and resource markets, most economic decision makers participate in the economy as
both buyers and sellers.
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,Name Clas Dat
: s: e:

Chapter 01: The Art and Science of Economic Analysis

a. True
b. False
ANSWER: True

10. Labor and capital are exchanged in the resource market.
a. True
b. False
ANSWER: True

11. A rational individual gives more to charity when such contributions receive favorable tax treatment.
a. True
b. False
ANSWER: True

12. A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.
a. True
b. False
ANSWER: False

13. The assumption of rational self-interest does not rule out the possibility of concern for other individuals.
a. True
b. False
ANSWER: True

14. It is always rational to acquire more information before making a decision.
a. True
b. False
ANSWER: False

15. Rational self-interest is equivalent to pure selfishness.
a. True
b. False
ANSWER: False

16. Sara is considering the purchase of a new car. Rational self-interest demands that she do an exhaustive research study
to acquire every bit of information possible about her potential options.
a. True
b. False
ANSWER: False

17. A marginal adjustment only refers to a minor change.
a. True
b. False
ANSWER: False
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Chapter 01: The Art and Science of Economic Analysis


18. A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.
a. True
b. False
ANSWER: True

19. Most real economic choices involve small (or marginal) changes rather than all-or-nothing decisions.
a. True
b. False
ANSWER: True

20. Economic decision makers will continue to acquire information only as long as the expected additional benefit
exceeds the expected additional cost of the information.
a. True
b. False
ANSWER: True

21. The behavior of the entertainment industry in a city is a microeconomics topic.
a. True
b. False
ANSWER: True

22. An economic model will produce poor predictions if it includes assumptions.
a. True
b. False
ANSWER: False

23. A good economic theory brings clarity to chaos.
a. True
b. False
ANSWER: True

24. Most economists consider a theory a good one if it predicts well.
a. True
b. False
ANSWER: True

25. The ceteris paribus assumption is the other-things-constant assumption.
a. True
b. False
ANSWER: True

26. The ceteris paribus assumption is a behavioral assumption.
a. True

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