Test Bank to Accompany
i i i
Microeconomics
SeventhEdition i
i by
Pindyck / Rubinfeldi i
Pearson Education
i
© i2009
i 8/12/200
8
,Contents
Chapter i1 Preliminaries....................................................................................................................1
Chapter i2 The iBasics iof iSupply iand iDemand ............................................................................ 16
Chapter i3 Consumer iBehavior ...................................................................................................... 55
Chapter i4 Individual iand iMarket iDemand............................................................................... 125
Chapter i5 Uncertainty iand iConsumer iBehavior ........................................................................ 179
Chapter i6 Production ................................................................................................................... 236
Chapter i7 The iCost iof iProduction .............................................................................................. 273
Chapter i8 Profit iMaximization iand iCompetitive iSupply ......................................................... 327
Chapter i9 The iAnalysis iof iCompetitive iMarkets ...................................................................... 375
Chapter i10 Market iPower: iMonopoly iand iMonopsony ............................................................. 438
Chapter i11 Pricing iwith iMarket iPower ....................................................................................... 480
Chapter i12 Monopolistic iCompetition iand iOligopoly ................................................................ 528
Chapter i13 Game iTheory iand iCompetitive iStrategy .................................................................. 565
Chapter i14 Markets iFor iFactor iInputs ......................................................................................... 614
Chapter i15 Investment, iTime iand iCapital iMarkets .................................................................... 656
Chapter i16 General iEquilibrium iand iEconomic iEfficiency ........................................................ 698
Chapter i17 Markets iwith iAsymmetric iInformation .................................................................... 743
Chapter i18 Externalities iand iPublic iGoods ................................................................................. 787
,Chapter 1 Preliminaries
i
1) Microeconomics iis i the i branch i of i economics i that i deals i with i which i of i the i following i topics?
A) The i behavior i of i individual i consumers
B) Unemployment i and i interest i rates
C) The i behavior i of i individual i firms i and i investors
D) B iand iC
E) A iand iC
Answer:
i i E
Diff: i1
Section: i 1.1
2) A iRolling iStones isong igoes: i ʺYou icanʹt ialways iget iwhat iyou iwant.ʺ i This iechoes ian
iimportant itheme ifrom imicroeconomics. i Which iof ithe i following istatements iis ithe ibest
iexample iof ithis itheme?
A) Consumers imust imake ithe ibest ipurchasing idecisions ithey ican, igiven itheir
ilimited iincomes.
B) Workers ido inot ihave ias imuch ileisure ias ithey iwould ilike, igiven itheir iwages iand
iworking iconditions.
C) Workers i in i planned i economies, i such i as i North i Korea, i do i not i have i much i choice i over
i jobs.
D) Firms iin imarket ieconomies ihave ilimited ifinancial
resources. iAnswer:
i i A
Diff: i1
Section: i 1.1
3) Economics iis iabout ithe iallocation iof iscarce iresources. i Which iof ithe ifollowing iis
iNOT ian iexample iof ieconomic iscarcity?
A) If iSteve igoes ito isee ithe imovie iMaster iand iCommander ion iSaturday, ihe iwill inot ibe
iable ito iafford ibuying iice icream.
B) If iJenny istudies ifor iher ieconomics iquiz ithis ievening, ishe iwill inot ihave itime ito iwalk
iher idog.
C) If iGeneral iMotors iincreases iits iproduction iof iSUVs ithis iyear, iit iwill ihave ito ispend
imore ion iadvertising.
D) If iBorders iBooks iincreases ithe inumber iof ititles iit icarries, iit iwill ihave ito ireallocate
ishelf ispace ito iaccommodate ithe inew ititles.
Answer: i C
Diff: i2
Section: i 1.1
4) A ivalid iand i useful itheory i of igold i prices:
A) helps ito i predict i the i movements iof i gold i prices i over i time.
B) may i be i founded i on i simplifying iassumptions.
C) need inot iexactly i predict ievery ichange iin i gold iprices.
D) all iof ithe iabove
E) none iof ithe
above iAnswer:
i i D
Diff: i1
Section: i 1.1
1
, 5) Use i the i following i two i statements i to i answer i this i question:
I. Economic itheories iare ideveloped ito iexplain iobserved iphenomena iby ideducing ifrom ia
iset i of ibasic irules iand iassumptions.
II. Economic itheories iuse ivalue ijudgments ito idetermine iwhich ipeople iought ito ipay
imore itaxes.
A) i Both iI iand iII iare itrue. B) i I iis itrue, iand iII iis ifalse.
C) i I iis ifalse, iand iII iis itrue. D) iBoth iI iand iII iare
ifalse. iAnswer: i B
Diff: i1
Section: i 1.1
6) Which iof i the ifollowing i is ia i positive istatement?
A) The iPresident iof ithe iUnited iStates iought ito ibe ielected iby ia idirect ivote iof ithe
iAmerican ipeople irather ithan ithe iElectoral iCollege.
B) A ifundamental iassumption iof ithe ieconomic itheory iof iconsumer ibehavior iis
ithat iconsumers ialways iprefer ihaving imore iof iany igood ito ihaving iless iof iit.
C) Because imany iadults icannot iafford ito igo ito icollege, itax icredits ifor ituition ishould
ibe iintroduced.
D) all iof ithe iabove
E) none iof ithe
iabove iAnswer: i B
Diff: i1
Section: i 1.1
7) Which i of i the i following i is i a i normative istatement?
A) The itaxes ipaid iby ithe ipoor ishould ibe ireduced iin iorder ito iimprove ithe
iincome idistribution iin ithe iU.S.
B) State i governments i should i not i subsidize i corporations i by i training i welfare i recipients.
C) Presidential icandidates ishould inot ibe igiven ifunds ifrom ithe ifederal igovernment ito
irun icampaigns.
D) The isea iotter ishould inot ibe iallowed ito ispread iinto iSouthern iCalifornia icoastal
iwaters, ibecause iit iwill ireduce ithe ivalue iof ifisheries.
E) all iof ithe
iabove iAnswer: i E
Diff: i1
Section: i 1.1
8) Which iof i the ifollowing i is ia i positive istatement?
A) Intermediate imicroeconomics ishould ibe irequired iof iall ieconomics imajors iin iorder
ito ibuild ia isolid ifoundation iin ieconomic itheory.
B) The iminimum iwage ishould inot ibe iincreased ibecause ithis iaction iwould
iincrease iunemployment.
C) Smoking i should i be i restricted i on i all i airline i flights.
D) All iautomobile ipassengers ishould ibe irequired ito iwear iseatbelts iin iorder ito iprotect
ithem iagainst iinjury.
E) none iof ithe
iabove iAnswer: i E
Diff: i1
Section: i 1.1
2
i i i
Microeconomics
SeventhEdition i
i by
Pindyck / Rubinfeldi i
Pearson Education
i
© i2009
i 8/12/200
8
,Contents
Chapter i1 Preliminaries....................................................................................................................1
Chapter i2 The iBasics iof iSupply iand iDemand ............................................................................ 16
Chapter i3 Consumer iBehavior ...................................................................................................... 55
Chapter i4 Individual iand iMarket iDemand............................................................................... 125
Chapter i5 Uncertainty iand iConsumer iBehavior ........................................................................ 179
Chapter i6 Production ................................................................................................................... 236
Chapter i7 The iCost iof iProduction .............................................................................................. 273
Chapter i8 Profit iMaximization iand iCompetitive iSupply ......................................................... 327
Chapter i9 The iAnalysis iof iCompetitive iMarkets ...................................................................... 375
Chapter i10 Market iPower: iMonopoly iand iMonopsony ............................................................. 438
Chapter i11 Pricing iwith iMarket iPower ....................................................................................... 480
Chapter i12 Monopolistic iCompetition iand iOligopoly ................................................................ 528
Chapter i13 Game iTheory iand iCompetitive iStrategy .................................................................. 565
Chapter i14 Markets iFor iFactor iInputs ......................................................................................... 614
Chapter i15 Investment, iTime iand iCapital iMarkets .................................................................... 656
Chapter i16 General iEquilibrium iand iEconomic iEfficiency ........................................................ 698
Chapter i17 Markets iwith iAsymmetric iInformation .................................................................... 743
Chapter i18 Externalities iand iPublic iGoods ................................................................................. 787
,Chapter 1 Preliminaries
i
1) Microeconomics iis i the i branch i of i economics i that i deals i with i which i of i the i following i topics?
A) The i behavior i of i individual i consumers
B) Unemployment i and i interest i rates
C) The i behavior i of i individual i firms i and i investors
D) B iand iC
E) A iand iC
Answer:
i i E
Diff: i1
Section: i 1.1
2) A iRolling iStones isong igoes: i ʺYou icanʹt ialways iget iwhat iyou iwant.ʺ i This iechoes ian
iimportant itheme ifrom imicroeconomics. i Which iof ithe i following istatements iis ithe ibest
iexample iof ithis itheme?
A) Consumers imust imake ithe ibest ipurchasing idecisions ithey ican, igiven itheir
ilimited iincomes.
B) Workers ido inot ihave ias imuch ileisure ias ithey iwould ilike, igiven itheir iwages iand
iworking iconditions.
C) Workers i in i planned i economies, i such i as i North i Korea, i do i not i have i much i choice i over
i jobs.
D) Firms iin imarket ieconomies ihave ilimited ifinancial
resources. iAnswer:
i i A
Diff: i1
Section: i 1.1
3) Economics iis iabout ithe iallocation iof iscarce iresources. i Which iof ithe ifollowing iis
iNOT ian iexample iof ieconomic iscarcity?
A) If iSteve igoes ito isee ithe imovie iMaster iand iCommander ion iSaturday, ihe iwill inot ibe
iable ito iafford ibuying iice icream.
B) If iJenny istudies ifor iher ieconomics iquiz ithis ievening, ishe iwill inot ihave itime ito iwalk
iher idog.
C) If iGeneral iMotors iincreases iits iproduction iof iSUVs ithis iyear, iit iwill ihave ito ispend
imore ion iadvertising.
D) If iBorders iBooks iincreases ithe inumber iof ititles iit icarries, iit iwill ihave ito ireallocate
ishelf ispace ito iaccommodate ithe inew ititles.
Answer: i C
Diff: i2
Section: i 1.1
4) A ivalid iand i useful itheory i of igold i prices:
A) helps ito i predict i the i movements iof i gold i prices i over i time.
B) may i be i founded i on i simplifying iassumptions.
C) need inot iexactly i predict ievery ichange iin i gold iprices.
D) all iof ithe iabove
E) none iof ithe
above iAnswer:
i i D
Diff: i1
Section: i 1.1
1
, 5) Use i the i following i two i statements i to i answer i this i question:
I. Economic itheories iare ideveloped ito iexplain iobserved iphenomena iby ideducing ifrom ia
iset i of ibasic irules iand iassumptions.
II. Economic itheories iuse ivalue ijudgments ito idetermine iwhich ipeople iought ito ipay
imore itaxes.
A) i Both iI iand iII iare itrue. B) i I iis itrue, iand iII iis ifalse.
C) i I iis ifalse, iand iII iis itrue. D) iBoth iI iand iII iare
ifalse. iAnswer: i B
Diff: i1
Section: i 1.1
6) Which iof i the ifollowing i is ia i positive istatement?
A) The iPresident iof ithe iUnited iStates iought ito ibe ielected iby ia idirect ivote iof ithe
iAmerican ipeople irather ithan ithe iElectoral iCollege.
B) A ifundamental iassumption iof ithe ieconomic itheory iof iconsumer ibehavior iis
ithat iconsumers ialways iprefer ihaving imore iof iany igood ito ihaving iless iof iit.
C) Because imany iadults icannot iafford ito igo ito icollege, itax icredits ifor ituition ishould
ibe iintroduced.
D) all iof ithe iabove
E) none iof ithe
iabove iAnswer: i B
Diff: i1
Section: i 1.1
7) Which i of i the i following i is i a i normative istatement?
A) The itaxes ipaid iby ithe ipoor ishould ibe ireduced iin iorder ito iimprove ithe
iincome idistribution iin ithe iU.S.
B) State i governments i should i not i subsidize i corporations i by i training i welfare i recipients.
C) Presidential icandidates ishould inot ibe igiven ifunds ifrom ithe ifederal igovernment ito
irun icampaigns.
D) The isea iotter ishould inot ibe iallowed ito ispread iinto iSouthern iCalifornia icoastal
iwaters, ibecause iit iwill ireduce ithe ivalue iof ifisheries.
E) all iof ithe
iabove iAnswer: i E
Diff: i1
Section: i 1.1
8) Which iof i the ifollowing i is ia i positive istatement?
A) Intermediate imicroeconomics ishould ibe irequired iof iall ieconomics imajors iin iorder
ito ibuild ia isolid ifoundation iin ieconomic itheory.
B) The iminimum iwage ishould inot ibe iincreased ibecause ithis iaction iwould
iincrease iunemployment.
C) Smoking i should i be i restricted i on i all i airline i flights.
D) All iautomobile ipassengers ishould ibe irequired ito iwear iseatbelts iin iorder ito iprotect
ithem iagainst iinjury.
E) none iof ithe
iabove iAnswer: i E
Diff: i1
Section: i 1.1
2
