Test Bank to Accompany microeconomics seventh edition

Test Bank to Accompany microeconomics seventh edition Contents Chapter 1 Preliminaries ........................................................................................................................1 Chapter 2 The Basics of Supply and Demand..................................................................................16 Chapter 3 Consumer Behavior...........................................................................................................55 Chapter 4 Individual and Market Demand...................................................................................125 Chapter 5 Uncertainty and Consumer Behavior...........................................................................179 Chapter 6 Production ........................................................................................................................236 Chapter 7 The Cost of Production ...................................................................................................273 Chapter 8 Profit Maximization and Competitive Supply ............................................................327 Chapter 9 The Analysis of Competitive Markets ..........................................................................375 Chapter 10 Market Power: Monopoly and Monopsony.................................................................438 Chapter 11 Pricing with Market Power............................................................................................480 Chapter 12 Monopolistic Competition and Oligopoly ...................................................................528 Chapter 13 Game Theory and Competitive Strategy......................................................................565 Chapter 14 Markets For Factor Inputs ..............................................................................................614 Chapter 15 Investment, Time and Capital Markets ........................................................................656 Chapter 16 General Equilibrium and Economic Efficiency ...........................................................698 Chapter 17 Markets with Asymmetric Information........................................................................743 Chapter 18 Externalities and Public Goods......................................................................................787 1 Chapter 1 Preliminaries 1) Microeconomics is the branch of economics that deals with which of the following topics? A) The behavior of individual consumers B) Unemployment and interest rates C) The behavior of individual firms and investors D) B and C E) A and C Answer: E Diff: 1 Section: 1.1 2) A Rolling Stones song goes: ʺYou canʹt always get what you want.ʺ This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme? A) Consumers must make the best purchasing decisions they can, given their limited incomes. B) Workers do not have as much leisure as they would like, given their wages and working conditions. C) Workers in planned economies, such as North Korea, do not have much choice over jobs. D) Firms in market economies have limited financial resources. Answer: A Diff: 1 Section: 1.1 3) Economics is about the allocation of scarce resources. Which of the following is NOT an example of economic scarcity? A) If Steve goes to see the movie Master and Commander on Saturday, he will not be able to afford buying ice cream. B) If Jenny studies for her economics quiz this evening, she will not have time to walk her dog. C) If General Motors increases its production of SUVs this year, it will have to spend more on advertising. D) If Borders Books increases the number of titles it carries, it will have to reallocate shelf space to accommodate the new titles. Answer: C Diff: 2 Section: 1.1 4) A valid and useful theory of gold prices: A) helps to predict the movements of gold prices over time. B) may be founded on simplifying assumptions. C) need not exactly predict every change in gold prices. D) all of the above E) none of the above Answer: D Diff: 1 Section: 1.1 2 5) Use the following two statements to answer this question: I. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions. II. Economic theories use value judgments to determine which people ought to pay more taxes. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false. Answer: B Diff: 1 Section: 1.1 6) Which of the following is a positive statement? A) The President of the United States ought to be elected by a direct vote of the American people rather than the Electoral College. B) A fundamental assumption of the economic theory of consumer behavior is that consumers always prefer having more of any good to having less of it. C) Because many adults cannot afford to go to college, tax credits for tuition should be introduced. D) all of the above E) none of the above Answer: B Diff: 1 Section: 1.1 7) Which of the following is a normative statement? A) The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S. B) State governments should not subsidize corporations by training welfare recipients. C) Presidential candidates should not be given funds from the federal government to run campaigns. D) The sea otter should not be allowed to spread into Southern California coastal waters, because it will reduce the value of fisheries. E) all of the above Answer: E Diff: 1 Section: 1.1 8) Which of the following is a positive statement? A) Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. B) The minimum wage should not be increased because this action would increase unemployment. C) Smoking should be restricted on all airline flights. D) All automobile passengers should be required to wear seatbelts in order to protect them against injury. E) none of the above Answer: E Diff: 1 Section: 1.1 3 9) Which of the following is a positive statement? A) When the price of a good goes up, consumers buy less of it. B) When the price of a good goes up, firms produce more of it. C) When the Federal government sells bonds, interest rates rise and private investment is reduced. D) all of the above E) none of the above Answer: D Diff: 1 Section: 1.1 10) Which of the following statements is false? An economic analysis of carbon taxes can: A) calculate the increase in costs faced by coal-using industries. B) predict the effect on unemployment in West Virginia coal mining communities. C) compare the likely reductions in medical expenditures on diseases caused by smog. D) present a trade-off of the costs and benefits of different levels of carbon taxes. E) conclude that such taxes should be imposed to benefit future generations. Answer: E Diff: 1 Section: 1.1 11) Use the following two statements to answer this question: I. In order to answer normative questions, it is necessary to make value judgments. II. In order to conduct positive economic analysis, it is always necessary to use empirical evidence in addition to economic theories. A) I and II are incorrect. B) I is correct, II is incorrect. C) I is incorrect, II is correct. D) Both I and II are correct. Answer: B Diff: 1 Section: 1.1 12) questions have to do with explanation and prediction, questions have to do with what ought to be. A) Positive; negative. B) Negative; normative. C) Affirmative; positive. D) Positive; normative. E) Econometric; theoretical. Answer: D Diff: 1 Section: 1.1 13) The key assumption underlying the theory of the firm is that: A) firms are assumed to maximize sales revenue. B) managers are assumed to maximize the number of employees in their department. C) firms are assumed to maximize profits. D) none of the above Answer: C Diff: 1 Section: 1.1 4 14) Which of the following statements is NOT true? A) The trade-offs facing consumers and producers are based on prices. B) All prices are determined by market interactions between buyers and sellers. C) Prices serve an important role in microeconomics. D) Only A and B above false. E) Only B and C above are false. Answer: B Diff: 1 Section: 1.1 15) Please use the following statements to answer this question: I. The process of testing and revising theories is central to the development of economics as a science. II. Theory is imperfect and may not adequately describe economic behavior in some cases. A) I and II are true. B) I is true and II is false. C) I is false and II is true. D) I and II are false. Answer: A Diff: 1 Section: 1.1 16) The trade-offs facing consumers include: A) how to allocate income across goods and serves. B) how to allocate income between consumption and savings. C) both A and B D) none of the above Answer: C Diff: 1 Section: 1.1 17) The trade-offs facing workers include all of the following EXCEPT: A) decision to work or remain outside the workforce. B) decision to work or seek additional education. C) decision to work for a large corporation or a small firm. D) decision to allocate their time between work and leisure. E) All of the above are trade-offs facing workers. Answer: E Diff: 1 Section: 1.1 18) Firms face trade-offs in production, including decisions related to: A) which products to produce. B) how much of a particular product to produce. C) the best way to produce a given amount of output. D) all of the above Answer: D Diff: 2 Section: 1.1 5 19) Which of the following markets has the most restrictive geographic boundary? A) The market for retail gasoline B) The market for housing C) The market for gold D) The market for beef Answer: B Diff: 1 Section: 1.2 20) An investor can acquire shares of stock in Acme Corporation either by purchasing shares on the stock market or by purchasing a bond that is convertible into shares of Acme stock. After careful study, the investor discovers that she can profit by purchasing the bond, converting it to shares of stock, and selling the stock. This practice is called: A) selling short. B) arbitrage. C) profiteering. D) dumping. E) none of the above Answer: B Diff: 1 Section: 1.2