Test Bank for Principles of Microeconomics, 3rd Edition by Betsey Stevenson and Wolfers
Chapter 01 3e - Stevenson
Indicate the answer choice that best completes the statement or answers the question.
1. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one
worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The
marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that
workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will
be the total revenue of her store?
a. She will hire two workers and the revenue of the store will be $1,400.
b. She will hire three workers and the revenue of the store will be $1,800.
c. She will hire four workers and the revenue of the store will be $2,000.
d. She will hire five workers and the revenue of the store will be $2,000.
ANSWER: c
2. Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can
make 20 drinks that sell for $4 on average in one hour. A second worker can make another 16 drinks in one
hour. The marginal benefit of each additional worker decreases by four drinks with each additional hire.
Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles
hire for each hour?
a. four
b. five
c. six
d. seven
ANSWER: b
3. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one
worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The
marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that
workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will
be her total cost for labor?
a. She will hire two workers at a total cost of $160.
b. She will hire three workers at a total cost of $480.
c. She will hire four workers at a total cost of $640.
d. She will hire five workers at a total cost of $2,000.
ANSWER: c
Page 1
,Name: Class: Date:
Chapter 01 3e - Stevenson
4. Carolyn is a junior in college studying economics. She has created a new software application that applies
the four principles of economic decision making to any potential decision that a user may face. She is
considering leaving school after this academic year to pursue further development of her app. Carolyn should
consider all of these costs when calculating the opportunity costs of staying in college EXCEPT the:
a. time she will spend studying instead of working on the app.
b. potential forgone profits from selling her app.
c. potential fame that could come from creating a useful app.
d. cost of supplies and the technology fees she paid during the first three years of college.
ANSWER: d
5. Consider the decision to read your economics textbook regularly. Which of the four core principles of
economics applies to the notion that reading this textbook will require time and effort but that doing so will
improve your grade in this course?
a. the cost-benefit principle
b. the opportunity cost principle
c. the marginal principle
d. the interdependence principle
ANSWER: a
6. You're ready to launch your first ad campaign to attract new customers to your small business. You consider
hiring an ad agency to launch the campaign because you have no background in marketing. However, you
discover a YouTube channel of a marketing expert who teaches small businesses how to create and launch
their own marketing campaigns. You learn so much from this channel that you decide to do it yourself. Since
you follow the Rational Rule, which of these statements explains how the interdependency between markets
changes your choice?
a. You earn more surplus by doing it yourself now that you understand more about marketing.
b. You earn less surplus by doing it yourself now.
c. You would have been better off hiring the professional and you misused the framing effect in your decision.
d. You earn more surplus by using the professional now that you understand more about marketing.
ANSWER: a
Page 2
,Name: Class: Date:
Chapter 01 3e - Stevenson
7. Diane is a student studying economics and currently working on her class schedule for next semester. When
she considers taking another economics course and how to meet prerequisites for future economics courses,
she is acknowledging dependencies that exist:
a. between her own choices.
b. between people or businesses in the same market.
c. between markets.
d. through time.
ANSWER: d
8. The Rational Rule suggests you should continue with an activity until your _____ benefit _____ your marginal
cost.
a. total; equals
b. total; exceeds
c. marginal; equals
d. marginal; is less than
ANSWER: c
9. You have paid $100 for student season tickets to the football games at your university. It is halfway through
the season, and the team has not won any games. You are considering whether you will attend any future
games this season. All of these are costs or benefits you should consider when making this decision
EXCEPT the:
a. cost of a hotdog and soda you will inevitably buy at a future game.
b. time spent at the game rather than studying.
c. frustration experienced from watching the team lose in previous games.
d. $5 you will earn per game by selling the remaining tickets.
ANSWER: c
10. How is the economic surplus generated by a decision calculated?
a. It is the total benefits minus total costs arising from the decision.
b. It is the total benefits plus total costs arising from the decision.
c. It is the sum of benefits arising from the decision.
d. It is the sum of costs arising from the decision.
ANSWER: a
Page 3
, Name: Class: Date:
Chapter 01 3e - Stevenson
11. Harry is an engineering student taking an economics elective in his senior year. He has the option after college
to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics course to
help with this decision. By considering that he cannot be both a petroleum engineer and a rollercoaster
designer, he is acknowledging the dependencies that exist:
a. between his own choices.
b. between people or businesses in the same market.
c. between markets.
d. through time.
ANSWER: a
12. A doctor has worked as a general practitioner for several years, earning an annual salary of $125,000. They
are now deciding whether they want to open their own private practice or continue as a team member in the
existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice,
they will receive $50,000 in salary from the business annually until the practice is well-established. They
anticipate the practice will take one year to become fully established. They paid $200,000 for medical
school. They should open their own practice if the future benefits exceed:
a. $175,000.
b. $200,000.
c. $375,000.
d. $75,000.
ANSWER: a
13. A central and fundamental theme in economics is that:
a. for me to have something, someone else must be willing to give it up.
b. the United States is a rich country, but we are simply not aware of it.
c. resources are limited and cannot satisfy all the ways a society wants to use them.
d. we can build as much as we want, since resources are unlimited.
ANSWER: c
14. Kathleen is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to
watch. Kathleen should continue watching episodes until the marginal:
a. benefit of watching another episode exceeds the marginal cost.
b. benefit of watching another episode is equal to the marginal cost.
c. benefit of watching another episode is positive.
d. cost of watching another episode is positive.
ANSWER: b
Page 4
Chapter 01 3e - Stevenson
Indicate the answer choice that best completes the statement or answers the question.
1. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one
worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The
marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that
workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will
be the total revenue of her store?
a. She will hire two workers and the revenue of the store will be $1,400.
b. She will hire three workers and the revenue of the store will be $1,800.
c. She will hire four workers and the revenue of the store will be $2,000.
d. She will hire five workers and the revenue of the store will be $2,000.
ANSWER: c
2. Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can
make 20 drinks that sell for $4 on average in one hour. A second worker can make another 16 drinks in one
hour. The marginal benefit of each additional worker decreases by four drinks with each additional hire.
Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles
hire for each hour?
a. four
b. five
c. six
d. seven
ANSWER: b
3. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one
worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The
marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that
workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will
be her total cost for labor?
a. She will hire two workers at a total cost of $160.
b. She will hire three workers at a total cost of $480.
c. She will hire four workers at a total cost of $640.
d. She will hire five workers at a total cost of $2,000.
ANSWER: c
Page 1
,Name: Class: Date:
Chapter 01 3e - Stevenson
4. Carolyn is a junior in college studying economics. She has created a new software application that applies
the four principles of economic decision making to any potential decision that a user may face. She is
considering leaving school after this academic year to pursue further development of her app. Carolyn should
consider all of these costs when calculating the opportunity costs of staying in college EXCEPT the:
a. time she will spend studying instead of working on the app.
b. potential forgone profits from selling her app.
c. potential fame that could come from creating a useful app.
d. cost of supplies and the technology fees she paid during the first three years of college.
ANSWER: d
5. Consider the decision to read your economics textbook regularly. Which of the four core principles of
economics applies to the notion that reading this textbook will require time and effort but that doing so will
improve your grade in this course?
a. the cost-benefit principle
b. the opportunity cost principle
c. the marginal principle
d. the interdependence principle
ANSWER: a
6. You're ready to launch your first ad campaign to attract new customers to your small business. You consider
hiring an ad agency to launch the campaign because you have no background in marketing. However, you
discover a YouTube channel of a marketing expert who teaches small businesses how to create and launch
their own marketing campaigns. You learn so much from this channel that you decide to do it yourself. Since
you follow the Rational Rule, which of these statements explains how the interdependency between markets
changes your choice?
a. You earn more surplus by doing it yourself now that you understand more about marketing.
b. You earn less surplus by doing it yourself now.
c. You would have been better off hiring the professional and you misused the framing effect in your decision.
d. You earn more surplus by using the professional now that you understand more about marketing.
ANSWER: a
Page 2
,Name: Class: Date:
Chapter 01 3e - Stevenson
7. Diane is a student studying economics and currently working on her class schedule for next semester. When
she considers taking another economics course and how to meet prerequisites for future economics courses,
she is acknowledging dependencies that exist:
a. between her own choices.
b. between people or businesses in the same market.
c. between markets.
d. through time.
ANSWER: d
8. The Rational Rule suggests you should continue with an activity until your _____ benefit _____ your marginal
cost.
a. total; equals
b. total; exceeds
c. marginal; equals
d. marginal; is less than
ANSWER: c
9. You have paid $100 for student season tickets to the football games at your university. It is halfway through
the season, and the team has not won any games. You are considering whether you will attend any future
games this season. All of these are costs or benefits you should consider when making this decision
EXCEPT the:
a. cost of a hotdog and soda you will inevitably buy at a future game.
b. time spent at the game rather than studying.
c. frustration experienced from watching the team lose in previous games.
d. $5 you will earn per game by selling the remaining tickets.
ANSWER: c
10. How is the economic surplus generated by a decision calculated?
a. It is the total benefits minus total costs arising from the decision.
b. It is the total benefits plus total costs arising from the decision.
c. It is the sum of benefits arising from the decision.
d. It is the sum of costs arising from the decision.
ANSWER: a
Page 3
, Name: Class: Date:
Chapter 01 3e - Stevenson
11. Harry is an engineering student taking an economics elective in his senior year. He has the option after college
to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics course to
help with this decision. By considering that he cannot be both a petroleum engineer and a rollercoaster
designer, he is acknowledging the dependencies that exist:
a. between his own choices.
b. between people or businesses in the same market.
c. between markets.
d. through time.
ANSWER: a
12. A doctor has worked as a general practitioner for several years, earning an annual salary of $125,000. They
are now deciding whether they want to open their own private practice or continue as a team member in the
existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice,
they will receive $50,000 in salary from the business annually until the practice is well-established. They
anticipate the practice will take one year to become fully established. They paid $200,000 for medical
school. They should open their own practice if the future benefits exceed:
a. $175,000.
b. $200,000.
c. $375,000.
d. $75,000.
ANSWER: a
13. A central and fundamental theme in economics is that:
a. for me to have something, someone else must be willing to give it up.
b. the United States is a rich country, but we are simply not aware of it.
c. resources are limited and cannot satisfy all the ways a society wants to use them.
d. we can build as much as we want, since resources are unlimited.
ANSWER: c
14. Kathleen is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to
watch. Kathleen should continue watching episodes until the marginal:
a. benefit of watching another episode exceeds the marginal cost.
b. benefit of watching another episode is equal to the marginal cost.
c. benefit of watching another episode is positive.
d. cost of watching another episode is positive.
ANSWER: b
Page 4
