Test Bank for Principles of
Economics 3 Edition By
rd
Betsey Stevenson, Justin
Wolfers (All Chapters 1-
35, 100% Original Verified,
A+ Grade)
This is The Only Original
and Complete Test Bank
for 3 Edition, All Other
rd
Files in the Market are
Fake/Old/Wrong Edition.
,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.
b. B.
c. C.
d. D.
ANSWER: c
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
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.
c. C.
d. D.
ANSWER: d
3. 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 will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all
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.
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
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?
a. $1,160
b. $200
c. $320
d. $960
ANSWER: a
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
at least:
a. $1.
b. $5.
c. $8.
d. $10.
ANSWER: d
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, Name: Class: Date:
Chapter 1
7. You are a math tutor, and you offer in-home tutoring on weekday afternoons for $20 an hour. On Saturdays, you
tutor students hourly for free at the community center. Since you follow the Rational Rule for Consumers, which
statement can you conclude is TRUE?
a. Your economic surplus rises or at least remains unchanged when you tutor at the community center.
b. You couldn't gain any economic surplus from tutoring at the community center since you earn $0 per hour.
c. You can't compare the two types of tutoring because you can't quantify how much donating your time means to you.
d. The time you spend tutoring the students on weekday afternoons lowers your economic surplus.
ANSWER: a
8. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up
specials and the rights to some of Seinfeld's previous work. Which statement can you conclude is TRUE?
a. The $100 million deal lowered Netflix's economic surplus.
b. Netflix is worse off because of the cost of the $100 million.
c. The $100 million deal provided fewer total benefits than total cost to Netflix.
d. The cost of the $100 million deal was no greater than the benefits of the deal.
ANSWER: d
9. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up
specials. Which statement can you conclude is FALSE?
a. The transaction lowered the comedian's economic surplus.
b. The deal was a voluntary exchange between Netflix and the comedian.
c. For Netflix, the cost of the deal was no greater than the benefits of the deal.
d. The benefits of the deal were at least equal to the cost for the comedian.
ANSWER: a
10. You are on the marketing team for Kraft. Knowing that most people base their decisions on how things are
described, your team must determine the best language to entice people to buy Kraft cheese. Your team is
choosing between describing the package content as containing "5% fat" or as "95% fat-free." What is the term
for why most people would react differently to the two phrases?
a. framing effect
b. cost-benefit analysis
c. willingness to pay
d. economic surplus
ANSWER: a
Copyright Macmillan Learning. Powered by Cognero. Page 3
Economics 3 Edition By
rd
Betsey Stevenson, Justin
Wolfers (All Chapters 1-
35, 100% Original Verified,
A+ Grade)
This is The Only Original
and Complete Test Bank
for 3 Edition, All Other
rd
Files in the Market are
Fake/Old/Wrong Edition.
,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.
b. B.
c. C.
d. D.
ANSWER: c
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
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.
c. C.
d. D.
ANSWER: d
3. 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 will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all
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
Copyright Macmillan Learning. Powered by Cognero. Page 1
,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.
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
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?
a. $1,160
b. $200
c. $320
d. $960
ANSWER: a
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
at least:
a. $1.
b. $5.
c. $8.
d. $10.
ANSWER: d
Copyright Macmillan Learning. Powered by Cognero. Page 2
, Name: Class: Date:
Chapter 1
7. You are a math tutor, and you offer in-home tutoring on weekday afternoons for $20 an hour. On Saturdays, you
tutor students hourly for free at the community center. Since you follow the Rational Rule for Consumers, which
statement can you conclude is TRUE?
a. Your economic surplus rises or at least remains unchanged when you tutor at the community center.
b. You couldn't gain any economic surplus from tutoring at the community center since you earn $0 per hour.
c. You can't compare the two types of tutoring because you can't quantify how much donating your time means to you.
d. The time you spend tutoring the students on weekday afternoons lowers your economic surplus.
ANSWER: a
8. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up
specials and the rights to some of Seinfeld's previous work. Which statement can you conclude is TRUE?
a. The $100 million deal lowered Netflix's economic surplus.
b. Netflix is worse off because of the cost of the $100 million.
c. The $100 million deal provided fewer total benefits than total cost to Netflix.
d. The cost of the $100 million deal was no greater than the benefits of the deal.
ANSWER: d
9. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up
specials. Which statement can you conclude is FALSE?
a. The transaction lowered the comedian's economic surplus.
b. The deal was a voluntary exchange between Netflix and the comedian.
c. For Netflix, the cost of the deal was no greater than the benefits of the deal.
d. The benefits of the deal were at least equal to the cost for the comedian.
ANSWER: a
10. You are on the marketing team for Kraft. Knowing that most people base their decisions on how things are
described, your team must determine the best language to entice people to buy Kraft cheese. Your team is
choosing between describing the package content as containing "5% fat" or as "95% fat-free." What is the term
for why most people would react differently to the two phrases?
a. framing effect
b. cost-benefit analysis
c. willingness to pay
d. economic surplus
ANSWER: a
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