TEST BANK
Principles of Economics
11th Edition
N. Gregory Mankiw
Complete Test Bank • All 38 Chapters
Multiple-Choice Quizzes • True/False Questions
Short Questions with Answers
Updated Questions • 2026/2027 Release
Principles of Economics • 11th Edition 1
,TABLE OF CONTENTS
PART I. INTRODUCTION
01. Ten Principles of Economics
02. Thinking Like an Economist
03. Interdependence and the Gains from Trade
PART II. HOW MARKETS WORK
04. The Market Forces of Supply and Demand
05. Elasticity and Its Application
06. Supply, Demand, and Government Policies
PART III. MARKETS AND WELFARE
07. Consumers, Producers, and the Efficiency of Markets
08. Applications: The Costs of Taxation
09. Application: International Trade
PART IV. THE ECONOMICS OF THE PUBLIC SECTOR
10. Externalities
11. Public Goods and Common Resources
12. The Economics of Healthcare
13. The Design of the Tax System
PART V. FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
14. The Costs of Production
15. Firms in Competitive Markets
16. Monopoly
17. Monopolistic Competition
18. Oligopoly
Principles of Economics • 11th Edition 2
,TABLE OF CONTENTS
PART VI. THE ECONOMICS OF THE LABOR MARKET
19. The Markets for the Factors of Production
20. Earnings and Discrimination
21. Income Inequality and Poverty
PART VII. TOPICS FOR FURTHER STUDY
22. The Theory of Consumer Choice
23. Frontiers in Microeconomics
PART VIII. THE DATA OF MACROECONOMICS
24. Measuring a Nation’s Income
25. Measuring the Cost of Living
PART IX. THE REAL ECONOMY IN THE LONG RUN
26. Production and Growth
27. Saving, Investment, and the Financial System
28. The Basic Tools of Finance
29. Unemployment
PART X. MONEY AND PRICES IN THE LONG RUN
30. The Monetary System
31. Money Growth and Inflation
PART XI. THE MACROECONOMICS OF OPEN ECONOMICS
32. Open-Economy Macroeconomics: Basic Concepts
33. A Macroeconomic Theory of the Open Economy
Principles of Economics • 11th Edition 3
,TABLE OF CONTENTS
PART XII. SHORT-RUN ECONOMIC FLUCTUATIONS
34. Aggregate Demand and Aggregate Supply
35. The Influence of Monetary and Fiscal Policy on Aggregate Demand
36. The Keynesian Cross
37. The Short-Run Trade-off between Inflation and Unemployment
PART XIII. FINAL THOUGHTS
38. Five Debates over Macroeconomic Policy
APPENDIX: How Economists Use Data
Principles of Economics • 11th Edition 4
, Test Bank Principles of Economics, 11th Edition N. Gregory Mankiw
Chap 01 11e - Mankiw (MCQs)
Indicate the answer choice that best completes the statement or answers the question.
1. After much consideration, you have chosen Italy over France for your Study Abroad program next year.
However, the deadline for your final decision is still months away and you may reverse this decision. Which of
the following events could prompt you to reverse this decision?
a. The marginal benefit of going to France increases.
b. The marginal cost of going to France increases.
c. The marginal benefit of going to Italy increases.
d. The marginal cost of going to Italy decreases.
ANSWER: a
2. The ability of an individual to own and exercise control over scarce resources is called
a. market failure.
b. property rights.
c. externality.
d. market power.
ANSWER: b
3. Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
ANSWER: c
4. Samuel is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car
for $5,800. Samuel discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to
potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should
he do?
a. He should sell the car now for $3,800.
b. He should keep the car since it wouldn’t be rational to spend $6,400 restoring a car and then sell it for
only $5,800.
c. He should complete the additional work and sell the car for $5,800.
d. It does not matter which action he takes since the outcome will be the same either way.
ANSWER: a
Page 1
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
5. Suppose your college introduces a mandatory technology fee for all students to support campus Wi-Fi. How
does this fee affect your opportunity cost of attending college?
a. The technology fee is not part of the opportunity cost of attending college if you would not have to pay
for Wi-Fi otherwise.
b. The technology fee is part of the opportunity cost of attending college if you would not have to pay for
Wi-Fi otherwise.
c. Only half of the technology fee is part of the opportunity cost of attending college.
d. The technology fee is not part of the opportunity cost of attending college under any circumstances.
ANSWER: b
6. If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention.
b. a decrease in foreign competition.
c. fewer market participants.
d. weaker property rights.
ANSWER: a
7. Widespread respiratory illnesses have been linked to pollution from delivery trucks operating in major cities.
While companies profit from quick deliveries, the health consequences affect many residents. This is an
example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. no market failure.
ANSWER: a
8. If the United States decides to trade with Vietnam, we know that
a. Vietnam will benefit, but trade with a less developed country could not benefit the United States.
b. it will not benefit Vietnam because workers in the United States are more productive.
c. Vietnam and the United States can both benefit.
d. it will not benefit either country because their cultural differences are too vast.
ANSWER: c
9. Widespread respiratory illnesses have been linked to pollution from delivery trucks operating in major cities.
While companies profit from quick deliveries, the health consequences affect many residents. This is an
example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. no market failure.
ANSWER: a
Page 2
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
10. Productivity is defined as the
a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.
ANSWER: a
11. Jordan is considering going to college. Currently, the costs of tuition are $18,000, room and board $9,500, and
books cost $2,200. If Jordan does not attend college, he will earn $20,000 working a job and spend $6,000 on
room and board. Jordan's cost of going to college is
a. $29,700.
b. $43,700.
c. $39,700.
d. $51,700.
ANSWER: b
12. A bagel shop sells fresh-baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels,
so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is
$1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at
6:30 p.m. on a particular day, which of the following alternatives is most attractive?
a. Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
b. Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00
per dozen.
c. Throw the bagels away and produce eight fewer dozen bagels tomorrow.
d. Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.
ANSWER: a
13. Which of these activities will most likely impose an external cost?
a. A fitness influencer streams their workout from a crowded gym.
b. A delivery driver vapes inside a shared office space.
c. A new parent takes their baby for a walk in the park.
d. A barista grabs a quick bite between shifts.
ANSWER: b
14. Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.
c. Trading for a good can make a nation better off only if the nation cannot produce that good itself.
d. Trade helps rich nations and hurts poor nations.
ANSWER: a
Page 3
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
15. For which of the following individuals would the opportunity cost of going to college be highest?
a. A software engineer with a lucrative job offer waiting after graduation.
b. A social entrepreneur running a nonprofit that depends on their leadership.
c. A recent high school graduate unsure about their career path.
d. An aspiring musician playing gigs part-time with minimal income.
ANSWER: a
16. The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are
different in that
a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from
scarce resources.
b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution
of those benefits.
c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the
benefits.
d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical
tradeoffs.
ANSWER: a
17. To improve living standards, policymakers should
a. impose restrictions on foreign competition.
b. formulate policies designed to increase productivity.
c. impose tougher immigration policies.
d. provide tax breaks for the middle class.
ANSWER: b
18. The ability of an individual to own and exercise control over scarce resources is called
a. market failure.
b. property rights.
c. externality.
d. market power.
ANSWER: b
19. Destiny is a graphic designer with a strong client list. Instead of spending hours cooking meals every week, she
subscribes to a local meal prep service. She knows that she can earn more in the time saved than what she
pays for the prepared meals. This scenario best illustrates which principle of economics?
a. Trade can make everyone better off.
b. Markets are usually a good way to organize economic activity.
c. Governments can sometimes improve market outcomes.
d. Prices rise when the government prints too much money.
ANSWER: a
Page 4
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
20. Suppose the cost of hosting a 450-seat concert is $45,000 and there are 10 empty seats. The marginal cost
ofadmitting one more attendee is
a. $450.
b. $450.
c. $45,000.
d. This cannot be determined from the information given.
ANSWER: d
21. Suppose the cost of hosting a 200-seat concert is $100,000 and 10 seats remain unsold. If the marginal cost of
admitting one more attendee is $20 and a last-minute fan is willing to pay $50 for a ticket, the concert organizer
should
a. sell the ticket because the marginal benefit exceeds the marginal cost.
b. sell the ticket because the marginal benefit exceeds the average cost.
c. not sell the ticket because the marginal benefit is less than the marginal cost.
d. not sell the ticket because the marginal benefit is less than the average cost.
ANSWER: a
22. An increase in the overall level of prices in an economy is referred to as
a. the income effect.
b. inflation.
c. deflation.
d. the substitution effect.
ANSWER: b
23. Sabrina decides to spend 3 hours working overtime rather than going to the park with her friends. She earns $12
per hour for overtime work. Her opportunity cost of working is
a. the $36 she earns working.
b. the $36 minus the enjoyment she would have received from going to the park.
c. the enjoyment she would have received had she gone to the park.
d. nothing, since she would have received less than $36 worth of enjoyment from going to the park.
ANSWER: c
24. Which of the following do economists not generally regard as a legitimate reason for the government to
intervene in a market?
a. To promote efficiency
b. To promote equality
c. To enforce property rights
d. To protect an industry from foreign competition
ANSWER: d
Page 5
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
25. Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce.
b. The "invisible hand" usually maximizes the income of society as a whole.
c. Households decide which firms to work for and what to buy with their incomes.
d. Government policies are the primary forces that guide the decisions of firms and households.
ANSWER: d
26. An increase in the overall level of prices in an economy is referred to as
a. the income effect.
b. inflation.
c. deflation.
d. the substitution effect.
ANSWER: b
27. When the government implements programs such as progressive income tax rates, which of the following is
likely to occur?
a. Equality is increased and efficiency is increased.
b. Equality is increased and efficiency is decreased.
c. Equality is decreased and efficiency is increased.
d. Equality is decreased and efficiency is decreased.
ANSWER: b
28. In a market economy, who makes the decisions that guide most economic activity?
a. Firms only
b. Households only
c. Firms and households
d. Government
ANSWER: c
29. Natural gas is considered to be a nonrenewable energy source. Which of the following statements is correct?
a. Natural gas is an unlimited resource.
b. Natural gas is a scarce resource.
c. Natural gas is a nonscarce resource.
d. Natural gas is not a resource.
ANSWER: b
Page 6
Principles of Economics
11th Edition
N. Gregory Mankiw
Complete Test Bank • All 38 Chapters
Multiple-Choice Quizzes • True/False Questions
Short Questions with Answers
Updated Questions • 2026/2027 Release
Principles of Economics • 11th Edition 1
,TABLE OF CONTENTS
PART I. INTRODUCTION
01. Ten Principles of Economics
02. Thinking Like an Economist
03. Interdependence and the Gains from Trade
PART II. HOW MARKETS WORK
04. The Market Forces of Supply and Demand
05. Elasticity and Its Application
06. Supply, Demand, and Government Policies
PART III. MARKETS AND WELFARE
07. Consumers, Producers, and the Efficiency of Markets
08. Applications: The Costs of Taxation
09. Application: International Trade
PART IV. THE ECONOMICS OF THE PUBLIC SECTOR
10. Externalities
11. Public Goods and Common Resources
12. The Economics of Healthcare
13. The Design of the Tax System
PART V. FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
14. The Costs of Production
15. Firms in Competitive Markets
16. Monopoly
17. Monopolistic Competition
18. Oligopoly
Principles of Economics • 11th Edition 2
,TABLE OF CONTENTS
PART VI. THE ECONOMICS OF THE LABOR MARKET
19. The Markets for the Factors of Production
20. Earnings and Discrimination
21. Income Inequality and Poverty
PART VII. TOPICS FOR FURTHER STUDY
22. The Theory of Consumer Choice
23. Frontiers in Microeconomics
PART VIII. THE DATA OF MACROECONOMICS
24. Measuring a Nation’s Income
25. Measuring the Cost of Living
PART IX. THE REAL ECONOMY IN THE LONG RUN
26. Production and Growth
27. Saving, Investment, and the Financial System
28. The Basic Tools of Finance
29. Unemployment
PART X. MONEY AND PRICES IN THE LONG RUN
30. The Monetary System
31. Money Growth and Inflation
PART XI. THE MACROECONOMICS OF OPEN ECONOMICS
32. Open-Economy Macroeconomics: Basic Concepts
33. A Macroeconomic Theory of the Open Economy
Principles of Economics • 11th Edition 3
,TABLE OF CONTENTS
PART XII. SHORT-RUN ECONOMIC FLUCTUATIONS
34. Aggregate Demand and Aggregate Supply
35. The Influence of Monetary and Fiscal Policy on Aggregate Demand
36. The Keynesian Cross
37. The Short-Run Trade-off between Inflation and Unemployment
PART XIII. FINAL THOUGHTS
38. Five Debates over Macroeconomic Policy
APPENDIX: How Economists Use Data
Principles of Economics • 11th Edition 4
, Test Bank Principles of Economics, 11th Edition N. Gregory Mankiw
Chap 01 11e - Mankiw (MCQs)
Indicate the answer choice that best completes the statement or answers the question.
1. After much consideration, you have chosen Italy over France for your Study Abroad program next year.
However, the deadline for your final decision is still months away and you may reverse this decision. Which of
the following events could prompt you to reverse this decision?
a. The marginal benefit of going to France increases.
b. The marginal cost of going to France increases.
c. The marginal benefit of going to Italy increases.
d. The marginal cost of going to Italy decreases.
ANSWER: a
2. The ability of an individual to own and exercise control over scarce resources is called
a. market failure.
b. property rights.
c. externality.
d. market power.
ANSWER: b
3. Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
ANSWER: c
4. Samuel is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car
for $5,800. Samuel discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to
potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should
he do?
a. He should sell the car now for $3,800.
b. He should keep the car since it wouldn’t be rational to spend $6,400 restoring a car and then sell it for
only $5,800.
c. He should complete the additional work and sell the car for $5,800.
d. It does not matter which action he takes since the outcome will be the same either way.
ANSWER: a
Page 1
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
5. Suppose your college introduces a mandatory technology fee for all students to support campus Wi-Fi. How
does this fee affect your opportunity cost of attending college?
a. The technology fee is not part of the opportunity cost of attending college if you would not have to pay
for Wi-Fi otherwise.
b. The technology fee is part of the opportunity cost of attending college if you would not have to pay for
Wi-Fi otherwise.
c. Only half of the technology fee is part of the opportunity cost of attending college.
d. The technology fee is not part of the opportunity cost of attending college under any circumstances.
ANSWER: b
6. If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention.
b. a decrease in foreign competition.
c. fewer market participants.
d. weaker property rights.
ANSWER: a
7. Widespread respiratory illnesses have been linked to pollution from delivery trucks operating in major cities.
While companies profit from quick deliveries, the health consequences affect many residents. This is an
example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. no market failure.
ANSWER: a
8. If the United States decides to trade with Vietnam, we know that
a. Vietnam will benefit, but trade with a less developed country could not benefit the United States.
b. it will not benefit Vietnam because workers in the United States are more productive.
c. Vietnam and the United States can both benefit.
d. it will not benefit either country because their cultural differences are too vast.
ANSWER: c
9. Widespread respiratory illnesses have been linked to pollution from delivery trucks operating in major cities.
While companies profit from quick deliveries, the health consequences affect many residents. This is an
example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. no market failure.
ANSWER: a
Page 2
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
10. Productivity is defined as the
a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.
ANSWER: a
11. Jordan is considering going to college. Currently, the costs of tuition are $18,000, room and board $9,500, and
books cost $2,200. If Jordan does not attend college, he will earn $20,000 working a job and spend $6,000 on
room and board. Jordan's cost of going to college is
a. $29,700.
b. $43,700.
c. $39,700.
d. $51,700.
ANSWER: b
12. A bagel shop sells fresh-baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels,
so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is
$1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at
6:30 p.m. on a particular day, which of the following alternatives is most attractive?
a. Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
b. Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00
per dozen.
c. Throw the bagels away and produce eight fewer dozen bagels tomorrow.
d. Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.
ANSWER: a
13. Which of these activities will most likely impose an external cost?
a. A fitness influencer streams their workout from a crowded gym.
b. A delivery driver vapes inside a shared office space.
c. A new parent takes their baby for a walk in the park.
d. A barista grabs a quick bite between shifts.
ANSWER: b
14. Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.
c. Trading for a good can make a nation better off only if the nation cannot produce that good itself.
d. Trade helps rich nations and hurts poor nations.
ANSWER: a
Page 3
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
15. For which of the following individuals would the opportunity cost of going to college be highest?
a. A software engineer with a lucrative job offer waiting after graduation.
b. A social entrepreneur running a nonprofit that depends on their leadership.
c. A recent high school graduate unsure about their career path.
d. An aspiring musician playing gigs part-time with minimal income.
ANSWER: a
16. The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are
different in that
a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from
scarce resources.
b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution
of those benefits.
c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the
benefits.
d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical
tradeoffs.
ANSWER: a
17. To improve living standards, policymakers should
a. impose restrictions on foreign competition.
b. formulate policies designed to increase productivity.
c. impose tougher immigration policies.
d. provide tax breaks for the middle class.
ANSWER: b
18. The ability of an individual to own and exercise control over scarce resources is called
a. market failure.
b. property rights.
c. externality.
d. market power.
ANSWER: b
19. Destiny is a graphic designer with a strong client list. Instead of spending hours cooking meals every week, she
subscribes to a local meal prep service. She knows that she can earn more in the time saved than what she
pays for the prepared meals. This scenario best illustrates which principle of economics?
a. Trade can make everyone better off.
b. Markets are usually a good way to organize economic activity.
c. Governments can sometimes improve market outcomes.
d. Prices rise when the government prints too much money.
ANSWER: a
Page 4
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
20. Suppose the cost of hosting a 450-seat concert is $45,000 and there are 10 empty seats. The marginal cost
ofadmitting one more attendee is
a. $450.
b. $450.
c. $45,000.
d. This cannot be determined from the information given.
ANSWER: d
21. Suppose the cost of hosting a 200-seat concert is $100,000 and 10 seats remain unsold. If the marginal cost of
admitting one more attendee is $20 and a last-minute fan is willing to pay $50 for a ticket, the concert organizer
should
a. sell the ticket because the marginal benefit exceeds the marginal cost.
b. sell the ticket because the marginal benefit exceeds the average cost.
c. not sell the ticket because the marginal benefit is less than the marginal cost.
d. not sell the ticket because the marginal benefit is less than the average cost.
ANSWER: a
22. An increase in the overall level of prices in an economy is referred to as
a. the income effect.
b. inflation.
c. deflation.
d. the substitution effect.
ANSWER: b
23. Sabrina decides to spend 3 hours working overtime rather than going to the park with her friends. She earns $12
per hour for overtime work. Her opportunity cost of working is
a. the $36 she earns working.
b. the $36 minus the enjoyment she would have received from going to the park.
c. the enjoyment she would have received had she gone to the park.
d. nothing, since she would have received less than $36 worth of enjoyment from going to the park.
ANSWER: c
24. Which of the following do economists not generally regard as a legitimate reason for the government to
intervene in a market?
a. To promote efficiency
b. To promote equality
c. To enforce property rights
d. To protect an industry from foreign competition
ANSWER: d
Page 5
,Name: Class: Date:
Chap 01 11e - Mankiw (MCQs)
25. Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce.
b. The "invisible hand" usually maximizes the income of society as a whole.
c. Households decide which firms to work for and what to buy with their incomes.
d. Government policies are the primary forces that guide the decisions of firms and households.
ANSWER: d
26. An increase in the overall level of prices in an economy is referred to as
a. the income effect.
b. inflation.
c. deflation.
d. the substitution effect.
ANSWER: b
27. When the government implements programs such as progressive income tax rates, which of the following is
likely to occur?
a. Equality is increased and efficiency is increased.
b. Equality is increased and efficiency is decreased.
c. Equality is decreased and efficiency is increased.
d. Equality is decreased and efficiency is decreased.
ANSWER: b
28. In a market economy, who makes the decisions that guide most economic activity?
a. Firms only
b. Households only
c. Firms and households
d. Government
ANSWER: c
29. Natural gas is considered to be a nonrenewable energy source. Which of the following statements is correct?
a. Natural gas is an unlimited resource.
b. Natural gas is a scarce resource.
c. Natural gas is a nonscarce resource.
d. Natural gas is not a resource.
ANSWER: b
Page 6
