TEST BANK 2021 Principles of Microeconomics Test Item File 2 Ninth Edition by Case/Fair/Oster

TEST BANK 2021 Principles of Microeconomics Test Item File 2 Ninth Edition by Case/Fair/Oster Test Item File to Accompany Principles of Microeconomics Test Item File 2 Ninth Edition by Case/Fair/Oster Prentice Hall c.2009 10/30/08 Contents Chapter 1 The Scope and Method of Economics 1 Chapter 2 The Economic Problem: Scarcity and Choice 29 Chapter 3 Demand, Supply, and Market Equilibrium 55 Chapter 4 Demand and Supply Applications 98 Chapter 5 Elasticity 117 Chapter 6 Household Behavior and Consumer Choice 135 Chapter 7 The Production Process: The Behavior of Profit-Maximizing Firms 171 Chapter 8 Short-Run Costs and Output Decisions 207 Chapter 9 Long-Run Costs and Output Decisions 252 Chapter 10 Input Demand: The Labor and Land Markets 292 Chapter 11 Input Demand: The Capital Markets and Investment Decision 323 Chapter 12 General Equilibrium and the Efficiency of Perfect Competition 348 Chapter 13 Monopoly and Antitrust Policy 377 Chapter 14 Oligopoly 425 Chapter 15 Monopolistic Competition 449 Chapter 16 Externalities, Public Goods, Imperfect Information, and Social Choice 476 Chapter 17 Uncertainty and Asymmetric Information 517 Chapter 18 Income Distribution and Poverty 535 Chapter 19 Public Finance: The Economics of Taxation 563 Chapter 20 International Trade, Comparative Advantage, and Protectionism 592 Chapter 21 Economic Growth in Developing and Transitional Economies 628 Chapter 1 The Scope and Method of Economics 1.1 Why Study Economics? 1 Multiple Choice 1) The reasons to study economics include which of the following? A) to be an informed voter B) to understand society and global affairs C) to learn a way of thinking D) all of the above Diff: 1 Topic: Why Study Economics? Skill: Fact 2) Marginalism is A) the best alternative that we forego when making a decision. B) the study of how societies choose to use scarce resources. C) a market situation in which profit opportunities are eliminated almost instantaneously. D) the process of analyzing the additional costs or benefits arising from a decision. Diff: 1 Topic: Why Study Economics? Skill: Definition 3) Economics is best defined as the study of A) financial decision-making. B) how consumers make purchasing decisions. C) choices made by people faced with scarcity. D) inflation, unemployment, and economic growth. Diff: 2 Topic: Why Study Economics? Skill: Definition 4) The Industrial Revolution refers to the rise of the modern factory system in during the late eighteenth and early nineteenth centuries. A) the United States B) England C) France D) Germany Diff: 1 Topic: Why Study Economics? Skill: Fact 1 5) Which of the following statements is correct? A) Economics is a natural science. B) In large measure, economics is the study of how people make choices. C) If poverty was eliminated there would be no reason to study economics. D) Economic analysis can be used to explain how societies, but not individuals, make decisions. Diff: 1 Topic: Why Study Economics? Skill: Fact 6) Economics is the study of A) how to invest in the stock market. B) how society uses limited resources. C) the role of money in markets. D) how government officials decide which goods and services are produced. Diff: 2 Topic: Why Study Economics? Skill: Definition 7) Costs that cannot be avoided, because they have already been incurred are known as A) differential costs. B) marginal costs. C) opportunity costs. D) sunk costs. Diff: 2 Topic: Why Study Economics? Skill: Definition 8) Suppose that two weeks ago you purchased a ticket to the symphony for $40. Last week someone invited you to go camping on the same night as the symphony concert. You would much rather go camping than go to the symphony. You have tried unsuccessfully to sell the symphony concert ticket. Which of the following statements regarding this situation is correct? A) The $40 symphony ticket should be irrelevant in your decision making, because it represents the marginal cost of going camping. B) The $40 you paid for the symphony ticket should be irrelevant in your decision making, because it is a sunk cost. C) The $40 you paid for the symphony ticket is relevant to the decision, as this represents the opportunity cost of going camping. D) You should base your decision on whether or not going camping will provide you with more than $40 in satisfaction. Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 9) You have decided that you want to attend a renaissance fair as King Henry VIII. You estimate that it will cost $80 to assemble your costume. After spending $80 on the costume, you realize that the additional pieces you need will cost you $20 more. The marginal cost of completing the costume is A) $20. B) $60. C) $80. D) $100. Diff: 2 Topic: Why Study Economics? Skill: Analytic AACSB: Analytic Skills 10) The concept of opportunity cost can be applied to the analysis of decision-making processes. A) only economy-wide B) only global C) only-small-scale D) any Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 11) That which we forgo, or give up, when we make a choice or a decision is known as A) equity. B) causation. C) correlation. D) opportunity cost. Diff: 2 Topic: Why Study Economics? Skill: Definition 12) Scarce resources give rise to the concept of A) efficient markets. B) opportunity costs. C) laissez-faire. D) positive economics. Diff: 1 Topic: Why Study Economics? Skill: Fact 13) Which of the following is an opportunity cost of attending college? A) the cost of your apartment or dorm B) the income you could have earned if you didnʹt attend college C) the cost of the food that you consume while you are attending college D) the education you gain from attending college. Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 14) If your tuition is $2,000 this semester, your books cost $400, you can only work 10 rather than 40 hours per week during the 15 weeks you are taking classes and you make $12 per hour, and your room and board is $4,000 this semester, then your opportunity cost of attending college this semester is A) $2,400. B) $2,760. C) $7,800. D) $11,800. Diff: 3 Topic: Why Study Economics? Skill: Analytic AACSB: Analytic Skills 15) If your tuition is $20,000 this semester, your books cost $2,000, you can only work 10 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $8,000 this semester, then your opportunity cost of attending college this semester is A) $22,000. B) $22,150. C) $28,750. D) $36,750. Diff: 3 Topic: Why Study Economics? Skill: Analytic AACSB: Analytic Skills 16) If you own a condo and you decide to lease it to your cousin A) there is no opportunity cost of leasing the condo because you own it. B) there is an opportunity cost of leasing the condo because you could have chosen to live in it. C) there is no opportunity cost of leasing the condo because you collect rent from your cousin. D) the only cost relevant to this decision is the price you paid for the condo. Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 17) You own The Wedding Crasher on DVD. The opportunity cost of watching this DVD for the fourth time A) is zero, since you own it. B) is one-fourth the cost of the DVD, as this is the fourth time you have watched it. C) is the value of the alternative use of the time you spend watching the DVD. D) must be the same as the opportunity cost of watching it the first time. Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 18) Opportunity cost is A) what we give up to get something else. B) marginal cost divided by sunk cost. C) the same as real cost. D) all of the above Diff: 1 Topic: Why Study Economics? Skill: Definition 19) Sunk costs A) are costs which have been incurred. B) are costs which cannot be avoided but have yet to be incurred. C) the sum of all marginal costs. D) the sum of all opportunity costs. Diff: 1 Topic: Why Study Economics? Skill: Definition 20) If you can download 10 ring tones for your cell phone for $10 or you could download 11 ring tones for your cell phone for $10.50, then the marginal cost of the eleventh ring tone is A) $0.50. B) $10.00. C) $10.50. D) $20.50. Diff: 2 Topic: Why Study Economics? Skill: Analytic AACSB: Analytic Skills 21) If you eat at a Las vegas casino that charges $12 for its all you can eat buffet, then the marginal cost of your third trip to the buffet is A) zero. B) $4. C) $12. D) $36. Diff: 2 Topic: Why Study Economics? Skill: Analytic AACSB: Analytic Skills 22) An efficient market is a market A) that deals in unlimited resources. B) in which long-term profits are guaranteed. C) in which profit opportunities are eliminated almost instantaneously. D) in which there are no opportunity costs. Diff: 2 Topic: Why Study Economics? Skill: Definition 23) If information is more costly and less easily available, then usually this A) makes markets more efficient. B) makes markets less efficient. C) decreases profit opportunities. D) decreases the opportunity cost of acquiring more information. Diff: 3 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 24) The common way of expressing the efficient market concept is A) ʺthe only true market is a profitable market.ʺ B) ʺthereʹs no such thing as a free lunch.ʺ C) ʺonly without government interference can a market survive.ʺ D) ʺonce an efficient market, always an efficient market.ʺ Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 25) Related to the Economics in Practice on p. 6: An example of a sunk cost to Apple in its production of the iPod is A) the $73 cost of the Toshiba hard drive. B) the cost of conception and design of the iPod. C) the $80 value-added received by Apple. D) the cost of all of the 451 components needed to produce the iPod. Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking 26) Related to the Economics in Practice on p. 6: The opportunity cost to Apple of having its 30-gigabyte video iPod assembled in China is A) the low wages paid to Chinese workers. B) the $4 per unit cost of assembly in China. C) having the iPod assembled in the next best available location. D) the value-added received by Apple. Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking 2 True/False 1) Resources are limited in both wealthy and poor societies. Answer: TRUE Diff: 1 Topic: Why Study Economics? Skill: Fact 2) The value of the best alternative foregone is the sunk cost of making a decision. Answer: FALSE Diff: 1 Topic: Why Study Economics? Skill: Fact 3) Opportunity costs arise because resources are limited. Answer: TRUE Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 4) Sunk costs affect marginal decision making. Answer: FALSE Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking 5) Sunk costs are those that cannot be recaptured. Answer: TRUE Diff: 1 Topic: Why Study Economics? Skill: Fact 1.2 The Scope of Economics 1 Multiple Choice 1) Microeconomics is best described as the study of A) the choices made by individual households, firms, and governments. B) inflation, unemployment, gross national product, and the nationʹs economy as a whole. C) how markets interact in the aggregate economy. D) marginal changes in the economy. Diff: 2 Topic: The Scope of Economics Skill: Definition 2) Macroeconomics is best described as the study of A) very large issues. B) the choices made by individual households, firms, and governments. C) the nationʹs economy as a whole. D) the relationship between inflation and wage inequality. Diff: 2 Topic: The Scope of Economics Skill: Definition 3) Which of the following is a microeconomics question? A) Is it sensible for a government to subsidize tobacco production? B) Why do some countries grow faster than others? C) Should Congress and the president take action to reduce global warming? D) Should the government attempt to influence the interest rate to lower inflation? Diff: 2 Topic: The Scope of Economics Skill: Conceptual AACSB: Reflective Thinking 4) Which of the following is a macroeconomics question? A) Should we have a constitutional amendment to balance the federal budget? B) Why does a firm decide to enter a particular market? C) Should the government prevent the merger of two large firms? D) Should the government put a tax on alcohol in an attempt to reduce highway fatalities? Diff: 1 Topic: The Scope of Economics Skill: Conceptual AACSB: Reflective Thinking 5) We can use macroeconomic analysis to A) learn how to balance a checkbook. B) study the choices made by households. C) understand marginal changes in the macroeconomy. D) understand why economies grow. Diff: 1 Topic: The Scope of Economics Skill: Fact 2 True/False 1) The rate of unemployment is a topic of microeconomics. Answer: FALSE Diff: 1 Topic: The Scope of Economics Skill: Conceptual AACSB: Reflective Thinking 2) The rate of inflation is a topic of macroeconomics. Answer: TRUE Diff: 2 Topic: The Scope of Economics Skill: Conceptual AACSB: Reflective Thinking 1.3 The Method of Economics 1 Multiple Choice 1) Which of the following is an example of a normative question? A) How will an increase in the price of diesel fuel affect truck drivers? B) What fraction of an income-tax rebate check will be spent on consumer goods? C) Should the government provide free prescription drugs to lower-income citizens? D) How will an increase in the minimum wage affect migrant workers? Diff: 2 Topic: The Method of Economics Skill: Conceptual AACSB: Reflective Thinking 2) The compilation of data that describe phenomena and facts is referred to as A) an economic model. B) Marxist ideology. C) a normative statement. D) descriptive economics. Diff: 2 Topic: The Method of Economics Skill: Definition 3) The amount of exercise that one gets is an important factor in the determination of his general state of health. This is best described as A) a positive statement. B) Marxist ideology. C) a normative statement. D) descriptive economics. Diff: 2 Topic: The Method of Economics Skill: Conceptual AACSB: Reflective Thinking 4) Opportunity cost is A) the additional cost incurred from the consumption of one more unit of output. B) the cost involved when choosing between alternatives. C) the cost of production which cannot be recaptured. D) the total cost incurred from the consumption of additional output. Diff: 2 Topic: The Method of Economics Skill: Definition