Test bank questions for Nguyen & Wait Essentials of Microeconomics 2e
Chapter 1
1. As an economist, you observe that as inflation (the rate of increase in the price level) falls,
unemployment rises. What can you say in regards to this observation?
a. The decrease in inflation caused unemployment to rise.
b. The increase in unemployment cased inflation to decrease.
c. Both a and b.
*d. Without an economic theory, it is not possible to imply causality from this observation.
e. None of the above.
2. Opportunity cost is:
a. The sum of the value of all the forgone activities.
b. The value of the second and third actions forgone.
*c. The next best forgone opportunity.
d. The value of the action chosen, net of the value of the next best action.
e. None of the above.
3. A sunk cost:
a. Is the opportunity cost of an action.
b. Is a cost that cannot be recovered.
c. Is the marginal cost of an action being considered by a person or firm.
d. Has no opportunity cost.
*e. b and d.
Nguyen & Wait Essentials of Microeconomics Page 1
Information Classification: General
, 4. Ceteris paribus means
a. only two variables are moving at the one time.
b. everything is variable.
c. everything is constant.
*d. other things equal.
e. none of the above.
5. Ceteris paribus is used in economics
*a. to help highlight the impact from the change in one economic variable.
b. because in the real world only one variable changes at a time.
c. because more than one variable changing at a time is extremely rare.
d. all of the above.
e. none of the above.
6. Opportunity costs
*a. Include both explicit and implicit costs.
b. Include explicit and sunk costs.
c. Include implicit, explicit and sunk costs.
d. Include explicit costs only.
e. Only include implicit costs.
7. Elina is contemplating doing a degree. If she does she will incur university fees of $20 000 in
her first year and have to spend $5 000 on text books and university supplies, expenses that she
would not have otherwise incurred. To help pay for these fees Elina will have to cash out a term
deposit of $20 000 from which she earnt interest of 10% per annum. What is the opportunity
cost of Elina attending university for a year?
a. $20 000
*b. $27 000
Nguyen & Wait Essentials of Microeconomics Page 2
Information Classification: General
, c. $25 000
d. $22 000
e. $7 000
8. Elina is contemplating doing a degree. If she does she will incur university fees of $20 000 in
her first year and have to spend $5 000 on text books and university supplies, expenses that she
would not have otherwise incurred. To come to university Elina will also have to give up her job
in a local brewery from which she earns $35 000 a year. What is the opportunity cost of Elina
attending university for a year?
a. $40 000
b. $35 000
c. $5 000
d. $25 000
*e. $60 000
9. Suzie spends her Thursday afternoon sleeping. If she had not slept she would have read a
book. Her third preferred choice would have been to chat with her housemate. Which statement
is true?
a. The opportunity cost of sleeping is not reading the book and not chatting to her housemate.
b. The opportunity cost of sleeping is not reading the book, minus the benefit of chatting to her
housemate.
c. The opportunity cost of sleeping is not chatting to her housemate.
*d. The opportunity cost of sleeping is not reading the book.
e. None of the above.
10. Which statement is true?
a. The marginal benefit of an activity is the extra cost incurred.
*b. The marginal benefit of an activity is the extra benefit enjoyed.
c. The marginal benefit of an activity is the total benefit a person receives from consuming all of
the items of that good.
Nguyen & Wait Essentials of Microeconomics Page 3
Information Classification: General
, d. All of the above.
e. None of the above.
11. The marginal benefit of a good for an individual is the total benefit they receive from
consuming every unit of that particular good. True or false?
False
12. Alex is considering buying a vintage guitar. Alex’s preferences are such that he likes the
telecaster best, followed by the DuoJet, followed by an SG. All guitars are the same price, and he
plans on buying one guitar. The opportunity cost of buying the telecaster is:
*a. Not buying the DuoJet.
b. Not buying the SG.
c. Not buying either the DuoJet and the SG
d. The benefit Alex would have received buying the DuoJet, net of the enjoyment he would have
received from the SG.
e. The sum of the marginal benefits from both of the DuoJet and the SG.
13. Jackson studies economics at university. His university fees are $20 000. Other study costs
(textbooks, pencils, a computer, and so on) are $5000. Studying allows him to work parttime as
a tutor, which pays him $7000. If he was not studying and tutoring he would work as a
swimming instructor, which would pay $25000 in the same period. What is his opportunity cost
of studying?
$43 000
14. All sunk costs have an opportunity cost. True or false?
False
Nguyen & Wait Essentials of Microeconomics Page 4
Information Classification: General
Chapter 1
1. As an economist, you observe that as inflation (the rate of increase in the price level) falls,
unemployment rises. What can you say in regards to this observation?
a. The decrease in inflation caused unemployment to rise.
b. The increase in unemployment cased inflation to decrease.
c. Both a and b.
*d. Without an economic theory, it is not possible to imply causality from this observation.
e. None of the above.
2. Opportunity cost is:
a. The sum of the value of all the forgone activities.
b. The value of the second and third actions forgone.
*c. The next best forgone opportunity.
d. The value of the action chosen, net of the value of the next best action.
e. None of the above.
3. A sunk cost:
a. Is the opportunity cost of an action.
b. Is a cost that cannot be recovered.
c. Is the marginal cost of an action being considered by a person or firm.
d. Has no opportunity cost.
*e. b and d.
Nguyen & Wait Essentials of Microeconomics Page 1
Information Classification: General
, 4. Ceteris paribus means
a. only two variables are moving at the one time.
b. everything is variable.
c. everything is constant.
*d. other things equal.
e. none of the above.
5. Ceteris paribus is used in economics
*a. to help highlight the impact from the change in one economic variable.
b. because in the real world only one variable changes at a time.
c. because more than one variable changing at a time is extremely rare.
d. all of the above.
e. none of the above.
6. Opportunity costs
*a. Include both explicit and implicit costs.
b. Include explicit and sunk costs.
c. Include implicit, explicit and sunk costs.
d. Include explicit costs only.
e. Only include implicit costs.
7. Elina is contemplating doing a degree. If she does she will incur university fees of $20 000 in
her first year and have to spend $5 000 on text books and university supplies, expenses that she
would not have otherwise incurred. To help pay for these fees Elina will have to cash out a term
deposit of $20 000 from which she earnt interest of 10% per annum. What is the opportunity
cost of Elina attending university for a year?
a. $20 000
*b. $27 000
Nguyen & Wait Essentials of Microeconomics Page 2
Information Classification: General
, c. $25 000
d. $22 000
e. $7 000
8. Elina is contemplating doing a degree. If she does she will incur university fees of $20 000 in
her first year and have to spend $5 000 on text books and university supplies, expenses that she
would not have otherwise incurred. To come to university Elina will also have to give up her job
in a local brewery from which she earns $35 000 a year. What is the opportunity cost of Elina
attending university for a year?
a. $40 000
b. $35 000
c. $5 000
d. $25 000
*e. $60 000
9. Suzie spends her Thursday afternoon sleeping. If she had not slept she would have read a
book. Her third preferred choice would have been to chat with her housemate. Which statement
is true?
a. The opportunity cost of sleeping is not reading the book and not chatting to her housemate.
b. The opportunity cost of sleeping is not reading the book, minus the benefit of chatting to her
housemate.
c. The opportunity cost of sleeping is not chatting to her housemate.
*d. The opportunity cost of sleeping is not reading the book.
e. None of the above.
10. Which statement is true?
a. The marginal benefit of an activity is the extra cost incurred.
*b. The marginal benefit of an activity is the extra benefit enjoyed.
c. The marginal benefit of an activity is the total benefit a person receives from consuming all of
the items of that good.
Nguyen & Wait Essentials of Microeconomics Page 3
Information Classification: General
, d. All of the above.
e. None of the above.
11. The marginal benefit of a good for an individual is the total benefit they receive from
consuming every unit of that particular good. True or false?
False
12. Alex is considering buying a vintage guitar. Alex’s preferences are such that he likes the
telecaster best, followed by the DuoJet, followed by an SG. All guitars are the same price, and he
plans on buying one guitar. The opportunity cost of buying the telecaster is:
*a. Not buying the DuoJet.
b. Not buying the SG.
c. Not buying either the DuoJet and the SG
d. The benefit Alex would have received buying the DuoJet, net of the enjoyment he would have
received from the SG.
e. The sum of the marginal benefits from both of the DuoJet and the SG.
13. Jackson studies economics at university. His university fees are $20 000. Other study costs
(textbooks, pencils, a computer, and so on) are $5000. Studying allows him to work parttime as
a tutor, which pays him $7000. If he was not studying and tutoring he would work as a
swimming instructor, which would pay $25000 in the same period. What is his opportunity cost
of studying?
$43 000
14. All sunk costs have an opportunity cost. True or false?
False
Nguyen & Wait Essentials of Microeconomics Page 4
Information Classification: General
