Complete Test Bank Principles of MICROeconomics 9th Edition Mankiw Questions & Answers with rationales (Chapter 1-22)

Ch 01: Ten Principles of Economics Page 1 Principles of MICROeconomics 9th Edition Mankiw Test Bank True / False 1. Scarcity means that there is less of a good or resource available than people wish to have. a. True b. False ANSWER: True 2. Economics is the study of how evenly goods and services are distributed within society. a. True b. False ANSWER: False 3. Economics is the study of how society allocates its unlimited resources. a. True b. False ANSWER: False 4. Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires. a. True b. False ANSWER: True 5. Equality means distributing society’s resources in the most efficient manner. a. True b. False ANSWER: False 6. Economists study how people make decisions. a. True b. False ANSWER: True 7. With careful planning, we can usually get something that we like without having to give up something else that we like. a. True b. False ANSWER: False 8. Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff. a. True b. False ANSWER: True 9. The classic tradeoff between “guns and butter” states that when a society spends more on national d efense, it has less to spend on consumer goods to raise the standard of living. Ch 01: Ten Principles of Economics Page 2 Principles of MICROeconomics 9th Edition Mankiw Test Bank a. True b. False ANSWER: True 10. Efficiency means everyone in the economy should receive an equal share of the goods and services produced. a. True b. False ANSWER: False 11. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie. a. True b. False ANSWER: True 12. Government policies that improve equality usually increase efficiency at the same time. a. True b. False ANSWER: False 13. Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality. a. True b. False ANSWER: True 14. An individual deciding how to allocate her limited time is dealing with both scarcity and trade -offs. a. True b. False ANSWER: True 15. The cost of an action is meas ured in terms of foregone opportunities. a. True b. False ANSWER: True 16. Tuition is the single -largest cost of attending college for most students. a. True b. False ANSWER: False 17. If wages for accountants rose, then accountants’ leisure time would have a lower opportun ity cost. a. True b. False ANSWER: False Ch 01: Ten Principles of Economics Page 3 Principles of MICROeconomics 9th Edition Mankiw Test Bank 18. A marginal change is a small incremental adjustment to an existing plan of action. a. True b. False ANSWER: True 19. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of th at activity. a. True b. False ANSWER: False 20. If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75. a. True b. False ANSWER: False 21. The fa ct that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior. a. True b. False ANSWER: False 22. A rational decisionm aker takes an action if and only if the marginal cost exceeds the marginal benefit. a. True b. False ANSWER: False 23. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of bee r by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives. a. True b. False ANSWER: True 24. A tax on gasoline is an incentive that encourag es people to drive smaller more fuel-efficient cars. a. True b. False ANSWER: True 25. To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change. a. True b. False ANSWER: True Ch 01: Ten Principles of Economics Page 4 Principles of MICROeconomics 9th Edition Mankiw Test Bank 26. One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft. a. True b. False ANSWER: True 27. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity. a. True b. False ANSWER: True 28. Trade with any nation can be mutually beneficial. a. True b. False ANSWER: True 29. Trade can make everyone better off except in the case where one person is better at doing everything. a. True b. False ANSWER: False 30. The invisible hand ensures that economic prosperity is distributed equally. a. True b. False ANSWER: False 31. A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests. a. True b. False ANSWER: False 32. Communist countries worked o n the premise that government officials were in the best position to allocate the economy’s scarce resources. a. True b. False ANSWER: True 33. The government can potentially improve market outcomes if market inequalities or market failure exists. a. True b. False ANSWER : True