Microeconomics 17th Edition Test Bank

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Chapter 1 TestbankStudent: ___________________________________________________________________________1.For economists, the word "utility" means:A.versatility and flexibility.B.rationality.C.pleasure and satisfaction.D.purposefulness.2.In economics, the pleasure, happiness, or satisfaction received from a product is called:A.marginal cost.B.rational outcome.C.status fulfillment.D.utility.3.When economists say that people actrationally in their self interest, they mean that individuals:A.look for and pursue opportunities to increase their utility.B.generally disregard the interests of others.C.are mainly creatures of habit.D.areunpredictable.4.According to Emerson: "Want is a growing giant whom the coat of Have was never large enoughto cover." According to economists, "Want" exceeds "Have" because:A.people are greedy.B.productive resources are limited.C.human beings are inherently insecure.D.people are irrational.5.According to economists, economic self-interest:A.is a reality that underlies economic behavior.B.has the same meaning as selfishness.C.is morecharacteristic of men than of women.D.is usually self-defeating.

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6.When entering a building, Sam diverts his path to go through an open door rather than make thephysical effort to open the closed door that is directly in his path. This is an example of:A.irrational behavior.B.a lazy person.C.marginal benefit-marginal cost analysis.D.programmed learning.7.Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't loseany money onmy financial investment." His economist friend points out that in effect he did losemoney, because he could have received a 3 percent return on the $1000 if he had bought a bankcertificate of deposit instead of the coins. The economist's analysis in this case incorporates theidea of:A.opportunity costs.B.marginal benefits that exceed marginal costs.C.imperfect information.D.normative economics.8.A person should consume more of something when its marginal:A.benefit exceeds its marginal cost.B.cost exceeds its marginal benefit.C.cost equals its marginal benefit.D.benefit is still positive.9.Economics may best be defined as the:A.interaction between macro and microconsiderations.B.social science concerned with how individuals, institutions, and society make optimal choicesunder conditions of scarcity.C.empirical testing of value judgments through the use of logic.D.use of policy to refute factsand hypotheses.10.The study of economics is primarily concerned with:A.keeping private businesses from losing money.B.demonstrating that capitalistic economies are superior to socialistic economies.C.choices that are made inseeking the best use of resources.D.determining the most equitable distribution of society's output.

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11.The economic perspective refers to:A.macroeconomic phenomena, but not microeconomic phenomena.B.microeconomicphenomena, but not macroeconomic phenomena.C.the making of purposeful decisions in a context of marginal costs and marginal benefits.D.unlimited resources in a context of limited economic wants.12.The economic perspective entails:A.irrational behavior by individuals and institutions.B.a comparison of marginal benefits and marginal costs in decision making.C.short-term but not long-term thinking.D.rejection of the scientific method.13.Purposefulbehavior suggests that:A.everyone will make identical choices.B.resource availability exceeds economic wants.C.individuals will make different choices because of different desired outcomes.D.an individual's economic goals cannotinvolve tradeoffs.14.Purposeful behavior means that:A.people are selfish in their decision-making.B.people weigh costs and benefits to make decisions.C.people are immune from emotions affecting their decisions.D.decision-makers do not make mistakes when weighing costs and benefits.15.Economics involves marginal analysis because:A.most decisions involve changes from the present situation.B.marginal benefits always exceed marginal costs.C.marginal costs always exceed marginal benefits.D.much economic behavior is irrational.16.You should decide to go to a movie:A.if the marginal cost of the movie exceeds its marginal benefit.B.if the marginal benefit of the movieexceeds its marginal cost.C.if your income will allow you to buy a ticket.D.because movies are enjoyable.

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17.Marginal costs exist because:A.the decision to engage in one activity means forgoing some other activity.B.wants arescarce relative to resources.C.households and businesses make rational decisions.D.most decisions do not involve sacrifices or tradeoffs.18.The assertion that "There is no free lunch" means that:A.there are always tradeoffsbetween economic goals.B.all production involves the use of scarce resources and thus the sacrifice of alternative goods.C.marginal analysis is not used in economic reasoning.D.choices need not be made if behavior is rational.19.Consumers spend their incomes to get the maximum benefit or satisfaction from the goods andservices they purchase. This is a reflection of:A.resource scarcity and the necessity of choice.B.purposeful behavior.C.marginal costs thatexceed marginal benefits.D.the tradeoff problem that exists between competing goals.20.If someone produced too much of a good, this would suggest that:A.rational choice cannot be applied to many economic decisions.B.the good wasproduced to the point where its marginal cost exceeded its marginal benefit.C.certain goods and services such as education and health care are inherently desirable andshould be produced regardless of costs and benefits.D.the good was produced to the point where its marginal benefit exceeded its marginal cost.21.Even though local newspapers are very inexpensive, people rarely buy more than one of themeach day. This fact:A.is an example of irrational behavior.B.implies thatreading should be taught through phonics rather than the whole language method.C.contradicts the economic perspective.D.implies that, for most people, the marginal benefit of reading a second newspaper is less thanthe marginal cost.

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22.In deciding whether to study for an economics quiz or go to a movie, one is confronted by theidea(s) of:A.scarcity and opportunity costs.B.money and real capital.C.complementary economic goals.D.full production.23.Which oneof the following expressions best states the idea of opportunity cost?A."A penny saved is a penny earned."B."He who hesitates is lost."C."There is no such thing as a free lunch."D."All that glitters is not gold."24.Which ofthe following is an economic explanation for why most college-aged movie stars do notattend college.A.they are too dumb to get into collegeB.they would find college life boringC.the opportunity cost in terms of reduced income is too greatD.they cannot afford the room, board, and tuition fees most colleges charge25.Suppose that a university decides to spend $1 million to upgrade personal computers andscientific equipment for faculty rather than spend $1 million to expandparking for students. Thisexample illustrates:A.distorted priorities.B.opportunity costs.C.increasing opportunity costs.D.productive efficiency.26.Which of the following most closely relates to the idea ofopportunity costs?A.tradeoffs.B.economic growth.C.technological change.D.capitalism.

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27.An economic hypothesis:A.has the same meaning as an economic principal or economic law.B.is usually a normativestatement.C.is a possible explanation of cause and effect.D.is a stronger generalization than an economic law.28.Which of the following terms implies theleastdegree of confidence in an economicgeneralization?A.a hypothesis.B.a theory.C.a principle.D.a law.29.Which of the following terms implies thegreatestdegree of confidence in an economicgeneralization?A.a hypothesis.B.a theory.C.a principle.D.an anomaly.30.A well-tested economic theory is often called:A.a hypothesis.B.a prototype.C.a principle.D.ananomaly.31.Economists:A.use both the economic perspective and the scientific method.B.use the economic perspective but not the scientific method.C.make positive economic statements, but not normative economic statements.D.reject theorizing as being impractical.

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32.The scientific method is:A.not applicable to economics, because economics deals with human beings.B.also known as the economic perspective.C.analysis that moves from broadgeneralizations called laws to theories and then tohypotheses.D.used by economists and other social scientists, as well as by physical scientists and lifescientists.33.The process by which economists test hypotheses against facts to develop theories, principles,and models is called:A.the economic perspective.B.the scientific method.C.policy economics.D.microeconomics.34.Economic theories:A.are useless because they are not based on laboratoryexperimentation.B.that are true for individual economic units are never true for the economy as a whole.C.are generalizations based on a careful observation of facts.D.are abstractions and therefore of no application to realsituations.35.Theoretical economics:A.is also known as policy economics.B.is the process of deriving principles of economics.C.is highly impractical since it does not deal with the real world.D.rejects the scientificmethod as being inappropriate for the social sciences.36.Which of the following is acorrectstatement?A.Economic concepts or laws that are valid during depression are necessarily valid duringprosperity.B.Though notquantitatively exact, economic laws are useful because they allow us to predictand therefore control or adjust to events.C.Economics is as scientific as are physics and chemistry because economic laws are asquantitatively precise as the laws ofphysics or chemistry.D.Because economics is concerned with questions of "ought," it is a branch of applied ethics andnot scientific.

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37.In constructing models, economists:A.make simplifying assumptions.B.include allavailable information.C.must use mathematical equations.D.attempt to duplicate the real world.38.Economic models:A.are of limited use because they cannot be tested empirically.B.are limited to variables that aredirectly related to one another.C.emphasize basic economic relationships by purposefully simplifying the complexities of thereal world.D.are unrealistic and therefore of no practical consequence.39.The term "ceteris paribus" means:A.that if event A precedes event B, A has caused B.B.that economics deals with facts, not values.C.other things equal.D.prosperity inevitably follows recession.40.The basic purpose of the other-things-equal assumption is to:A.allow one to reason about the relationship between variablesXandYwithout the intrusion ofvariableZ.B.allow one to focus upon micro variables by ignoring macro variables.C.allow one to focus upon macro variables by ignoring microvariables.D.determine whetherXcausesYor vice versa.41.Suppose an economist says that "Other things equal, the lower the price of bananas, the greaterthe amount of bananas purchased." This statement indicates that:A.thequantity of bananas purchased determines the price of bananas.B.all factors other than the price of bananas (for example, consumer tastes and incomes) areassumed to be constant.C.economists can conduct controlled laboratoryexperiments.D.one cannot generalize about the relationship between the price of bananas and the quantitypurchased.

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42.An hypothesis is:A.a fundamental truth that all economists accept.B.a tentative, untested statement ofpossible cause and effect.C.the same as a normative statement.D.also known as a principle or law.43.The term "other things equal" means that:A.the associated statement is normative.B.many variables affect the variableunder consideration.C.a number of relevant variables are assumed to be constant.D.when variableXincreases so does related variableY.44.Macroeconomics approaches the study of economics from the viewpoint of:A.the entireeconomy.B.governmental units.C.the operation of specific product and resource markets.D.individual firms.45.Which of the following is associated with macroeconomics?A.an examination of the incomes of Harvard BusinessSchool graduatesB.an empirical investigation of the general price level and unemployment rates since 1990C.a study of the trend of pecan prices since the Second World WarD.a case study of pricing and production in the textbookindustry46.The problems of aggregate inflation and unemployment are:A.major topics of macroeconomics.B.not relevant to the U.S. economy.C.major topics of microeconomics.D.peculiar to command economies.

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47.Which of thefollowing statements pertains to macroeconomics?A.Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force.B.A decline in the price of soybeans caused farmer Wanek to plant more land in wheat.C.National incomegrew by 2.7 percent last year.D.The Pumpkin Center State Bank increased its interest rate on consumer loans by 1percentage point.48.Macroeconomics can best be described as the:A.analysis of how a consumer tries to spend income.B.study of the large aggregates of the economy or the economy as a whole.C.analysis of how firms attempt to maximize their profits.D.study of how supply and demand determine prices in individual markets.49.Microeconomics isconcerned with:A.the aggregate or total levels of income, employment, and output.B.a detailed examination of specific economic units that make up the economic system.C.positive economics, but not normative economics.D.theestablishing of an overall view of the operation of the economic system.50.Microeconomics:A.is the basis for the "after this, therefore because of this" fallacy.B.is not concerned with details, but only with the overall bigpicture of the economy.C.is concerned with individual economic units and specific markets.D.describes the aggregate flows of output and income.51.Which of the following is a macroeconomic statement?A.The gross profits of allU.S. businesses were $182 billion last year.B.The price of beef declined by 3 percent last year.C.General Motors' profits increased last year.D.The productivity of steelworkers increased by 1 percent last year.

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52.Which of thefollowing is a microeconomic statement?A.The real domestic output increased by 2.5 percent last year.B.Unemployment was 6.8 percent of the labor force last year.C.The price of personal computers declined last year.D.The generalprice level increased by 4 percent last year.53.A normative statement is one that:A.is based on the law of averages.B.applies only to microeconomics.C.applies only to macroeconomics.D.is based on value judgments.54.Which of the following is a normative statement?A.The temperature is high today.B.The humidity is high today.C.It is too hot to play tennis today.D.It will cool off later this evening.55.A positive statement is one which is:A.derived by induction.B.derived by deduction.C.subjective and is based on a value judgment.D.objective and is based on facts.56.Which of the following is a positive statement?A.The humidity is too high today.B.Itis too hot to jog today.C.The temperature is 92 degrees today.D.Summer evenings are nice when it cools off.57.Normative statements are concerned with:A.facts and theories.B.what ought to be.C.what is.D.rational choice involving costs and benefits.

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58.A positive statement is concerned with:A.some goal that is desirable to society.B.what should be.C.what is.D.the formulation of economic policy.59.Ideally, valuejudgments are involved at the:A.levels of facts, theory, and policy.B.levels of facts and theory only.C.level of facts only.D.level of policy only.60.Most of the disagreement among economists involves:A.facts.B.principles.C.positive statements.D.normative statements.61."Economics is concerned with how individuals, institutions, and society make optimal choicesunder conditions of scarcity." This statement is:A.positive, butincorrect.B.positive and correct.C.normative, but incorrect.D.normative and correct.62.Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes shouldbe increased on beer because collegestudents drink too much." We can conclude that:A.Ben's statement is normative, but Holly's is positive.B.Holly's statement is normative, but Ben's is positive.C.Both statements are normative.D.Both statements are positive.

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63.The economizing problem is:A.the need to make choices because economic wants exceed economic means.B.how to distribute resources equally amongst all members of society.C.that people's means often exceed their wants.D.that people donot know how to rationally allocate resources.64.The economizing problem is one of deciding how to make the best use of:A.virtually unlimited resources to satisfy virtually unlimited wants.B.limited resources to satisfyvirtually unlimited wants.C.unlimited resources to satisfy limited wants.D.limited resources to satisfy limited wants.65.When the economist says that economic wants are insatiable, this means that:A.economic resources arevaluable only because they can be used to produce consumer goods.B.economic resources–land, labor, capital, and entrepreneurial ability–are scarce.C.these wants are virtually unlimited and therefore incapable of completesatisfaction.D.the structure of consumer demand varies from time to time and from country to country.66.The scarcity problem:A.persists only because countries have failed to achieve continuous full employment.B.persistsbecause economic wants exceed available productive resources.C.has been solved in all industrialized nations.D.has been eliminated in affluent societies such as the United States and Canada.67.The alternative combinations of two goodswhich a consumer can purchase with a given moneyincome is shown by:A.a production possibilities curve.B.a demand curve.C.consumer expenditure line.D.a budget line.

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68.The budget line shows:A.the amount of product Athat a consumer is willing to give up to obtain one more unit of productB.B.all possible combinations of two goods that can be purchased, given money income and theprices of the goods.C.the minimum amount of two goods that a consumer canpurchase with a given money income.D.all possible combinations of two goods that yield the same level of utility to the consumer.69.Refer to the budget line shown in the diagram above. If the consumer's money income is $20,the:A.prices ofCandDcannot be determined.B.price ofCis $2 and the price ofDis $4.C.consumer can obtain a combination of 5 units of bothCandD.D.price ofCis $4 and the price ofDis $2.70.Refer to the budget line shown in the diagram above. If the consumer's money income is $20,which of the following combinations of goods isunattainable?A.4 units of C, and 6 units of D.B.5 units of C, and no units of D.C.1 unit of C, and 8 units of D.D.2 units of C, and 6 units of D.71.Refer to the budget line shown in the diagram above. The absolute value of the slope of thebudget line is:A.MUC/MUD.B.one-half.C.PD/PC.D.PC/PD.

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72.In movingalong a given budget line:A.the prices of both products and money income are assumed to be constant.B.each point on the line will be equally satisfactory to consumers.C.money income varies, but the prices of the two goods areconstant.D.the prices of both products are assumed to vary, but money income is constant.73.An increase in money income:A.shifts the consumer's budget line to the right.B.shifts the consumer's budget line to the left.C.increases the slope of the budget line.D.has no effect on the budget line.74.In drawing a budget line it is assumed that:A.consumer preferences are fixed.B.the prices of the two products are variable.C.money income isfixed.D.consumer willingness to substitute between the two products is fixed.75.The shift of the budget line fromcdtoabin the above figure is consistent with:A.decreases in the prices of bothMandN.B.an increase in the price ofMand a decrease in the price ofN.C.a decrease in money income.D.an increase in money income.

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