Microeconomics, 3rd Edition Test Bank

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Test Canvas : Self-Test Quiz - Chapter 01
Microeconom ics, 3e
Test Canvas: Self-Test Quiz - Chapter 01
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Total Questions 20
Total Points 20
1. Multiple Choice: Economists would most likely disagree...
Question Economists would most likely disagree with which of the following statements?
Answer
Correct
Feedback
Correct! There are finite amounts available of Inputs used in production such as
labor and natural resources Section: Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! Economists generally agree about the power of incentives, the prevalence
of opportunity costs, and the tendency of markets to seek equilibrium. Section:
Individual Choice: The Core of Economics
People respond to incentives.
Making a choice involves an opportunity cost.
Markets move towards equilibrium.
Resources and inputs used in production are unlimited.
2. Multiple Choice: Macroeconomics is the branch of econo...
Question Macroeconomics is the branch of economics studying:
Answer how prices are determined.
why trade-offs exist.
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Points: 1
Points: 1

Correct
Feedback
Macroeconomists seek to understand the patterns of recession and recovery, as
well as the underlying causes of economic growth. Section: Economy-Wide
Interactions
Incorrect
Feedback
The ups and downs in economic activity are the focal point of macroeconomic
theory. Section: Economy-Wide Interactions
how decisions are made at the margin.
fluctuations in the overall level of business activity.
3. Multiple Choice: Economists generally agree that peopl...
Question Economists generally agree that people are most likely to change their behavior
when they:
Answer
Correct
Feedback
Correct! Economists assume that people will systematically act in ways to make
themselves better off. Section: Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! Although scarcity is ever-present, individuals have an incentive to make
the best decisions possible in the face of scarcity. Section: Individual Choice: The
Core of Economics
are asked to do so voluntarily.
are given incentives to do so.
live in a world without scarcity.
live in a world without opportunity costs.
4. Multiple Choice: Economists would most likely agree wi...
Question Economists would most likely agree with which one of the following statements?
Answer
Correct
Feedback
Correct! The assumption that individuals seek to promote their own best interest is
a cornerstone of economic theory. Section: Individual Choice: The Core of
Economics
Incorrect
Feedback
Incorrect! Economists assert that everyone can gain from trade, and that this is
one of the efficiencies resulting from a market economy. However, even an efficient
trade entails an opportunity cost for both parties. Section: Individual Choice: The
Core of Economics
When transactions occur voluntarily, the seller gains and the buyer loses.
Market economies generate economic growth, but they do not promote
efficiency.
People usually exploit opportunities to make themselves better off.
If people make wise decisions, they can avoid incurring any opportunity cost.
Points: 1
Points: 1

5. Multiple Choice: Most individuals choose careers in wh...
Question Most individuals choose careers in which they specialize in producing only one
type of good or service, yet as consumers they have access to a wide variety of
goods and services. What principle allows for this?
Answer
Correct
Feedback
Correct! The efficiency of market economies derives from the fact that the great
arena of trade allows for fine degrees of specialization. Section: Interaction: How
Economies Work
Incorrect
Feedback
Incorrect! Each individual will use the mechanism of the market to trade the fruits of
his productive efforts for the items she seeks to consume. Section: Interaction:
How Economies Work
trade
equity
scarcity
opportunity cost
6. Multiple Choice: In his book The Wealth of Nations, Ad...
Question In his book The Wealth of Nations, Adam Smith used the example of pin-making to
illustrate the advantages of:
Answer
Correct
Feedback
Correct! Smith described the advantages of an assembly-line production method
over the practice of one craftsman making each individual item from start to finish.
Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! Smith described a pin factory in which each worker specialized in one
step of the process. Section: Interaction: How Economies Work
equity.
specialization.
marginal analysis.
interaction of choices.
7. Multiple Choice: An opportunity cost arises:
Question An opportunity cost arises:
Answer only when a monetary cost is incurred.
only when a time cost is incurred.
only when the wrong decision is made.
Points: 1
Points: 1
Points: 1

Correct
Feedback
Correct! The opportunity cost is the value of the best alternative forgone. Section:
Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! The opportunity cost is the value of something not chosen. Section:
Individual Choice: The Core of Economics
whenever any choice is made.
8. Multiple Choice: Exchanges taking place in a market sy...
Question Exchanges taking place in a market system:
Answer
Correct
Feedback
Correct! Each individual determines whether the exchange will better her own self-
interest prior to agreeing to the trade. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! Market exchanges occur when both parties expect to benefit. Section:
Interaction: How Economies Work
are voluntary.
are inefficient.
will benefit one party at the expense of another.
are monitored by the government to ensure that scarce resources are being
used wisely.
9. Multiple Choice: The condition of scarcity means that:
Question The condition of scarcity means that:
Answer
Correct
Feedback
Correct! Scarcity arises from the fact that the productive resources are not infinitely
available Section: Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! Scarcity arises from the fact that the productive resources are not
infinitely available. Section: Individual Choice: The Core of Economics
when the government produces something, there is no opportunity cost.
choices must be made in the allocation of productive resources.
you will not incur an opportunity cost if you make the right choice.
only a command economy can make efficient use of resources.
10. Multiple Choice: The purpose of an economic system is to:
Question The purpose of an economic system is to:
Answer eliminate scarcity.
Points: 1
Points: 1
Points: 1

Correct
Feedback
Correct! Not all economic systems use the same criteria for making these
decisions, but they all allocate goods and resources Section: Interaction: How
Economies Work
Incorrect
Feedback
Incorrect! Allocation decisions are made by a central authority In a command
economy. In a market economy, they are made by the collective effect of individual
decisions. Section: Interaction: How Economies Work
protect the environment.
allocate scarce resources.
create an equal distribution of wealth.
11. Multiple Choice: The focal point of economic inquiry is:
Question The focal point of economic inquiry is:
Answer
Correct
Feedback
Correct! In particular, economists look at how decisions are made at the margin by
individual households and firms Section: Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! Economists evaluate the way that individuals use the perceived costs
and benefits of various choices they might make. Section: Individual Choice: The
Core of Economics
the stock market.
the value of the dollar.
individual choice.
business ethics.
12. Multiple Choice: An economic system is in __________ w...
Question An economic system is in __________ when no individual would be better off by
making a different choice.
Answer
Correct
Feedback
Correct! A point of equilibrium is where, ceteris paribus, no one has an incentive to
make a different decision Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! If individuals are in the process of changing their decisions and their
behavior, then the economy will still be moving to a point of equilibrium. Section:
Interaction: How Economies Work
chaos
decline
jeopardy
equilibrium
Points: 1
Points: 1

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13. Multiple Choice: An economy is __________ if it has ex...
Question An economy is __________ if it has exploited all opportunities to benefit someone
without making anyone else worse off.
Answer
Correct
Feedback
Correct! At a point of efficiency, scarce resources of an economy have been used
where they are most highly valued. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! An efficient outcome is one in which any reallocation of resources would
result in a higher opportunity cost. Section: Interaction: How Economies Work
efficient
equitable
wealthy
failing
14. Multiple Choice: Economic theory asserts that people w...
Question Economic theory asserts that people will behave in ways that:
Answer
Correct
Feedback
Correct! Economists assume that people make choices based on what they
expect will serve their own best interests. Section: Individual Choice: The Core of
Economics
Incorrect
Feedback
Incorrect! Economists predict behavior based on the idea that each individual will
pursue opportunities to improve her own wellbeing. Section: Individual Choice: The
Core of Economics
will be unfair to others.
will enhance their own overall well-being.
will not take advantage of opportunities for self-improvement.
do not follow generally predictable patterns.
15. Multiple Choice: An equilibrium outcome is one in which:
Question An equilibrium outcome is one in which:
Answer no one has as incentive to change his or her decisions or behavior.
there is no scarcity.
there is no opportunity cost.
the distribution of wealth is fair.
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Correct
Feedback
Correct! An equilibrium is where, ceteris paribus, no one has an incentive to make
a different decision. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! Even though individuals may be content with their choices in an
equilibrium outcome, they still incur an opportunity cost in terms of the forgone
alternative. Section: Interaction: How Economies Work
16. Multiple Choice: Which one of the following statements...
Question Which one of the following statements is not true of a market economy?
Answer
Correct
Feedback
Correct! Market economies are characterized by scarcity and opportunity cost, and
the individuals who operate within them respond to incentives. Individual choices
determine the appropriate level of production and consumption. Section: Individual
Choice: The Core of Economics
Incorrect
Feedback
Incorrect! Market economies are characterized by scarcity and opportunity cost
and the individuals who operate within them respond to incentives. In a market
economy, choices made by individuals and firms determine the appropriate level of
production and consumption. Section: Individual Choice: The Core of Economics
Productive resources are scarce.
Every choice involves an opportunity cost.
A central planning authority makes decisions about production and
consumption.
People will respond to incentives.
17. Multiple Choice: Market failure results when the:
Question Market failure results when the:
Answer
Correct
Feedback
Correct! Government intervention may be used to solve problems arising from
market failure. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! Traffic congestion is an example of market failure. Pollution created by a
chemical factory is an example of market failure. (This example explains the
'pursuit of self interest leads to bad results' a little better.) Section: Interaction: How
Economies Work
pursuit of individual self-interest leads to bad results for society as a whole.
market fails to create an equal distribution of wealth.
market fails to create an equal distribution of income.
market fails to eliminate scarcity.
18. Multiple Choice: Adam Smith used the idea of the invis...
Question
Points: 1
Points: 1
Points: 1

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Adam Smith used the idea of the invisible hand to refer to the ability of market
economies to:
Answer
Correct
Feedback
Correct! The effect of the invisible hand is seen in the success of market
economies. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! In The Wealth of Nations, Smith talked about how producers supply us
with the goods we want to consume because they are acting in their own best
interest. In other words, they will not earn a profit unless they are providing goods
that consumers want to buy. Section: Interaction: How Economies Work
recover from recessions.
solve the problem of market failure.
harness the power of individual self-interest for the good of society as a whole.
convince people that society is better off if its members sacrifice their own self-
interest for the cause of the greater good.
19. Multiple Choice: After finishing high school, LeBron J...
Question After finishing high school, LeBron James decided to enter the NBA rather that
going to college to begin his studies to become a doctor. This choice between the
two careers can best be described by:
Answer
Correct
Feedback
The value of the next best alternative when a choice is made is its opportunity cost.
Section: Individual Choice: The Core of Economics
Incorrect
Feedback
Incorrect! When an individual chooses one outcome and decides to forgo the
another, what that person gives up is opportunity cost of that choice. Section:
Individual Choice: The Core of Economics
equilibrium.
scarcity.
market failure.
opportunity cost.
20. Multiple Choice: If market failures exist, the market ...
Question If market failures exist, the market can become efficient when:
Answer the government intervenes to improve society's welfare.
people just ignore the problem.
the government eliminates all market transactions.
Points: 1
Points: 1

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Correct
Feedback
Correct! Wise use of government policy can help markets operate more efficiently
and improve the welfare of the people. Section: Interaction: How Economies Work
Incorrect
Feedback
Incorrect! In the presence of market failure, assuming the good or service is
desirable, governments can intervene to improve the outcome. Section: Interaction:
How Economies Work
all citizens immigrate to a country where the market failure does not exist.
OK

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Tests, Surveys, and Pools Tests
Test Canvas : TestBanks Chapter 01: First Principles
Microeconom ics, 3e
Test Canvas: TestBanks Chapter 01: First Principles
The Test Canvas allows you to add and edit questions, add Question Sets or Random Blocks, reorder questions,
and review the test. More Help
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Description
Instructions
Total Questions 223
Total Points 0
1. True/False: Because the United States is a rich n...
Question Because the United States is a rich nation, free health care can be provided for all
citizens without considering the issue of scarcity.
Answer True
False
2. True/False: The study of economics arises because...
Question The study of economics arises because of the necessity for choice, and the
necessity for choice arises because of the fundamental problem of scarcity of
resources.
Answer True
False
3. True/False: Opportunity cost means that in the re...
Question Opportunity cost means that in the rebuilding of Iraq, if the United States spends
$87 billion, we have to forgo the opportunity to spend $87 billion on some other
program.
Answer True
False
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Points: 0
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4. True/False: In 2003, Congress passed a tax cut. S...
Question In 2003, Congress passed a tax cut. Since taxes were reduced, the country did not
incur any opportunity cost from this decision.
Answer True
False
5. True/False: A trade-off involves weighing the cos...
Question A trade-off involves weighing the costs and the benefits.
Answer True
False
6. True/False: Using marginal analysis to decide whe...
Question Using marginal analysis to decide whether to consume an additional slice of pizza
requires making a comparison of the benefits and costs associated with the
consumption of an additional slice of pizza.
Answer True
False
7. True/False: Economists make predictions about ind...
Question Economists make predictions about individual behavior based on the assumption
that people exploit opportunities to make themselves better off. The fact that
different individuals make different choices when confronted with the same situation
implies that this assumption is often violated.
Answer True
False
8. True/False: The principle that people will exploi...
Question The principle that people will exploit opportunities to do what is best for others is
the basis of all predictions by economists about individual behavior.
Answer True
False
9. True/False: When people in Brazil engage in trade...
Question When people in Brazil engage in trade with people in Germany, the citizens of
each nation are made worse off.
Answer True
False
10. True/False: As long as individuals know that they...
Question
Points: 0
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As long as individuals know that they can find the goods and services that they
want in the market, they are willing to forgo being self-sufficient and are willing to
specialize.
Answer True
False
11. True/False: Trade allows people to get more of wh...
Question Trade allows people to get more of what they want.
Answer True
False
12. True/False: In equilibrium there will be no furth...
Question In equilibrium there will be no further opportunities for gains from trade.
Answer True
False
13. True/False: An economic situation is in equilibri...
Question An economic situation is in equilibrium when no individual would be better off taking
a different action.
Answer True
False
14. True/False: Market equilibrium will always be eff...
Question Market equilibrium will always be efficient even if it is not equitable.
Answer True
False
15. True/False: An economy is efficient if one person...
Question An economy is efficient if one person can be made better off by reallocating
resources without making anyone else worse off.
Answer True
False
16. True/False: Equity is the same as efficiency.
Question Equity is the same as efficiency.
Answer True
False
17. True/False: If an economy's resources are used ef...
Question
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If an economy's resources are used efficiently, then it is guaranteed that the
economy will also achieve equity.
Answer True
False
18. True/False: Handicapped-designated parking spaces...
Question Handicapped-designated parking spaces are an example of the market economy
achieving efficiency.
Answer True
False
19. True/False: The fact that individuals in a market...
Question The fact that individuals in a market economy act so as to make themselves better
off is a major reason why a market equilibrium is usually efficient.
Answer True
False
20. True/False: According to the textbook, markets us...
Question According to the textbook, markets usually lead to efficiency.
Answer True
False
21. True/False: Market failure occurs when the pursui...
Question Market failure occurs when the pursuit of self-interest leads to bad results.
Answer True
False
22. Multiple Choice: Microeconomics deals with:
Question Microeconomics deals with:
Answer the working of the entire economy or large sectors of it.
economic growth.
individual decision makers in the economy.
gross domestic product.
23. Multiple Choice: The study of a single firm and how it...
Question The study of a single firm and how it determines prices would fall under the study
of:
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Answer macroeconomics.
microeconomics.
economic growth.
fiscal policy.
24. Multiple Choice: Macroeconomics deals with:
Question Macroeconomics deals with:
Answer bits and pieces of the economy.
the question of how a business unit should operate profitably.
the working of the entire economy or large sectors of it.
how individuals make decisions.
25. Multiple Choice: The primary emphasis in macroeconomic...
Question The primary emphasis in macroeconomics is on:
Answer how firms set prices.
the national economy.
marginal analysis.
bits and pieces of the economy.
26. Multiple Choice: Which of the following would be studi...
Question Which of the following would be studied in macroeconomics?
Answer the change in automobile sales due to a change in the price of automobiles
the impact of a tax reduction on the profits of an individual business
recessions
the unemployment of workers displaced by technological change in the
typesetting industry
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27. Multiple Choice: Scarcity in economics means:
Question Scarcity in economics means:
Answer We do not have sufficient resources to produce all the goods and services we
want.
The wants of people are limited.
There must be poor people in rich countries.
Shortages exist in nearly all markets.
28. Multiple Choice: If resources are “scarce,&rdquo...
Question If resources are “scarce,” it means that they:
Answer cannot provide enough goods or services to satisfy all human material wants
and needs.
have no opportunity cost.
are probably not valued by consumers.
have an unlimited supply.
29. Multiple Choice: A key theme fundamental to all of eco...
Question A key theme fundamental to all of economics is:
Answer There are limited wants.
We are a rich country but are simply not aware of it.
People have unlimited wants facing limited means to satisfy them.
There are unlimited resources.
30. Multiple Choice: The problem of scarcity is confronted...
Question The problem of scarcity is confronted by:
Answer industrialized societies only.
preindustrialized societies only.
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societies governed by communist philosophies only.
all societies.
31. Multiple Choice: When we are forced to make choices, w...
Question When we are forced to make choices, we are facing the concept of:
Answer ceteris paribus.
free goods.
scarcity.
the margin.
32. Multiple Choice: The basic concern of microeconomics is:
Question The basic concern of microeconomics is:
Answer to keep business firms from losing money.
to prove that capitalism is better than socialism.
to study the choices people make.
to use unlimited resources to produce goods and services to satisfy limited
wants.
33. Multiple Choice: How people choose among the alternati...
Question How people choose among the alternatives available to them is:
Answer not part of the study of economics.
impossible to describe.
the study of microeconomics.
not important.
34. Multiple Choice: We are forced to make choices because...
Question We are forced to make choices because of:
Answer exploitation.
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efficiency.
scarcity.
the margin.
35. Multiple Choice: Scarcity exists when:
Question Scarcity exists when:
Answer making choices among two or more alternatives is not necessary.
individuals can have more of any good.
individuals can have more of one good but only at the expense of another.
resources are unlimited.
36. Multiple Choice: Scarcity in economics means:
Question Scarcity in economics means:
Answer We do not have sufficient resources to produce all of the goods and services
we want.
The wants of people are limited.
There must be poor people in rich countries.
Economists are clearly not doing their jobs.
37. Multiple Choice: Although water is very abundant in mo...
Question Although water is very abundant in most places, it is scarce because:
Answer it has no alternative uses.
there is not enough of it to meet all needs.
it is a free good.
scarce goods in general are not all that costly.
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38. Multiple Choice: Water is considered a scarce good bec...
Question Water is considered a scarce good because:
Answer not enough of it is available for all needs.
it does not have any uses.
scarce goods are less expensive.
not enough of it is available for all needs and because it is less expensive.
39. Multiple Choice: The problem of determining what goods...
Question The problem of determining what goods and services society should produce:
Answer exists because we can produce more than we need or want.
exists because there are not enough resources to provide all of the goods and
services that people want to purchase.
would not exist if all goods and services were scarce.
would not exist if government owned all of the resources.
40. Multiple Choice: In China, which of the following woul...
Question In China, which of the following would not be a resource in the production of rice?
Answer fertile land
labor
capital equipment
money
41. Multiple Choice: A resource is anything that:
Question A resource is anything that:
Answer can be used in production.
you pay for.
is in scarce supply.
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can be consumed.
42. Multiple Choice: We have to make choices because:
Question We have to make choices because:
Answer we have unlimited income.
resources are scarce.
resources are infinite
with good planning, trade-offs can be avoided.
43. Multiple Choice: When a chef creates a dinner plate of...
Question When a chef creates a dinner plate of food for a customer, which of the following
represents the physical capital resource?
Answer the chef himself or herself
the oven
the food ingredients
the chef's training and experience
44. Multiple Choice: Manny is attending college and majori...
Question Manny is attending college and majoring in economics. Manny is improving his:
Answer land.
labor.
capital.
human capital.
45. Multiple Choice: Which is not an example of a resource?
Question Which is not an example of a resource?
Answer land
labor
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