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Microeconomics: An Intuitive Approach with Calculus 2nd Edition Test Bank

Microeconomics: An Intuitive Approach with Calculus 2nd Edition Test Bank is a comprehensive exam guide designed to help you master key topics with detailed explanations and practice questions.

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1.Oneoftheaimsofpositiveeconomicsistorankpoliciesunderconsiderationfrommostdesirabletoleastdesirable.a.Trueb.FalseANSWER:FalseRATIONALE:Positiveeconomicsaimstopredicttheconsequencesofpolicies,nottoevaluatethemasmoreorlessdesirable.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM2.Positiveeconomicscantelluswhichpoliciesareefficientandwhicharenot.a.Trueb.FalseANSWER:TrueRATIONALE:Efficiencyisanobjectivelydefinedconcept:Asituationisefficientifthereisnowaytomakesomepeoplebetteroffwithoutmakingothersworseoff.Tosaythatonesituationismoreefficientthananotherisnotanormativestatement---evenifoftenpeoplethinkitisthesameassayingthatonesituationisbetterthananother.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM

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3.WheneconomistssaythatpolicyAismoreefficientthanpolicyB,theymeanpolicyAisbetterthanpolicyB.a.Trueb.FalseANSWER:FalseRATIONALE:TosaythatpolicyAismoreefficientthanpolicyBisonlytosaythat,atleastinprinciple,itispossibletomakeeveryonebetteroff(oratleastaswelloff)underpolicyAthanpolicyB.Thisisnotthesameasmakinganormativejudgmentaboutwhichpolicyisbetter.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM4.Economiststalkabouttrade-offsalotbecausetheyhavecometounderstandthatwheneverthereisawinnerfromapolicyortransaction,theremustalsobealoser.a.Trueb.FalseANSWER:FalseRATIONALE:Oneofthefundamentallessonsofeconomicsisthattherearemanysituationswheneveryonecanwin.Inawillingtrade(i.e.,Ipay$2foracappuccinotothecoffeeshopowner),nooneishurt,andbothofusarebetteroff.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:9/4/20152:12PM

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5.Aspontaneousorderemergesfromindividualdecisionsthatcausesomethingto“work”withoutanyoneplanningforitto“work”.a.Trueb.FalseANSWER:TrueRATIONALE:Aspontaneousorderisanorderthatisunplannedbutsimplyarisesfromindividualsdoingthebesttheycangiventheircircumstances.Oneexampleofthisistheprovisionofcomplexgoodsandservicesinthemarketwherethousandsofindividualsparticipateinthecreationofsomethingwithoutmostofthembeingawarethatthisiswhattheyaredoing.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM

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6.Wheneconomistsassumethatpeoplearerational,theyareassumingthatpeoplegenerallyagreewhatisgoodforhumanbeings.a.Trueb.FalseANSWER:FalseRATIONALE:Wheneconomistsassumepeoplearerational,theyareassumingthatpeoplearegoal-oriented---thattheyhaveinmindsomethingtheyaretryingtoachieveandthendothebesttheycantoachieveit.Thisisnotthesameassayingthatpeopleagreewhatisgoodforhumanbeings---onlythatindividualsthinktheyknowwhatisgoodforthemselvesandthenactaccordingly.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM7.Ifmedicalpatientsarerational(inthewayeconomiststhinkoftheterm),theywilldowhatmedicalexpertsbelieveisbestforthem.a.Trueb.FalseANSWER:FalseRATIONALE:Arationalpatient’sviewofwhatis“best”maydifferfromamedicalexpert’sview---andthusthepatientmayrationallyviolatetheexpert’sadvice.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:9/25/20153:31PM

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8.Supposetwoeconomicmodelsgivethesamepredictions---butoneissimplisticandunrealisticinitsassumptionswhiletheotherisrichindetailandresemblestherealworldmoreclosely.Ifthesolegoaloftheeconomististopredict,thentheeconomistshouldusethesimpleandunrealisticmodel.a.Trueb.FalseANSWER:TrueRATIONALE:Iftwomodelspredictequallywell,thenitmakesmoresensetousethesimplemodelthat’seasytouse,eveniftheassumptionsareunrealistic.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:9/6/20151:05PM9.Tosaythatonepolicyisbetterthananotherbecauseitismoreefficientisanormative,notapositive,statement.a.Trueb.FalseANSWER:TrueRATIONALE:Itisapositivestatementtosaythatonepolicyismoreefficientthananother---butjudgingthepolicyas“better”involvesvaluejudgmentsthatmakethestatementanormativeone.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM

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10.Iftwoindividualsvoluntarilyagreetoatransactionthatonlyaffectsthem(andnooneelse),itmustbethatthetransactionisefficient.a.Trueb.FalseANSWER:TrueRATIONALE:Ifthetwoindividualsagreevoluntarily,thentheymustbothbelievethetransactionmakesthembetteroff(oratleastnoworseoff).Ifthetransactionfurthermoreaffectsnooneelse,itmeansthatthetransactionhasimprovedsomepeople’s(perceived)welfarewithoutmakinganyoneworseoff.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:2/11/201510:52PMDATEMODIFIED:2/11/201510:52PM11.Inordertopredictbehavior,economicmodelsmustberealistic.a.Trueb.FalseANSWER:FalseRATIONALE:Economicmodelsdonothavetoberealistic.Modelsthatmakecertainassumptionsmayhelpustopredictbehavior.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/25/20153:34PMDATEMODIFIED:9/25/20153:41PM

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12.Eacheconomicmodelcanbeappliedtomanydifferentreal-worldproblems.a.Trueb.FalseANSWER:TrueRATIONALE:Onceyoubecomereallycomfortablewiththewayeconomistsmodelbehavior,itallreallyboilsdowntoonesinglemodel,oratleastonesingleconceptualapproach.POINTS:1DIFFICULTY:A&B-SectionMaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/25/20153:39PMDATEMODIFIED:9/25/20153:42PM

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True/False1.Ifallconsumersareprice-takersfacingthesameprices,thentheirbudgetlineswillallhavethesameslope.a.Trueb.FalseANSWER:TrueRATIONALE:Theslopeofthebudgetconstraintis-p1/p2---i.e.itismadeupsolelyofprices.Ifthosearethesameforallconsumers,thentheslopeisthesameforallconsumers.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM2.Ifallconsumersareprice-takersfacingthesameprices,thenallchoicesetsarethesame.a.Trueb.FalseANSWER:FalseRATIONALE:Whiletheslopesofthebudgetconstraintswillbethesameforallconsumers,thechoicesetswilldifferdependingoneachconsumer’sincome.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM

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3.Regardlessofwhichconsumptionbundleinherchoicesetaconsumerchooses,shewillspendallofheravailableincome.a.Trueb.FalseANSWER:FalseRATIONALE:Allavailableincomeisspentonlyontheportionofthechoicesetthatisequaltothebudgetline(orbudgetconstraint).POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM4.Inagraphofchoicesets,apricechangecausestheslopeofbudgetlinestochange.a.Trueb.FalseANSWER:TrueRATIONALE:Asthepriceofagoodisreduced,thebudgetlineswingsoutward.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:10/7/201511:46AM5.Ifaconsumer'sfixedincomeincreases,hisopportunitycostalsoincreases.a.Trueb.FalseANSWER:FalseRATIONALE:Althoughaconsumer'schoicesmaychange,hisopportunitycostdoesnot,sincetheopportunitycostisdeterminedbythepriceofthegood,notbyhisincreasedincome.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:10/7/201511:33AM

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6.Whenthegoodontheverticalaxisisacompositegood,theslopeofthebudgetlineisequaltominusthepriceofthegoodonthehorizontalaxis.a.Trueb.FalseANSWER:TrueRATIONALE:Thepriceofcompositegoodsis1---whichmeansthattheusualslope-p1/p2becomes-p1.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM7.Whenthegoodonthehorizontalaxisisacompositegood,theslopeofthebudgetconstraintisminusthepriceofthegoodontheverticalaxis.a.Trueb.FalseANSWER:FalseRATIONALE:Theslopeisusually-p1/p2---andwhenp1=1(asitiswhengood1isacompositegood),thentheslopeofthebudgetlineis-1/p2;i.e.minustheinverseofp2.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM8.Whiletheendowmentbundlemustlieontheoriginalbudgetline,itneednotlieonthebudgetlinewhenpriceschange.a.Trueb.FalseANSWER:FalseRATIONALE:Consumersalwayshavetheoptionofconsumingtheirendowmentbundle---whichmeanstheendowmentbundlealwaysliesonthebudgetlineregardlessofwhathappenstoprices.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM

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9.Forchoicesetsemergingfrom“exogenous”income,thebudgetlinewillshiftparallelwheneverbothpriceschangebythesamepercentage.a.Trueb.FalseANSWER:FalseRATIONALE:Sincetheslopeofthebudgetconstraintisthenegativepriceratio,theslopewillremainthesameifbothpricesincreasebythesamefactor---whichmeansthenewbudgetlinewillbeparalleltotheoriginal.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM10.Forchoicesetsgeneratedfromendowmentbundles,thebudgetlinewillshiftparallelifbothpriceschangebythesameproportion.a.Trueb.FalseANSWER:FalseRATIONALE:Theslopeofthebudgetremainsunchanged---asdoestheendowmentbundle.Sincethebudgetlinealwayshastopassthroughtheendowmentbundle,ansimultaneousandproportionateincreaseinbothpriceswillcausenochangeinthebudgetconstraint.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM

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11.Thebudgetlineonagraphrepresentschoiceswhichexhaustallresources.a.Trueb.FalseANSWER:TrueRATIONALE:Thebudgetlinerepresentsallcombinationsofgoodsthat,ifchosenbyaparticularconsumerwouldleavenomoneyinhisorherbudget.POINTS:1DIFFICULTY:ASectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:10/7/201511:29AMDATEMODIFIED:10/7/201511:34AM12.Inagraphofchoicesets,apricechangeaffectstheratiobutdoesnotaffectthebudgetline.a.Trueb.FalseANSWER:FalseRATIONALE:Apricechangewillcausetheslopeofabudgetlinetochange.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:True/FalseHASVARIABLES:FalseDATECREATED:10/7/201511:39AMDATEMODIFIED:10/7/201511:44AMMultipleChoice

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13.Thefollowingchangesinaconsumer’seconomiccircumstancesresultinasteeperbudgetlinewiththeverticalinterceptunchanged.(Denotethegoodonthehorizontalasgood1andthegoodontheverticalasgood2.)a.Akpercentdecreaseinthepriceofgood2combinedwithakpercentdecreaseinincomeb.Akpercentincreaseinthepriceofgood2combinedwithakpercentdecreaseinincomec.Akpercentdecreaseinthepriceofgood2combinedwithakpercentincreaseinincomed.Akpercentincreaseinthepriceofgood2combinedwithakpercentincreaseinincome.e.NoneoftheaboveANSWER:aRATIONALE:Adecreaseinthepriceofgood2causestheslopetobecomesteeper,andadecreaseinincomeshiftsthebudgetlineinward.Together,theseimplythatthebudgetlinerotatesinwardwiththeverticalinterceptfixed---justasitwouldifthepriceofgood1increasesbyitself.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:MultipleChoiceHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM14.Supposeinflationcomesintheformofanacross-theboardincreaseinallpricesbysomepercentagek.Foraconsumerwithexogenousincomeoperatingina2-goodworld,thiswillcausethebudgetconstrainttoa.rotateinwardb.rotateoutwardc.shiftoutinaparallelwayd.shiftinwardinaparallelwaye.noneoftheaboveANSWER:dRATIONALE:Sincetheslopeofthebudgetisthepriceratio,andsincebothpricesincreasedbythesameproportion,theslopeisunchanged---butthesamelevelofexogenousincomenowbuysless.POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:MultipleChoiceHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM

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15.Supposeyouaregivenacouponforpizza.Thiscouponlowersthepriceforeachadditionalpizzayoubuyby5%foreachadditionpizzayoubuy.Whathappenstoyourbudgetconstraint,withpizzaonthehorizontalaxisandacompositegoodonthevertical?a.Theverticalinterceptremainsthesamebuttheslopebecomessteeperasmorepizzasarebought.b.Theverticalinterceptincreasesandtheslopebecomessteeperasmorepizzasarebought.c.Theverticalinterceptremainsthesamebuttheslopebecomesshallowerasmorepizzasarebought.d.Theverticalinterceptincreasesbuttheslopebecomesshallowerasmorepizzasarebought.e.Noneoftheabove.ANSWER:cRATIONALE:Ifnopizzasarebought,thennothingchanges---implyingthattheverticalinterceptremainsthesame.Butasmorepizzasarebought,thepricefalls,implyinganincreasinglyshallowerbudgetline.POINTS:1DIFFICULTY:A-SectionmaterialQUESTIONTYPE:MultipleChoiceHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM16.Supposethegovernmentwantstodiscourageexcessiveconsumptionofalcohol.Itthereforeimposesaper-unittaxonalcoholthatincreasesasmorealcoholisboughtbyaconsumeratastore.Whathappenstoaconsumer’sbudgetataliquorstore(withlitersofalcoholonthehorizontalaxisandacompositegoodonthevertical)---assumingtheconsumertakesonlyonetriptothestore.a.Theverticalinterceptdecreasesandtheslopebecomesshallowerasmorealcoholisbought.b.Theverticalinterceptremainsconstantbuttheslopebecomesshallowerasmorealcoholisbought.c.Theverticalinterceptdecreasesandtheslopebecomessteeperasmorealcoholisbought.d.Theverticalinterceptremainsconstantbuttheslopebecomessteeperasmorealcoholisbought.e.Noneoftheabove.ANSWER:dRATIONALE:Ifnoalcoholisbought,nothingchangesasaresultofthetax---implyingtheverticalinterceptremainsunchanged.Butthepriceofalcoholincreasesasmoreisbought---implyingasteepeningoftheslope.POINTS:1DIFFICULTY:A-SectionmaterialQUESTIONTYPE:MultipleChoiceHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PMSubjectiveShortAnswer

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17.ConsideraconsumerwithachoicesetthatemergesfromanexogenousincomeI.Supposethat,asaresultofchangesinaconsumer’seconomiccircumstances,thebudgetlinerotatesoutward,withtheverticalinterceptremainingunchangedbutthehorizontalinterceptshiftingtotheright.Howcouldthishavehappenedifthepriceofthegoodonthehorizontalaxisdidnotchange?ANSWER:Ifthepriceofthegoodontheverticalaxisincreasesbythesameproportionasincomedoes.(Theincreaseinincomealongcausesaparallelshiftoutward,andtheincreaseinthepriceofgood2causestheslopetobecomeshallower.Ifthetwoincreasebythesamepercentage,theamountofgood2thatisaffordableremainsunchangedwhiletheamountofgood1thatisaffordableincreases.)POINTS:1DIFFICULTY:AsectionmaterialQUESTIONTYPE:SubjectiveShortAnswerHASVARIABLES:FalseDATECREATED:9/1/20151:26PMDATEMODIFIED:9/1/20151:26PM
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