Test Bank for Principles of Macroeconomics, 12th Edition

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1Principles of Macroeconomics, 12e(Case)Chapter 1The Scope and Method of Economics1.1Why Study Economics?1) Which of the following isnotlisted in the book as a reason to study economics?A) to learn a way of thinkingB) to understand societyC) to be an informed citizenD) to learn how to make lots of moneyAnswer: DDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-12) Among the fundamental concepts in economics areA) opportunity cost.B) marginalism.C) efficient markets.D) all of the aboveAnswer: DDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-13) Which of the following is the best definition of economics?A) the study of how individuals and societies choose to use the scarce resources that nature and previousgenerations have providedB) the study of how consumers spend their incomeC) the study of how business firms decide what inputs to hire and what outputs to produceD) the study of how the federal government allocates tax dollarsAnswer: ADiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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24) The rise of the modern factory system in England during the late eighteenth and early nineteenthcenturies is known as theA) Great Migration.B) Industrial Revolution.C) Wealth of Nations.D) Dark Ages.Answer: BDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-15) Which of the following statements isnotcorrect?A) Economics is a behavioral science.B) In large measure, economics is the study of how people make choices.C) If poverty were eliminated, there would be no reason to study economics.D) Economic analysis can be used to explain how both individuals and societies make decisions.Answer: CDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-16) The study of economicsA) is a very narrow endeavor.B) is a way of analyzing decision-making processes caused by scarcity.C) is concerned with proving that capitalism is better than socialism.D) focuses on how a business should function.Answer: BDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-17) Which of the following isnotone of the three fundamental concepts of economics?A) profit maximizationB) marginalismC) opportunity costD) the working of efficient marketsAnswer: ADiff: 1Topic: Why Study Economics?Skill: ConceptualLearning Outcome: Micro-1

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38) Suppose that you purchased a ticket to a jazz festival for $100 from an online ticket broker. Once youarrived at the festival, you discovered that parking costs you an additional $15. In this situation, theadditional $15 you pay for parking is an example ofA) an economic loss.B) opportunity cost.C) marginal cost.D) an inefficient cost.Answer: CDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-19) You have decided that you want to attend a costume party as Iron Man. You estimate that it will cost$40 to assemble your costume. After spending $40 on the costume, you realize that the additional piecesyou need will cost you $25 more. The marginal cost of completing the costume isA) $15.B) $25.C) $40.D) $65.Answer: BDiff: 2Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-110) The concept of opportunity costA) is relevant only to economics.B) can be applied to the analysis of any decision-making process.C) applies to consumers but not to firms.D) refers only to actual payments and incomes.Answer: BDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-111) Opportunity cost isA) that which we forgo, or give up, when we make a choice or a decision.B) a cost that cannot be avoided, regardless of what is done in the future.C) the additional cost of producing an additional unit of output.D) the additional cost of buying an additional unit of a product.Answer: ADiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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412) The reason that opportunity costs arise is thatA) an economy relies on money to facilitate exchange of goods and services.B) resources are scarce.C) there are no alternative decisions that could be made.D) people have limited wants.Answer: BDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-113) Which of the following isnotan opportunity cost of attending college?A) the tuition you payB) the income you could have earned if you didn't attend collegeC) the alternative uses of the time you spend studyingD) the cost of the food that you consume while you are attending collegeAnswer: DDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-114) If your tuition is $5,000 this semester, your books cost $600, you can only work 20 rather than 40 hoursper week during the 15 weeks you are taking classes and you make $15 per hour, and your room andboard is $3,000 this semester (same as if not attending college), then your opportunity cost of attendingcollege this semester isA) $5,600.B) $5,900.C) $10,100.D) $11,600.Answer: CDiff: 3Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1

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515) If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your roomand board is $7,500 this semester (same as if not attending college), then your opportunity cost ofattending college this semester isA) $26,500.B) $26,800.C) $31,000.D) $38,500.Answer: CDiff: 3Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-116) If you own a building and you decide to use that building to open a book store,A) there is no opportunity cost of using this building for a book store because you own it.B) there is an opportunity cost of using this building for a book store because it could have been used inother ways.C) the opportunity costs equal the cost of inventory.D) the only cost relevant to this decision is the price you paid for the building.Answer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-117) You own the video gameGrand Theft Auto V. The opportunity cost of playing this game for the secondtimeA) is zero.B) is one-half the cost of the game, as this is the second time you have played it.C) is the value of the alternative use of the time you spend playing the game.D) cannot be calculated.Answer: CDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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618) That which we forgo, or give up, when we make a choice or decision is calledA) out-of-pocket cost.B) marginal cost.C) real cost.D) opportunity cost.Answer: DDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-119) Economists often refer to risk-free ventures asA) efficient market outcomes.B) profit opportunities.C) those with no opportunity costs.D) break-even propositions.Answer: BDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-120) If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of thetenth DVD isA) $4.B) $13.C) $14.D) $130.Answer: ADiff: 2Topic: Why Study Economics?Skill: AnalyticalLearning Outcome: Micro-121) If you eat at a sushi restaurant that charges $20 for its all-you-can-eat sushi special, then the marginalcost of your 10th piece of sushi isA) zero.B) $2.C) $200.D) $2,000.Answer: ADiff: 2Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1

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722) A market in which profit opportunities are eliminated almost instantaneously isA) a laissez-faire market.B) a capitalist market.C) a socialist market.D) an efficient market.Answer: DDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-123) If information is less costly and more easily available, then usually thisA) makes markets more efficient.B) makes markets less efficient.C) increases profit opportunities.D) increases the opportunity cost of acquiring more information.Answer: ADiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-124) An efficient market is a market in whichA) everyone always gets what they want.B) profit opportunities are eliminated almost instantaneously.C) profits are always very high and persistent.D) opportunity costs are zero.Answer: BDiff: 2Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-125) Related to theEconomics in Practiceon page 5: According to theEconomics in Practice, a majority of the$10 retail value of the Barbie dollA) is needed to pay for the cost of the Taiwanese plastic used to make the dolls.B) pays for the Chinese labor used to assemble the doll.C) is captured in the United States.D) goes to the Japanese manufacturer of the hair which is used for the dolls.Answer: CDiff: 2Topic: Why Study Economics?: Economics in PracticeSkill: FactLearning Outcome: Micro-1

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826) Related to theEconomics in Practiceon page 5: The opportunity cost to Mattel of having its Barbie dollassembled in China isA) the low wages paid to Chinese workers.B) the $2 export value the doll carries when it leaves Hong Kong.C) the $8 of its $10 retail value which is captured in the United States.D) having the Barbie doll assembled in the next best available location.Answer: DDiff: 2Topic: Why Study Economics?: Economics in PracticeSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-127) The reasons to study economics include which of the following?A) to be an informed citizenB) to understand societyC) to learn a way of thinkingD) all of the aboveAnswer: DDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-128) Marginalism isA) the best alternative that we forgo when making a decision.B) the study of how societies choose to use scarce resources.C) a market situation in which profit opportunities are eliminated almost instantaneously.D) the process of analyzing the additional costs or benefits arising from a decision.Answer: DDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-129) Economics is best defined as the study ofA) financial decision making.B) how consumers make purchasing decisions.C) choices made by people faced with scarcity.D) inflation, unemployment, and economic growth.Answer: CDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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930) The Industrial Revolution refers to the rise of the modern factory system in ________ during the lateeighteenth and early nineteenth centuries.A) the United StatesB) EnglandC) FranceD) GermanyAnswer: BDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-131) Which of the following statements is correct?A) Economics is a natural science.B) In large measure, economics is the study of how people make choices.C) If poverty was eliminated there would be no reason to study economics.D) Economic analysis can be used to explain how societies, but not individuals, make decisions.Answer: BDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-132) Economics is the study ofA) how to invest in the stock market.B) how society uses limited resources.C) the role of money in markets.D) how government officials decide which goods and services are produced.Answer: BDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-133) You decide to go to LEGOLAND after you visit Disneyworld in Orlando. The cost of going toLEGOLAND after you visit Disneyworld is the ________ cost of getting from Disneyworld toLEGOLAND.A) efficiencyB) marginal time and moneyC) opportunityD) profit-maximizingAnswer: BDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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1034) Suppose that you sign up for a one-day cooking class at the local culinary school for $75. Once youarrive at the class, you discover that you must purchase an apron for an additional $5. In this situation,the additional $5 you pay for the apron is an example ofA) an inefficient cost.B) marginal cost.C) opportunity cost.D) an economic loss.Answer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-135) You have decided that you want to attend a renaissance fair as King Henry VIII. You estimate that itwill cost $80 to assemble your costume. After spending $80 on the costume, you realize that theadditional pieces you need will cost you $20 more. The marginal cost of completing the costume isA) $20.B) $60.C) $80.D) $100.Answer: ADiff: 2Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-136) You have narrowed down your Friday night plans to either going bowling or playing billiards. If youchoose to go bowling, then for you playing billiards is the ________ of going bowling.A) opportunity costB) marginal costC) empirical costD) variable costAnswer: ADiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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1137) That which we forgo, or give up, when we make a choice or a decision is known asA) equity.B) causation.C) correlation.D) opportunity cost.Answer: DDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-138) Scarce resources give rise to the concept ofA) efficient markets.B) opportunity costs.C) laissez-faire.D) positive economics.Answer: BDiff: 1Topic: Why Study Economics?Skill: FactLearning Outcome: Micro-139) Which of the following is an opportunity cost of attending college?A) the cost of your apartment or dormB) the income you could have earned if you didn't attend collegeC) the cost of the food that you consume while you are attending collegeD) the education you gain from attending collegeAnswer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-140) If your tuition is $2,000 this semester, your books cost $400, you can only work 10 rather than 40 hoursper week during the 15 weeks you are taking classes and you make $12 per hour, and your room andboard is $4,000 this semester (same as if not attending college), then your opportunity cost of attendingcollege this semester isA) $2,400.B) $2,760.C) $7,800.D) $11,800.Answer: CDiff: 3Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-1

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1241) If your tuition is $20,000 this semester, your books cost $2,000, you can only work 10 rather than 40hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your roomand board is $8,000 this semester (same as if not attending college), then your opportunity cost ofattending college this semester isA) $22,000.B) $22,150.C) $28,750.D) $36,750.Answer: CDiff: 3Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-142) If you own a condo and you decide to lease it to your cousin,A) there is no opportunity cost of leasing the condo because you own it.B) there is an opportunity cost of leasing the condo because you could have chosen to live in it.C) there is no opportunity cost of leasing the condo because you collect rent from your cousin.D) the only cost relevant to this decision is the price you paid for the condo.Answer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-143) You ownAmerican Sniperon DVD. The opportunity cost of watching this DVD for the fourth timeA) is zero, since you own it.B) is one-fourth the cost of the DVD, as this is the fourth time you have watched it.C) is the value of the alternative use of the time you spend watching the DVD.D) must be the same as the opportunity cost of watching it the first time.Answer: CDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-144) Opportunity cost isA) what we give up to get something else.B) marginal cost divided by total cost.C) the same as real cost.D) all of the aboveAnswer: ADiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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1345) Economists often refer to "good deals" asA) profit opportunities.B) break-even propositions.C) efficient market outcomes.D) those with no opportunity cost.Answer: ADiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-146) If you can download 10 ring tones for your cell phone for $10 or you could download 11 ring tones foryour cell phone for $10.50, then the marginal cost of the eleventh ring tone isA) $0.50.B) $10.00.C) $10.50.D) $20.50.Answer: ADiff: 2Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-147) If you eat at a Las Vegas casino that charges $12 for its all you can eat buffet, then the marginal cost ofyour third trip to the buffet isA) zero.B) $4.C) $12.D) $36.Answer: ADiff: 2Topic: Why Study Economics?Skill: AnalyticalAACSB: Analytical ThinkingLearning Outcome: Micro-148) An efficient market is a marketA) that deals in unlimited resources.B) in which long-term profits are guaranteed.C) in which profit opportunities are eliminated almost instantaneously.D) in which there are no opportunity costs.Answer: CDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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1449) If information is more costly and less easily available, then usually thisA) makes markets more efficient.B) makes markets less efficient.C) decreases profit opportunities.D) decreases the opportunity cost of acquiring more information.Answer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-150) The common way of expressing the efficient market concept isA) "the only true market is a profitable market."B) "there's no such thing as a free lunch."C) "only without government interference can a market survive."D) "once an efficient market, always an efficient market."Answer: BDiff: 2Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-151) Opportunity cost isA) the additional cost incurred from the consumption of one more unit of output.B) the cost involved when choosing between alternatives.C) the cost of production which cannot be recaptured.D) the total cost incurred from the consumption of additional output.Answer: BDiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-152) The cost involved when choosing between alternatives is known as theA) marginal cost.B) sunk cost.C) opportunity cost.D) normative cost.Answer: CDiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-1

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1553) Related to theEconomics in Practiceon p. 5: According to theEconomics in Practice, ________ of the $10retail value of a Barbie doll is captured in the United States.A) noneB) 35 centsC) $2D) $8Answer: DDiff: 1Topic: Why Study Economics?: Economics in PracticeSkill: FactLearning Outcome: Micro-154) Related to theEconomics in Practiceon p. 5: The opportunity cost to Apple of having the hard driveproduced in Japan by Toshiba isA) the wages paid to Japanese workers.B) the components of the hard drive which are not produced by Toshiba.C) having the hard drive produced by the next best available company.D) the value-added captured by Apple in the United States.Answer: CDiff: 2Topic: Why Study Economics?: Economics in PracticeSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-155) Resources are unlimited in a wealthy society.Answer: FALSEDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-156) The value of the best alternative foregone is the opportunity cost of making a decision.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-157) Opportunity costs arise due to scarce resources.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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1658) Marginal cost refers to the incremental cost arising from a decision.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-159) A market is considered efficient if profit opportunities remain continually available.Answer: FALSEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-160) Resources are limited in both wealthy and poor societies.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-161) A basic understanding of economics is needed to be an informed citizen.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-162) Opportunity costs are another name for marginal costs.Answer: FALSEDiff: 1Topic: Why Study Economics?Skill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-163) The phrase "there's no such thing as a free lunch" is a common way of expressing the concept ofefficient markets.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-164) Studying economics helps us to better understand society.Answer: TRUEDiff: 1Topic: Why Study Economics?Skill: DefinitionLearning Outcome: Micro-1

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171.2The Scope of Economics1) The branch of economics that examines the functioning of individual industries and the behavior ofindividual decision-making units isA) positive economics.B) normative economics.C) macroeconomics.D) microeconomics.Answer: DDiff: 1Topic: The Scope of EconomicsSkill: DefinitionLearning Outcome: Micro-12) Studying how the management of Hewlett Packard decides how many computers to produce and theprice to charge for its computers would be consideredA) descriptive economics.B) empirical economics.C) microeconomics.D) macroeconomics.Answer: CDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-13) Studying how Joshua allocates his time between school and video games is an example ofA) macroeconomics.B) microeconomics.C) industrial organization.D) descriptive economics.Answer: BDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-14) The study of how benefits are determined for city employees would be consideredA) microeconomics.B) macroeconomics.C) descriptive economics.D) institutional economics.Answer: ADiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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185) Inflation and unemploymentA) are the focus of normative economics.B) are a focus of microeconomics.C) are a focus of positive economics.D) are a focus of macroeconomics.Answer: DDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-16) Microeconomics is best described as the study ofA) the choices made by individual households, firms, and governments.B) inflation, unemployment, gross national product, and the nation's economy as a whole.C) how markets interact in the aggregate economy.D) marginal changes in the economy.Answer: ADiff: 1Topic: The Scope of EconomicsSkill: DefinitionLearning Outcome: Micro-17) Macroeconomics is best described as the study ofA) very large issues.B) the choices made by individual households, firms, and governments.C) the nation's economy as a whole.D) the relationship between inflation and wage inequality.Answer: CDiff: 1Topic: The Scope of EconomicsSkill: DefinitionLearning Outcome: Micro-18) Which of the following is a microeconomics question?A) Is it sensible for a government to subsidize tobacco production?B) Why do some countries grow faster than others?C) Should Congress and the president take action to reduce global warming?D) Should the government attempt to influence the interest rate to lower inflation?Answer: ADiff: 2Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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199) Which of the following is a macroeconomics question?A) Should we have a constitutional amendment to balance the federal budget?B) Why does a firm decide to enter a particular market?C) Should the government prevent the merger of two large firms?D) Should the government put a tax on alcohol in an attempt to reduce highway fatalities?Answer: ADiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-110) We can use macroeconomic analysis toA) learn how to balance a checkbook.B) study the choices made by households.C) understand marginal changes in the macroeconomy.D) understand why economies grow.Answer: DDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-111) The rate of economic growth is a topic of microeconomics.Answer: FALSEDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-112) The aggregate price level is a topic of macroeconomics.Answer: TRUEDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-113) The rate of unemployment is a topic of microeconomics.Answer: FALSEDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2014) The rate of inflation is a topic of macroeconomics.Answer: TRUEDiff: 1Topic: The Scope of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-11.3The Method of Economics1) Better insurance benefits increase the incentive of some individuals to work. This statement is bestdescribed asA) a positive statement.B) an example of theceteris paribusassumption.C) a normative statement.D) a comparative economics statement.Answer: ADiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-12) The government should extend the duration of unemployment benefits to those workers who lost theirjobs due to outsourcing. This statement is best described asA) an example of marginalism.B) an example of the fallacy of composition.C) a normative statement.D) a positive statement.Answer: CDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-13) The amount of education that one has is an important factor in the determination of his or her wagerate. This is best described asA) a positive statement.B) an example of the fallacy of composition.C) a normative statement.D) an example of marginalism.Answer: ADiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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214) Positive economics is an approach to economics thatA) seeks to understand behavior and the operation of systems while making judgments about theirusefulness to society.B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferredcourses of action.C) seeks to understand behavior and the operation of systems without making judgments.D) examines the role of government in the economy.Answer: CDiff: 1Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-15) Normative economics is an approach to economics thatA) seeks to understand behavior and the operation of systems without making judgments.B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferredcourses of action.C) applies statistical techniques and data to economic problems.D) examines the role of government in the economy.Answer: BDiff: 1Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-16) Which of the following is a normative question?A) Why do gasoline prices increase between Memorial Day and Labor Day?B) What will happen to gasoline consumption if the federal tax on gasoline is eliminated?C) To reduce the regressive nature of the gasoline excise tax, should the portion of the gasoline excise taxpaid by high-income individuals be increased?D) How will oil exploration be affected if the government subsidizes oil producers?Answer: CDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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227) Which of the following is a positive question?A) Will the level of teenage unemployment increase if the minimum wage is increased?B) Should the minimum wage be set at one-half the average manufacturing wage to guaranteeindividuals a decent standard of living?C) Wouldn't it be more equitable if the minimum wage increased automatically with the cost of living?D) Wouldn't it be better to try to increase people's wages through job-training programs rather than byrequiring employers to pay minimum wages?Answer: ADiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-18) Health insurance should be provided to every citizen in a wealthy nation such as the United States.This statement is best described asA) a positive statement.B) a normative statement.C) a marginal statement.D) an implication of an efficient market.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-19) There is great concern over the idea that citizens should have to provide specific identification to beable to vote in elections. A study of the costs and benefits of implementing a voter identification programis an example ofA) laissez-faire economics.B) positive economics.C) labor economics.D) normative economics.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2310) A measure that can change from observation to observation is known as a(n)A) empirical measure.B) model.C) causality.D) variable.Answer: DDiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-111) A formal statement of a theory is known as a(n)A) model.B) positive statement.C) empirical measure.D) causal statement.Answer: ADiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-1Refer to Scenario 1.1 below to answer the questions that follow.SCENARIO 1.1: An economist wants to understand the relationship between minimum wages and thelevel of teenage unemployment. The economist collects data on the values of the minimum wage and thelevels of teenage unemployment over time. The economist concludes that a 1% increase in minimumwage causes a 0.2% increase in teenage unemployment. From this information he concludes that theminimum wage is harmful to teenagers and should be reduced or eliminated to increase employmentamong teenagers.12) Refer to Scenario 1.1. The statement that a 1% increase in the minimum wage causes a 0.2% increase inteenage unemployment is an example ofA) equity.B) normative economics.C) positive economics.D) Ockham's razor.Answer: CDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2413) Refer to Scenario 1.1. The statement, "the minimum wage is harmful to teenagers and should bereduced or eliminated to increase employment among teenagers," is an example ofA) marginal economics.B) normative economics.C) positive economics.D) Ockham's razor.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-114) Refer to Scenario 1.1. The collection and use of the data on minimum wage and teenageunemployment over time is an example ofA) law and economics.B) economic history.C) econometrics.D) empirical economics.Answer: DDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-115) Refer to Scenario 1.1. The statement that an increase in the minimum wage causes an increase inteenage unemployment is an example ofA) a fallacy.B) an economic theory.C) normative economics.D) deductive reasoning.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-116) Refer to Scenario 1.1. A graph of the value of the minimum wage on one axis and the level of teenageunemployment on the other axis is an example ofA) an economic theory.B) an economic model.C) inductive reasoning.D) a variable theory.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2517) To isolate the impact of one single factor, economists invoke the assumption ofA) inductive reasoning.B) Ockham's razor.C)ceteris paribus.D)post hoc, ergo propter hoc.Answer: CDiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-118) The principle that irrelevant detail should not be included in a model is known asA) a fallacy.B)ceteris paribus.C) Ockham's razor.D) normative economics.Answer: CDiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-119) Economists use the phraseceteris paribusto express the assumptionA) "all else equal."B) "everything affects everything else."C) "scarcity is a fact of life."D) "there is no such thing as a free lunch."Answer: ADiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-120) The Latin phrase economists use that means all else equal isA)ceteris paribus.B)cogito ergo sum.C)carpe diem.D)caveat emptor.Answer: ADiff: 1Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-1

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2621) Marco observed that every time the temperature rises above 90 degrees, he forgets to take out thetrash. Based on this observation he concluded that temperatures above 90 degrees result in temporarymemory loss. In actuality, MarcoA) committed the fallacy of logic.B) committed theceteris paribuserror.C) was confusing causality.D) showed good reasoning relating to the relationship between temperatures and memory.Answer: CDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-122) Whenever the Democrats gain control of the Congress, spending on social programs increases;whenever Republicans gain control of the Congress, spending on defense increases. Hence, we knowwhat the next party in control will do. This statement is an example of theA) fallacy of inductive reasoning.B)post hoc,ergo propter hocfallacy.C) fallacy of stability.D)ceteris paribusfallacy.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-123) Whenever I go to the grocery store, I always stop at Starbucks on the way home. Therefore, going tothe grocery store causes me to go to Starbucks. This statement is an example of theA) fallacy of logic.B)post hoc,ergo propter hocfallacy.C) fallacy of inductive reasoning.D)ceteris paribusfallacy.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2724) The economy was expanding during all of the years that I was a student, but as soon as I graduated,the economy contracted. Therefore, the labor market was waiting until I started looking for a job tocontract. This statement is an example of theA)ceteris paribusfallacy.B)post hoc,ergo propter hocfallacy.C) fallacy of logic.D) fallacy of inductive reasoning.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-125) Every citizen in the United States should be required to become licensed to carry a firearm for thesake of protection. This statement is best described asA) a positive statement.B) a normative statement.C) a marginal statement.D) an implication of an efficient market.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-126) Rent control laws are imposed when city officials believe landlords have been exploiting tenants.Which of the following criteria are they using to guide their actions?A) efficiencyB) equityC) growthD) stabilityAnswer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2827) A government policy that tries to minimize inflation and unemployment can best be described astrying to achieve economicA) efficiency.B) equity.C) profitability.D) stability.Answer: DDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-128) Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes torise with income. Which of the following criteria best explains the goal of this tax system?A) efficiencyB) equityC) growthD) stabilityAnswer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-129) Normative economics ________ and positive economics ________.A) involves judgments; does not involve judgmentsB) involves judgments; also involves judgmentsC) does not involve judgments; involves judgmentsD) does not involve judgments; also does not involve judgmentsAnswer: ADiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-130) It always rains about an hour after you finish washing your car. Concluding that washing your carcaused it to rain is an example of theA) fallacy of logic.B)post hoc,ergo propter hocfallacy.C) fallacy of inductive reasoning.D)ceteris paribusconditions.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-1

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2931) Debbie observes that leaves fall from trees before the fist day of winter, and concludes that the fallingleaves cause winter to begin. This is an example ofA)ceteris paribus.B) thepost hoc,ergo propter hocfallacy.C) the fallacy of logic.D) Ockham's razor.Answer: BDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-132) You have observed that every time you do 30 minutes of cardio exercise before taking an exam youget an A. You therefore conclude that to get an A on an exam, all you have to do is 30 minutes of cardioexercise before you take an exam. You have committed theA) fallacy of logic.B) fallacy of inductive reasoning.C)post hoc, ergo propter hocfallacy.D) fallacy of division.Answer: CDiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-133) If you observe that Event A happens before Event B happens, and you erroneously conclude thatEvent A caused Event B, you would be guilty of an error called theA) fallacy of logic.B) fallacy of inductive reasoning.C) fallacy ofceteris paribus.D)post hoc, ergo propter hocfallacy.Answer: DDiff: 2Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-134) The mistake of inferring causality from two events happening one after the other is calledA) thepost hoc, ergo propter hocfallacy.B) the fallacy of composition.C) Ockham's razor.D) the fallacy of co-dependence.Answer: ADiff: 2Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-1

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3035) Thepost hoc, ergo propter hocfallacy is the belief thatA) if Event A happens before Event B happens, then Event A causes Event B to occur.B) what is true for the whole is necessarily true of the parts.C) what is true for a part is necessarily true for the whole.D) it is impossible to draw generalizations about cause and effect.Answer: ADiff: 2Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-136) The collection and use of data to test economic theories isA) empirical economics.B) descriptive economics.C) normative economics.D) positive economics.Answer: ADiff: 2Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-137) A change in economic output is potentially efficientA) if the value of the resulting gains exceeds the value of the resulting losses.B) if the value of the resulting gains exactly equals the value of the resulting losses.C) only if no one is made worse off.D) if the value of the resulting gains is less than the value of the resulting losses.Answer: ADiff: 2Topic: The Method of EconomicsSkill: ConceptualAACSB: Reflective ThinkingLearning Outcome: Micro-138) An efficient economy is an economyA) in which output is steady or growing and there is low inflation.B) that produces what consumers demand and does so at the least possible cost.C) that distributes output equally among all consumers.D) in which there is a fair distribution of wealth.Answer: BDiff: 2Topic: The Method of EconomicsSkill: DefinitionLearning Outcome: Micro-1

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