Test Bank for Principles of Microeconomics 10th Edition Case

download full file at http://testbankcafe.com http://testbankcafe.com Principles Principles of Microeconomics Microeconomics,, 10e (Case/Fair/Oster) – TB2 Chapter 2 The Economic Problem: Problem: carcit! carcit! an" Choice

2.1 Scarcity, Choice, and Opportunity Cost 1) roduction is the process by which !) products are used by consumers. ") resources are transformed into useful forms. C) products are con#erted into capital. $) resources are allocated and distributed. !nswer: " $iff: 1 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: $efinition 2) &oods and ser#ices of #alue to households are !) inputs in the production process. ") outputs in the production process. C) both inputs and outputs in the production process. $) unrelated to the production process. !nswer: " $iff: 1 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: $efinition ') (hich of the followin is a resource as the term is used by economists* !) buildins ") labor C) land $) all of the abo#e !nswer: $ $iff: 1 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin ) (hich of the followin would an economist classify as capital* !) a new deposit of natural as ") a o#ernment sa#ins bond C) a police car $) a -1 tra#ellers check !nswer: C $iff: 2 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin

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download full file at http://testbankcafe.com http://testbankcafe.com 0) conomists refer to thins that ha#e already been be en produced that are in turn used to produce other oods and ser#ices as !) land. ") labor. C) entrepreneurship. $) capital. !nswer: $ $iff: 1 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: $efinition ) %he principle that the cost of somethin is e3ual to what is sacrificed to et it is known as the !) marinal principle. ") principle of opportunity cost. C) principle of diminishin returns. $) reality principle. !nswer: " $iff: 1 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: $efinition 4) 5f scarcity was eliminated !) trade would become unnecessary. ") opportunity costs would increase. C) all nations would ha#e an absolute ad#antae in producin all products. $) the concept of trade6offs would become irrele#ant. !nswer: $ $iff: 2 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 7) !ccordin to the theory of 88888888, speciali9ation and free trade will benefit all trade partners, e#en when some are absolutely more efficient producers than others. !) comparati#e ad#antae ") absolute ad#antae C) social e3uity $) laisse96faire !nswer: ! $iff: 2 %opic: %o pic: Scarcity, Scarcity, Choice, and Opportunity Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com http://testbankcafe.com Refer to the information information provided provided in Ta Table 2.1 below to answer the following following questions. questions. Table 2#1

olly !#atar $esin %attoo $esin

 '

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download full file at http://testbankcafe.com 12) +efer to %able 2.1. %o ma=imi9e total production !) olly should speciali9e in a#atar desin and ete should speciali9e in tattoo desin. ") ete should speciali9e in a#atar desin and olly should speciali9e in tattoo desin. C) olly and ete should both split their time between desinin a#atars and tattoos. $) olly should desin a#atars and tattoos, but ete should only desin a#atars. !nswer: " $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: !nalytical !!CS": !nalytic Skills 1') +efer to %able 2.1. raisin ") raise> lowerin C) lower> raisin $) lower> lowerin !nswer: " $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com 1) Speciali9ation and trade e=ploit differences in producti#ity across workers and !) only benefit the e=porter. ") only benefit the importer. C) make e#eryone better off. $) make e#eryone worse off. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 14) 5f someone can produce a ood at a lower opportunity cost, she 88888888 in producin that ood. !) has a comparati#e ad#antae ") has an absolute ad#antae C) e=periences no diminishin returns $) e=periences no sunk costs !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 17) 5f a #intner has a comparati#e ad#antae in producin wine !) he can produce more wine usin the same resources than other #intners. ") wine is the only product he can produce. C) he can produce wine at a lower opportunity cost than other #intners. $) he also has an absolute ad#antae in producin wine. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 1;) (hich of the followin is an act of economic ?in#estment?* !) %he state leislature authori9es the sale of a state park. ") !n entrepreneur buys 0 shares of stock at -0 a share and then sells the stock at a profit for - a share. C) ! brewer purchases a new fermentation system for his beer. $) ! teacher deposits -0 in a retirement account. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com 2) 5n economics, the creation of capital is referred to as !) in#estment. ") comparati#e ad#antae. C) consumption. $) allocation. !nswer: ! $iff: 1 %opic: Scarcity, Choice, and Opportunity Cost Skill: $efinition 21) %he process of usin 88888888 to produce new capital is known as 88888888. !) money> speciali9ation ") resources> in#estment C) speciali9ation> absolute ad#antae $) comparati#e ad#antae> inefficient production !nswer: " $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: $efinition 22) Sa#in is an e=ample of !) e=chanin capital for cash. ") e=chanin scarce resources for unlimited resources. C) tradin present benefits for future benefits. $) tradin future benefits for present benefits. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 2') %he opportunity cost of in#estment in capital is forone present consumption when !) resources are scarce. ") resources are unlimited. C) capital is in reater supply than labor. $) the public chooses consumption o#er in#estment. !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com 2) !n e=ample of an in#estment is !) the purchase of an ihone by a company for one of its salesmen. ") the purchase of a share of "erkshire @athaway stock. C) the purchase of a o#ernment %reasury bill. $) all of the abo#e !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 20) "ecause resources are scarce, the opportunity cost of in#estment in capital is !) past in#estment. ") past consumption. C) foreone present consumption. $) future consumption. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 2) 5f the unemployment rate decreases from ;A to A, the economy will !) mo#e closer to a point on the ppf. ") mo#e away from the ppf toward the oriin. C) remain on the ppf. $) remain on the oriin. !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 24) eriods of full employment correspond to !) points outside the ppf. ") points inside the ppf. C) points on the ppf. $) either points inside or outside the ppf. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com Refer to the information provided in Figure 2.1 below to answer the questions that follow.

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download full file at http://testbankcafe.com ') !ll the combinations of oods and ser#ices that can be produced if all of societys resources are used efficiently are represented on an economys !) production possibility frontier. ") resource a#ailability diaram. C) factors of production statement. $) allocati#e allotment raph. !nswer: ! $iff: 1 %opic: Scarcity, Choice, and Opportunity Cost Skill: $efinition '0) (hen an economy is producin inside its production possibility frontier !) production inefficiency occurs. ") only technoloical ad#ances will allow it to increase production. C) it is efficient so lon as it is producin what people want. $) it must o#ercompensate by producin outside the cur#e to achie#e efficiency. !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin ') 5f an economy is producin on its production possibility frontier but is not producin what people want, the economy !) is e=periencin technoloical ad#ancement. ") is producin at more than one point on the production possibility frontier. C) is not bein allocati#ely efficient. $) is not bein producti#ely efficient. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin '4) 5f a society is producin at a point alon its production possibility frontier, then the society !) is fully employin its resources so it must be allocati#ely efficient. ") is fully employin its resources, but not necessarily bein allocati#ely efficient. C) is underallocatin resources so it must be inefficient. $) is o#erallocatin resources so efficiency is indeterminate. !nswer: " $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com '7) Suppose an economy produces cell phones and &S de#ices in perfectly competiti#e industries. %he economy is currently operatin at a point on its production possibility frontier. %he economy will most likely mo#e to a less6desirable point on the production possibility frontier if !) more firms enter the &S de#ice industry. ") more firms enter the cell phone industry. C) more firms enter both the &S de#ice industry and the cell phone industry. $) a sinle firm ains control o#er the production of cell phones. !nswer: $ $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin ';) %he #alue of the slope of a societys production possibility frontier is called its !) #alue of diminishin efficiency. ") marinal rate of substitution. C) marinal rate of transformation. $) diminishin opportunity cost of capitali9ation. !nswer: C $iff: 1 %opic: Scarcity, Choice, and Opportunity Cost Skill: $efinition ) !ssume a society can produce either beer or wine. 5f the marinal rate of transformation of allons of beer into allons of wine is .0, then the opportunity cost of wine is !) the 2 allons of beer that must be forone. ") the 2 allons of wine that must be forone. C) the .0 allons of beer that must be forone. $) the additional .0 allons of beer that can be produced. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: !nalytical 1) %he marinal rate of transformation is !) also called the marinal rate of substitution. ") rowth associated with technoloical ad#ances. C) the measure of diminishin marinal utility. $) the slope of the production possibility frontier. !nswer: $ $iff: 1 %opic: Scarcity, Choice, and Opportunity Cost Skill: $efinition



Fi$%re 2#&

2) +efer to

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download full file at http://testbankcafe.com Refer to the information provided in Figure 2. below to answer the questions that follow.

Fi$%re 2#'

) !ccordin to

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0) +efer to
download full file at http://testbankcafe.com !) e=actly ' ") fewer than ' C) more than ' $) e=actly  !nswer: C $iff: ' %opic: Scarcity, Choice, and Opportunity Cost Skill: !nalytical !!CS": !nalytic Skills 04) +efer to

download full file at http://testbankcafe.com 0;) !s you mo#e up the production possibility frontier, the absolute #alue of the marinal rate of transformation !) increases. ") decreases. C) initially increases, then decreases. $) initially decreases, then increases. !nswer: ! $iff: ' %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin ) "ecause resources are not e3ually well suited to producin all oods !) as more of a ood is produced the inputs used to produce that ood will increase in price. ") the opportunity costs of producin a ood will increase as more of that ood is produced. C) the opportunity costs of producin a ood will decrease as more of that ood is produced. $) as more of a ood is produced the 3uality of that ood declines and therefore the costs of production increase. !nswer: " $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin 1) conomic rowth will most likely occur when !) a society ac3uires new resources. ") a society decides to produce less usin e=istin resources. C) the society beins to produce the combination of oods society wants most. $) technoloy remains unchaned but unemployment increases. !nswer: ! $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com Refer to the information provided in Figure 2." below to answer the questions that follow.

Fi$%re 2#

2) +efer to
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download full file at http://testbankcafe.com 4') %he ap between rich and poor countries has 88888888 o#er time because poor countries find it difficult to de#ote resources to 88888888 production. !) increased> capital ") decreased> capital C) remained constant> capital $) remained constant> capital and consumer oods !nswer: ! $iff: 1 %opic: Scarcity, Choice, and Opportunity Cost Skill:
download full file at http://testbankcafe.com 44) +elated to the Economics in Practice on p. 27: One reason for the increase in sales of fro9en foods from -1 billion in 1;0 to -24 billion in 24 is the !) increased opportunity cost of cookin fro9en meals. ") decrease in the number of women in the labor force. C) increased opportunity cost of preparin home6cooked meals. $) decrease in popularity of the microwa#e o#en. !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost: conomics in ractice Skill: Conceptual !!CS": +eflecti#e %hinkin 47) +elated to the Economics in Practice on p. ';: 5n the sur#ey conducted by sther $uflo and !bhiHit "anerHee, the e=tremely poor were found to consume 88888888 of their budets on weddins, funerals, and other festi#als. !) #irtually none ") less than 0 percent C) almost 1 percent $) o#er half !nswer: C $iff: 2 %opic: Scarcity, Choice, and Opportunity Cost: conomics in ractice Skill:
download full file at http://testbankcafe.com 72) %hins that ha#e already been produced that are in turn used to produce other oods and ser#ices o#er time are called ?production possibility frontiers.? !nswer:

download full file at http://testbankcafe.com 77) Comparati#e ad#antae refers to the ability to produce at a lower financial cost than a competitor. !nswer:

download full file at http://testbankcafe.com ') (hich of the followin statements is true* !) lanned economies ha#e fared #ery well in recent years, with many of these economies thri#in. ") Command economies operate the most efficiently because the o#ernment makes all the production decisions. C) 5n command economies consumers still e=ercise choice. $) 5n a command economy, consumers answer the 3uestions of what to produce, how to produce it, and how to distribute it. !nswer: C $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin ) roduction decisions are centrali9ed in a !) laisse96faire economy. ") command economy. C) in#isible6hand economy. $) utopian economy. !nswer: " $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 0) (hich of the followin statements is true for a command economy* !) Consumers ha#e no choice concernin what they buy. ") anufacturers decide what is produced. C) %he amount of a ood supplied always e3uals the amount of the ood demanded. $) %he state decides how to distribute what is produced. !nswer: $ $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin ) 5n a 88888888 economy, the beha#ior of buyers and sellers determines what ets produced, how it is produced, and who ets it. !) command ") laisse96faire C) socialist $) utopian !nswer: " $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin download full file at http://testbankcafe.com

download full file at http://testbankcafe.com 4) 5n a market system, self6interest moti#ates most people to !) a#oid payin insurance premiums. ") remain self6sufficient. C) pro#ide products for other people. $) rely on o#ernment central plannin. !nswer: C $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 7) (hich of the followin is true of a market economy* !) 5n its pure form, it is also known as a command economy. ") $ecisions are reulated by a central aency. C) %he o#ernment answers the basic economic 3uestions of what ets produced, how it ets produced, and who ets it. $) 5t relies on millions of indi#idual economic decisions to determine econo mic outcomes. !nswer: $ $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin ;) %he idea that consumers determine what is produced in the economy throuh their demands is known as !) a laisse96faire economy. ") a command economy. C) consumer so#ereinty. $) free enterprise. !nswer: C $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: $efinition 1) %he freedom of indi#iduals to start and operate pri#ate business in search of profits is known as !) laisse96faire. ") free enterprise. C) centrali9ed decision makin. $) consumer so#ereinty. !nswer: " $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: $efinition


download full file at http://testbankcafe.com 11) %he amount that 88888888 ha#e accumulated out of past income throuh sa#in and inheritance is wealth. !) o#ernments ") households C) markets $) corporations !nswer: " $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: $efinition 12) 5n a 88888888, the amount of output that any one household ets depends on its income and wealth. !) ar=ist economy ") socialist economy C) command system $) free market system !nswer: $ $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 1') 5n which system are decisions made by thousands of people who ha#e information about resources, production technoloy and consumer desires* !) market system ") centrally planned system C) command system $) socialist system !nswer: ! $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 1) 5n a laisse96faire economy, what pro#ides indi#iduals the information needed to make decisions* !) insurance ") prices C) patents $) o#ernment !nswer: " $iff: 1 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin


download full file at http://testbankcafe.com 10) (hich of the followin statements is true* !) 5n a free market system, the basic economic 3uestions are answered with the help of a central o#ernment plan or directi#e. ") 5ndi#iduals uided by selfish beha#ior will produce products and ser#ices that enerate the hihest profits. C) %he basic coordinatin mechanism in a free market system is 3uantity adHustments toward e3uilibrium. $) 5n a free market system, competition forces firms to adopt efficient production techni3ues. !nswer: $ $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 1) Some economists ad#ocate o#ernment inter#ention in a market economy when resource costs for a pri#ate producer 88888888 to society. !) are reater than the full cost ") are e3ual to the full cost C) do not reflect the full cost $) ha#e no rele#ant cost !nswer: C $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 14) %he market system works by ettin each person, moti#ated by his or her own self6interest, to produce products for other people. !nswer: %+G $iff: 2 %opic: conomic Systems and the +ole of &o#ernment Skill: Conceptual !!CS": +eflecti#e %hinkin 17) ! command economy is one in which indi#iduals and firms set output tarets, incomes and prices. !nswer:

Test Bank for Principles of Microeconomics 10th Edition Case

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