econ 2000 | Course Paper

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RANDY METHENITIS

RICHLAND COLLEGE

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Contents

Chapter1TheScopeandMethodofEconomics………………………………………………………………..1

Chapter2TheEconomicProblem:ScarcityandChoice……………………………………………………33

Chapter3Demand,Supply,andMarketEquilibrium………………………………………………………64

Chapter4DemandandSupplyApplications…………………………………………………………………111

Chapter5Elasticity………………………………………………………………………………………………………..135

Chapter6HouseholdBehaviorandConsumerChoice…………………………………………………..159

Chapter7TheProductionProcess:TheBehaviorofProfitMaximizingFirms……………….204

Chapter8ShortRunCostsandOutputDecisions………………………………………………………….246

Chapter9LongRunCostsandOutputDecisions………………………………………………………….301

Chapter10InputDemand:TheLaborandLandMarkets………………………………………………..354

Chapter11InputDemand:TheCapitalMarketandtheInvestmentDecision………………….388

Chapter12GeneralEquilibriumandtheEfficiencyofPerfectCompetition……………………..417

Chapter13MonopolyandAntitrustPolicy……………………………………………………………………..443

Chapter14Oligopoly……………………………………………………………………………………………………….497

Chapter15MonopolisticCompetition……………………………………………………………………………..524

Chapter16Externalities,PublicGoods,andSocialChoice……………………………………………….556

Chapter17UncertaintyandAsymmetricInformation……………………………………………………..605

Chapter18IncomeDistributionandPoverty…………………………………………………………………..625

Chapter19PublicFinance:TheEconomicsofTaxation……………………………………………………659

Chapter20InternationalTrade,ComparativeAdvantage,andProtectionism………………….693

Chapter21EconomicGrowthinDevelopingandTransitionalEconomies………………………735



Preface

Test Item File 1 was prepared by Randy Methenitis of Richland College. It includes over

2,700 questions. All questions are machine-gradable and are either multiple-choice or

true-false. TIF1 is for use with the tenth edition of Principles of Microeconomics in the

first year of publication. This TIF is available in a computerized format using TestGen

EQ test-generating software.

The Test Item Files help instructors easily and efficiently assess student understanding

of economic concepts and analyses. Test questions are annotated with the following

information:

Difficulty: 1 for straight recall, 2 for some analysis, 3 for complex analysis

Type: multiple-choice, true/false, short-answer, essay

Topic: the term or concept the question supports

Skill: fact, definition, analytical, conceptual

AACSB: see description that follows

Special feature in the main book: Economics in Practice

TESTGEN

The computerized TestGen package allows instructors to customize, save, and generate

classroom tests. The test program permits instructors to edit, add, or delete questions

from the Test Item Files; edit existing graphics and create new graphics; analyze test

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extensive flexibility and ease of use. It provides many options for organizing and

displaying tests, along with search and sort features. The software and the Test Item

Files can be downloaded from the Instructor’s Resource Center

(www.pearsonhighered.com/educator).

The Association to Advance Collegiate Schools of Business (AACSB)

The authors of the Test Item Files have connected select questions to the general

knowledge and skill guidelines found in the AACSB assurance of learning standards.

What Is the AACSB? AACSB is a not-for-profit corporation of educational institutions,

corporations, and other organizations devoted to the promotion and improvement of

higher education in business administration and accounting. A collegiate institution

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provide advice to help you apply AACSB assurance of learning standards.

vi Case/Fair/Oster · Principles of Microeconomics, 10th Edition

What Are AACSB Assurance of Learning Standards? One of the criteria for AACSB

accreditation is quality of the curricula. Although no specific courses are required, the

AACSB expects a curriculum to include learning experiences in areas such as the

following:

1. Communication

2. Ethical Reasoning

3. Analytic Skills

4. Use of Information Technology

5. Multicultural and Diversity

6. Reflective Thinking

Questions that test skills relevant to these guidelines are appropriately tagged. For

example, a question testing the moral questions associated with externalities would

receive the Ethical Reasoning tag.

How Can Instructors Use the AACSB Tags? Tagged questions help you measure

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educational experiences to help students achieve these skills.

Other Supplements for Instructors

In addition to the Test Item File 1 and TestGen, the following supplements are available:

TWO OTHER TEST ITEM FILES

Microeconomics Test Item File 2, by Randy Methenitis of Richland College: This

additional Test Item File contains another 2,700 machine-gradable questions based on

TIF1 but regenerated to provide instructors with fresh questions when using the book

the second year. This TIF is available in a computerized format using TestGen EQ test-

generating software.

Microeconomics Test Item File 3, by Richard Gosselin of Houston Community

College: This third Test Item File includes 1,000 conceptual problems, essay questions,

and short-answer questions. Application-type problems ask students to draw graphs

and analyze tables. The Word files are available on the Instructor’s Resource Center

(www.pearsonhighered.com/educator).

POWERPOINT® LECTURE PRESENTATION

Three sets of PowerPoint® slides, prepared by Fernando Quijano of Dickinson State

University, and his assistant Shelly Tefft, are available for instructors to use.

Preface vii

1.

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INSTRUCTOR’S RESOURCE CD-ROM

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Instructor’s Manual

Three Test Item Files

PowerPoint® presentations

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Prentice Hall has partnerships with leading providers of classroom response systems

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personalized online learning, is a key part of Case, Fair, and Oster’s integrated learning

package for the 10th edition.

viii Case/Fair/Oster · Principles of Microeconomics, 10th Edition

FOR THE INSTRUCTOR

MyEconLab is an online course management, testing, and tutorial resource. Instructors

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4. Self-authored questions using Econ Exercise Builder

Exercises use multiple-choice, graph drawing, and free-response items, many of

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Customization and Communication MyEconLab in CourseCompass™ provides

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FOR THE STUDENT

MyEconLab puts students in control of their learning through a collection of tests,

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what they learn, test their understanding, and pursue a personalized Study Plan

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the core of MyEconLab are the following features:

1. Sample Tests, two per chapter

2. Personal Study Plan

3. Tutorial Instruction

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Sample Tests Two Sample Tests for each chapter are preloaded in MyEconLab, enabling

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assignments created by their instructor.

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solutions that are keyed to other tutorial resources.

Preface ix

Tutorial Instruction Launched from many of the exercises in the Study Plan,

MyEconLab provides tutorial instruction in the form of step-by-step solutions and other

media-based explanations.

Graphing Tool A graphing tool is integrated into the Tests and Study Plan exercises to

enable students to make and manipulate graphs. This feature helps students understand

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Additional MyEconLab Tools MyEconLab includes the following additional features:

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school year of news items with links to sources for further reading and

discussion questions.

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students to quiz themselves on vocabulary from one or more chapters at a time.

5. Research Navigator (CourseCompass™ version only)—This feature offers

extensive help on the research process and provides four exclusive databases of

credible and reliable source material, including the New York Times, the Financial

Times, and peer-reviewed journals.

MyEconLab content has been created through the efforts of: Charles Baum, Middle

Tennessee State University; Sarah Ghosh, University of Scranton; Russell Kellogg,

University of Colorado–Denver; Bert G.Wheeler, Cedarville University; and Noel Lotz

and Douglas A. Ruby, Pearson Education.



Chapter1

TheScopeandMethodofEconomics

1.1 WhyStudyEconomics?

1) WhichofthefollowingisNOTlistedinthebookasareasontostudyeconomics?

A) tolearnawayofthinking

B) tounderstandsocietyandglobalaffairs

C) toexaminethedebateabouttheroleofgovernment

D) tolearnhowtomakelotsofmoney

Answer: D

Diff:1

Topic: WhyStudyEconomics?

Skill: Fact

2) Amongthefundamentalconceptsineconomicsare

A) opportunitycost.

B) marginalism.

C) efficientmarkets.

D) alloftheabove

Answer: D

Diff:1

Topic: WhyStudyEconomics?

Skill: Conceptual

A

ACSB: ReflectiveThinking

3) 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previousgenerationshaveprovided

B) thestudyofhowconsumersspendtheirincome

C) thestudyofhowbusinessfirmsdecidewhatinputstohireandwhatoutputstoproduce

D) thestudyofhowthefederalgovernmentallocatestaxdollars

Answer: A

Diff:1

Topic: WhyStudyEconomics?

Skill: Definition

4) TheriseofthemodernfactorysysteminEnglandduringthelateeighteenthandearly

nineteenthcenturiesisknownasthe

A) GreatMigration.

B) IndustrialRevolution.

C) WealthofNations.

D) DarkAges.

Answer: B

Diff:1

Topic: WhyStudyEconomics?

Skill: Fact

Copyright©2012PearsonEducation,Inc.

2Case/Fair/Oster·PrinciplesofMicroeconomics,10thEdition

5) WhichofthefollowingstatementsisNOTcorrect?

A) Economicsisabehavioral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bothindividualsandsocietiesmake

decisions.

Answer: C

Diff:1

Topic: WhyStudyEconomics?

Skill: Conceptual

A

ACSB: ReflectiveThinking

6) Thestudyofeconomics

A) 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: B

Diff:1

Topic: WhyStudyEconomics?

Skill: Definition

7) Sunkcostsare

A) coststhatcannotbeavoided,becausetheyhavealreadybeenincurred.

B) thecostsofwhatwegiveupwhenwemakeachoiceoradecision.

C) theadditionalcostsofproducinganadditionalunitofaproduct.

D) theadditionalcostsofconsuminganadditionalunitofaproduct.

Answer: A

Diff:1

Topic: WhyStudyEconomics?

Skill: Definition

8) Supposethatyoupurchasedatickettoajazzfestivalfor$100amonthago.Lastweeksomeone

invitedyoutoahockeygameonthesamenightasthejazzfestival.Youwouldmuchrathergo

tothehockeygamethanthejazzfestival.Youhavetriedunsuccessfullytosellthejazzfestival

ticket.Whichofthefollowingstatementsregardingthissituationiscorrect?

A) The$100youpaidforthejazzfestivalticketisrelevanttothedecision,asthisrepresents

theopportunitycostofattendingthehockeygame.

B) Youshouldbaseyourdecisiononwhetherornotthehockeygamewillprovideyouwith

morethan$100insatisfaction.

C) The$100youpaidforthejazzfestivalticketshouldbeirrelevantinyourdecisionmaking,

becauseitisasunkcost.

D) The$100jazzfestivalticketshouldbeirrelevantinyourdecisionmaking,becauseit

representsthemarginalcostofattendingthehockeygame.

Answer: C

Diff:2

Topic: WhyStudyEconomics?

Skill: Conceptual

A

ACSB: ReflectiveThinking

Copyright©2012PearsonEducation,Inc.

Chapter1TheScopeandMethodofEconomics3

9) 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piecesyouneedwillcostyou$25more.Themarginalcostofcompletingthecostume

is

A) $15.

B) $25.

C) $40.

D) $65.

Answer: B

Diff:2

Topic: WhyStudyEconomics?

Skill:

A

nalytical

A

ACSB:

A

nalyticSkills

10) Theconceptofopportunitycost

A) 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: B

Diff:1

Topic: WhyStudyEconomics?

Skill: Conceptual

A

ACSB: ReflectiveThinking

11) Opportunitycostis

A) 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: A

Diff:1

Topic: WhyStudyEconomics?

Skill: Definition

12) Thereasonthatopportunitycostsariseisthat

A) 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: B

Diff:1

Topic: WhyStudyEconomics?

Skill: Fact

Copyright©2012PearsonEducation,Inc.

4Case/Fair/Oster·PrinciplesofMicroeconomics,10thEdition

13) WhichofthefollowingisNOTanopportunitycostofattendingcollege?

A) thetuitionyoupay

B) theincomeyoucouldhaveearnedifyoudidntattendcollege

C) thealternativeusesofthetimeyouspendstudying

D) thecostofthefoodthatyouconsumewhileyouareattendingcollege

Answer: D

Diff:2

Topic: WhyStudyEconomics?

Skill: Conceptual

A

ACSB: ReflectiveThinking

14) Ifyourtuitionis$5,000thissemester,yourbookscost$600,youcanonlywork20ratherthan40

hoursperweekduringthe15weeksyouaretakingclassesandyoumake$15perhour,and

yourroomandboardis$3000thissemester,thenyouropportunitycostofattendingcollegethis

semesteris

A) $5,600.

B) $5,900.

C) $10,100.

D) $11,600.

Answer: C

Diff:3

Topic: WhyStudyEconomics?

Skill:

A

nalytical

A

ACSB:

A

nalyticSkills

A

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