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Principles of Microeconomics, 12e (Case/Fair/Oster)
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
C) to be an informed citizen
D) to learn how to make lots of money
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
2) Among the fundamental concepts in economics is (are)
A) opportunity cost.
B) marginalism.
C) efficient markets.
D) all of the above
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
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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.
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
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 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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
7) Which of the following is not one of the three fundamental concepts of economics?
A) profit maximization
B) marginalism
C) opportunity cost
D) the working of efficient markets
Topic: Why Study Economics?
Skill: Conceptual
Learning Outcome: Micro-1
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8) Suppose that you purchased a ticket to a jazz festival for $100 from an online ticket broker. Once you
arrived at the festival, you discovered that parking costs you an additional $15. In this situation, the
additional $15 you pay for parking is an example of
A) an economic loss.
B) opportunity cost.
C) marginal cost.
D) an inefficient cost.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
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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.
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
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
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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 $3,000 this semester (same as if not attending college), then your opportunity cost of attending
college this semester is
A) $5,600.
B) $5,900.
C) $10,100.
D) $11,600.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
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15) If your tuition is $25,000 this semester, your books cost $1,500, 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 $7,500 this semester (same as if not attending college), then your opportunity cost of
attending college this semester is
A) $26,500.
B) $26,800.
C) $31,000.
D) $38,500.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
16) 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 in
other 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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
17) You own the video game Grand Theft Auto V. The opportunity cost of playing this game for the second
time
A) 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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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18) That which we forgo, or give up, when we make a choice or decision is called
A) out–of–pocket cost.
B) marginal cost.
C) real cost.
D) opportunity cost.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
19) Economists often refer to risk–free ventures as
A) efficient market outcomes.
B) profit opportunities.
C) those with no opportunity costs.
D) break–even propositions.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
20) If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the
tenth DVD is
A) $4.
B) $13.
C) $14.
D) $130.
Topic: Why Study Economics?
Skill: Analytical
Learning Outcome: Micro-1
21) If you eat at a sushi restaurant that charges $20 for its all–you–can–eat sushi special, then the marginal
cost of your 10th piece of sushi is
A) zero.
B) $2.
C) $200.
D) $2,000.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
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22) A market in which profit opportunities are eliminated almost instantaneously is
A) a laissez–faire market.
B) a capitalist market.
C) a socialist market.
D) an efficient market.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
23) If information is less costly and more easily available, then usually this
A) makes markets more efficient.
B) makes markets less efficient.
C) increases profit opportunities.
D) increases the opportunity cost of acquiring more information.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
24) An efficient market is a market in which
A) 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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
25) Related to the Economics in Practice on page 5: According to the Economics in Practice, a majority of the
$10 retail value of the Barbie doll
A) 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.
Topic: Why Study Economics?: Economics in Practice
Skill: Fact
Learning Outcome: Micro-1
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26) Related to the Economics in Practice on page 5: The opportunity cost to Mattel of having its Barbie doll
assembled in China is
A) 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.
Topic: Why Study Economics?: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
27) The reasons to study economics include which of the following?
A) to be an informed citizen
B) to understand society
C) to learn a way of thinking
D) all of the above
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
28) Marginalism is
A) 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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
29) Economics is best defined as the study of
A) financial decision making.
B) how consumers make purchasing decisions.
C) choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
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30) The Industrial Revolution refers to the rise of the modern factory system in ________ during the late
eighteenth and early nineteenth centuries.
A) the United States
B) England
C) France
D) Germany
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
31) 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.
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
32) Economics is the study of
A) 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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
33) You decide to go to LEGOLAND after you visit Disneyworld in Orlando. The cost of going to
LEGOLAND after you visit Disneyworld is the ________ cost of getting from Disneyworld to
LEGOLAND.
A) efficiency
B) marginal time and money
C) opportunity
D) profit–maximizing
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
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34) Suppose that you sign up for a one–day cooking class at the local culinary school for $75. Once you
arrive 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 of
A) an inefficient cost.
B) marginal cost.
C) opportunity cost.
D) an economic loss.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
35) You have decided that you want to attend a renaissance fair as King Henry VIII. You estimate that it
will cost $80 to assemble your costume. After spending $80 on the costume, you realize that the
additional pieces you need will cost you $20 more. The marginal cost of completing the costume is
A) $20.
B) $60.
C) $80.
D) $100.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
36) You have narrowed down your Friday night plans to either going bowling or playing billiards. If you
choose to go bowling, then for you playing billiards is the ________ of going bowling.
A) opportunity cost
B) marginal cost
C) empirical cost
D) variable cost
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1