11
37) That which we forgo, or give up, when we make a choice or a decision is known as
A) equity.
B) causation.
C) correlation.
D) opportunity cost.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
38) Scarce resources give rise to the concept of
A) efficient markets.
B) opportunity costs.
C) laissez–faire.
D) positive economics.
Topic: Why Study Economics?
Skill: Fact
Learning Outcome: Micro-1
39) Which of the following is an opportunity cost of attending college?
A) the cost of your apartment or dorm
B) the income you could have earned if you didn’t attend college
C) the cost of the food that you consume while you are attending college
D) the education you gain from attending college
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
40) If your tuition is $2,000 this semester, your books cost $400, you can only work 10 rather than 40 hours
per week during the 15 weeks you are taking classes and you make $12 per hour, and your room and
board is $4,000 this semester (same as if not attending college), then your opportunity cost of attending
college this semester is
A) $2,400.
B) $2,760.
C) $7,800.
D) $11,800.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
12
41) If your tuition is $20,000 this semester, your books cost $2,000, you can only work 10 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 $8,000 this semester (same as if not attending college), then your opportunity cost of
attending college this semester is
A) $22,000.
B) $22,150.
C) $28,750.
D) $36,750.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
42) 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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
43) You own American Sniper on DVD. The opportunity cost of watching this DVD for the fourth time
A) 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.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
44) Opportunity cost is
A) 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 above
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
13
45) Economists often refer to “good deals” as
A) profit opportunities.
B) break–even propositions.
C) efficient market outcomes.
D) those with no opportunity cost.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
46) If you can download 10 ring tones for your cell phone for $10 or you could download 11 ring tones for
your cell phone for $10.50, then the marginal cost of the eleventh ring tone is
A) $0.50.
B) $10.00.
C) $10.50.
D) $20.50.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
47) If you eat at a Las Vegas casino that charges $12 for its all you can eat buffet, then the marginal cost of
your third trip to the buffet is
A) zero.
B) $4.
C) $12.
D) $36.
Topic: Why Study Economics?
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-1
48) An efficient market is a market
A) 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.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
14
49) If information is more costly and less easily available, then usually this
A) makes markets more efficient.
B) makes markets less efficient.
C) decreases profit opportunities.
D) decreases the opportunity cost of acquiring more information.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
50) The common way of expressing the efficient market concept is
A) “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.”
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
51) Opportunity cost is
A) 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.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
52) The cost involved when choosing between alternatives is known as the
A) marginal cost.
B) sunk cost.
C) opportunity cost.
D) normative cost.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
15
53) Related to the Economics in Practice on p. 5: According to the Economics in Practice, ________ of the $10
retail value of a Barbie doll is captured in the United States.
A) none
B) 35 cents
C) $2
D) $8
Topic: Why Study Economics?: Economics in Practice
Skill: Fact
Learning Outcome: Micro-1
54) Related to the Economics in Practice on p. 5: The opportunity cost to Apple of having the hard drive
produced in Japan by Toshiba is
A) 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.
Topic: Why Study Economics?: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
55) Resources are unlimited in a wealthy society.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
56) The value of the best alternative foregone is the opportunity cost of making a decision.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
57) Opportunity costs arise due to scarce resources.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
16
58) Marginal cost refers to the incremental cost arising from a decision.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
59) A market is considered efficient if profit opportunities remain continually available.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
60) Resources are limited in both wealthy and poor societies.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
61) A basic understanding of economics is needed to be an informed citizen.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
62) Opportunity costs are another name for marginal costs.
Topic: Why Study Economics?
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
63) The phrase “there’s no such thing as a free lunch” is a common way of expressing the concept of
efficient markets.
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
64) Studying economics helps us to better understand society.
Answer: TRUE
Diff: 1
Topic: Why Study Economics?
Skill: Definition
Learning Outcome: Micro-1
17
Copyright © 2017 Pearson Education, Inc.
1.2 The Scope of Economics
1) The branch of economics that examines the functioning of individual industries and the behavior of
individual decision–making units is
A) positive economics.
B) normative economics.
C) macroeconomics.
D) microeconomics.
Topic: The Scope of Economics
Skill: Definition
Learning Outcome: Micro-1
2) Studying how the management of Hewlett Packard decides how many computers to produce and the
price to charge for its computers would be considered
A) descriptive economics.
B) empirical economics.
C) microeconomics.
D) macroeconomics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
3) Studying how Joshua allocates his time between school and video games is an example of
A) macroeconomics.
B) microeconomics.
C) industrial organization.
D) descriptive economics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
4) The study of how benefits are determined for city employees would be considered
A) microeconomics.
B) macroeconomics.
C) descriptive economics.
D) institutional economics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
18
5) Inflation and unemployment
A) 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.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
6) Microeconomics is best described as the study of
A) 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.
Topic: The Scope of Economics
Skill: Definition
Learning Outcome: Micro-1
7) Macroeconomics is best described as the study of
A) 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.
Topic: The Scope of Economics
Skill: Definition
Learning Outcome: Micro-1
8) 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?
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
19
9) 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?
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
10) We can use macroeconomic analysis to
A) 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.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
11) The rate of economic growth is a topic of microeconomics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
12) The aggregate price level is a topic of macroeconomics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
13) The rate of unemployment is a topic of microeconomics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
20
14) The rate of inflation is a topic of macroeconomics.
Topic: The Scope of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
1.3 The Method of Economics
1) Better insurance benefits increase the incentive of some individuals to work. This statement is best
described as
A) a positive statement.
B) an example of the ceteris paribus assumption.
C) a normative statement.
D) a comparative economics statement.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
2) The government should extend the duration of unemployment benefits to those workers who lost their
jobs due to outsourcing. This statement is best described as
A) an example of marginalism.
B) an example of the fallacy of composition.
C) a normative statement.
D) a positive statement.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
3) The amount of education that one has is an important factor in the determination of his or her wage
rate. This is best described as
A) a positive statement.
B) an example of the fallacy of composition.
C) a normative statement.
D) an example of marginalism.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1