TEST BANK Macroeconomics 4th Canadian Edition Paul Krugman; Robin Wells, Iris Au and Jack Parkinson (CHAPTERS 1-18)
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Microeconomics
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Microeconomics
Test Bank for Macroeconomics 4th Canadian Edition Paul Krugman; Robin Wells, Iris Au and Jack Parkinson (CHAPTERS 1-18)
Macroeconomics, Canadian Edition Test Bank / Macroeconomics Fourth Canadian Edition Test Bank.
9781319245474, 9781319331559 Test Bank / Krugman 14E Test Bank For Macroeconomics.
Part 1: What Is Economics? Introduction An Engine for Growth and
Discovery Chapter 01: First Principles
Indicate the answer choice that best completes the statement or answers the question.
Answers Key are available at the End of Every Chapter
1. A trade-off occurs when:
a. a firm decides to produce soap instead of shampoo.
b. governments use taxes to transfer incomes to lower income earners.
c. universities select applicants for admission.
d. a farm uses a machine, instead of a horse and plow, to till the soil.
2. Scarcity exists when:
a. making choices among two or more alternatives is unnecessary (i.e., there is no opportunity cost).
b. individuals can have as much of any good as they wish without giving up anything else.
c. individuals can have more of a good only by giving up something else.
d. the trade-off that arises because resources are limited is not a consideration.
3. Which statement presents one of the five principles for understanding how individual choices interact?
a. There are only marginal gains from trade.
b. Markets move toward equilibrium.
c. Resources should be used as efficiently as possible to achieve individual goals.
d. Overall spending sometimes gets out of line with the economy’s productive capacity.
4. If all of the opportunities to make someone better off (without making someone else worse off) have been
exploited, an economy is
a. equitable.
b. inefficient.
c. marginally optimal.
d. efficient.
5. A precipitous decline in spending often leads to:
a. a recession.
b. equity.
c. equilibrium.
d. efficiency.
6. King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You
buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The
opportunity cost of the burrito is:
a. $5.
b. your forgone enjoyment of the taco.
c. $5 and your forgone enjoyment of the taco.
d. $5 and your forgone enjoyment of the taco and the nachos.
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, 7. Suppose one parent picks up his child from day care, while the other parent stays home to make dinner. This
is an example of the principle that:
a. markets move toward equilibrium.
b. government policies can change spending.
c. there are gains from trade.
d. markets usually lead to efficiency.
8. Suppose schools in the province of Nova Scotia offered cash bonuses to students who scored high on the
provincial standardized exams (Nova Scotia Examinations, taken in grade 10 covering mathematics and
English). The cash bonuses are motivated by which economic principle?
a. Choices are necessary because resources are scarce.
b. The true cost of something is its opportunity cost.
c. “How much” is a decision at the margin.
d. People usually respond to incentives, exploiting opportunities to make themselves better off.
9. Savannah’s grandparents are excited about finally paying off their car because, as they say, “Our cost of
driving is now zero.” Savannah should explain to them the economic concept of:
a. marginal analysis: if the additional cost of driving is zero, then their additional benefit is also zero.
b. opportunity cost: by driving the car, they are giving up the opportunity to sell it, buy a smaller one, and
pocket the difference.
c. efficiency: if their cost of driving is now zero, they should let Savannah and her sisters drive the car
whenever they want. Savannah is better off, and her grandparents aren’t hurt.
d. equity: it is unfair that some people are still paying their car loans, while others are not.
10. Tara had a DVD rental shop, but the store went out of business because no one rents DVDs from stores
anymore. Which economic principle does this statement BEST represent?
a. Choices are necessary because resources are scarce.
b. People usually respond to incentives, exploiting opportunities to make themselves better off.
c. Markets move toward equilibrium.
d. One person’s spending is another person’s income.
11. The penthouse apartment in most high-rise apartment buildings usually costs more to rent than other
apartments. This BEST illustrates the economic concept of:
a. specialization.
b. scarcity.
c. equilibrium.
d. opportunity cost.
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,12. When markets don’t achieve efficiency:
a. they achieve equity.
b. the government must be intervening in the economy.
c. the government may intervene to improve society’s welfare.
d. they also don’t achieve equity.
13. In most cases, economic efficiency is achieved through:
a. incentives built into a market economy.
b. increasing bank regulations.
c. individuals choosing between opportunities that involve no risk.
d. maximizing the utility of equity.
14. People who live in small cities decide to spend more money in the course of their day-to-day activities. This
will MOST likely lead to:
a. less income for other people
b. more income for other people.
c. no impact on other people.
d. inflation.
15. Individuals gain from trade because:
a. of specialization in production.
b. they can sell at a higher price than they can buy the good itself.
c. self-sufficiency is the most efficient means of exchange.
d. of the principle of absolute advantage.
16. The interaction of individual choices underlies which economic principle?
a. Choices are necessary because resources are scarce.
b. There are gains from trade.
c. “How much” is a decision at the margin.
d. People usually respond to incentives, exploiting opportunities to make themselves better off.
17. If an economy is efficient:
a. all goods are produced at their maximum price and quality.
b. all opportunities to make people better off without making other people worse off have been
exploited.
c. resources are still available to produce specific consumer goods that are more desirable.
d. prices are the lowest they can possibly be.
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, 18. Given that people usually exploit opportunities to make themselves better off, which method of energy
conservation is likely to be MOST effective?
a. appealing to individuals to be good citizens
b. asking citizens to voluntarily reduce their energy consumption
c. imposing a per-unit tax on energy consumption
d. advertising the negative environmental impact of overuse of energy
19. The problem of scarcity applies to:
a. all countries, regardless of income levels.
b. advanced economies, since they have high income levels.
c. developing nations, as they do not have to sufficient resources to break the poverty cycle.
d. countries that lack large deposits of natural resources.
20. A decrease in efficiency means that an economy has:
a. reduced its opportunity costs.
b. decreased the equity of its distribution of goods and services.
c. made more people worse off without making others better off.
d. decreased the incentives of its citizens to follow their own self-interest.
21. Annabeth promises to do Eugenie’s taxes, and in exchange, Eugenie will set up several spreadsheets for
Annabeth’s household budget. This trade will MOST likely:
a. benefit both individuals.
b. hurt both individuals.
c. help Annabeth but hurt Eugenie.
d. help Eugenie but hurt Annabeth.
22. Which of the following questions would NOT involve marginal analysis?
a. How many minutes should I train at the gym?
b. How many workers should I fire?
c. What is an acceptable rate of absorption of a new medicine into the bloodstream?
d. Should I attend the Blue Jays game?
23. In the Okanagan-Similkameen Valley, British Colombia, apple production is limited by the number of
hectares available for agricultural production. Which economic concept does this statement BEST represent?
a. scarcity
b. marginal analysis
c. equilibrium
d. opportunity cost
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