Exam (elaborations)
Test Bank For Principles of Macroeconomics 2nd Edition by Betsey Stevenson; Justin Wolfers Chapter 1-23
Test Bank For Principles of Macroeconomics 2nd Edition by Betsey Stevenson; Justin Wolfers Chapter 1-23
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Name: Class: Date:Test Bank For
Principles of Macroeconomics 2th Edition by Betsey Stevenson; Justin Wolfers
Chapter 1-23
chapter 1
Indicate the answer choice that best completes the statement or answers the question.
1. Carolyn is a junior in college studying economics. She has created a new software application that applies the
four principles of economic decision making to any potential decision that a user may face. She is considering
leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of
these costs when calculating the opportunity costs of leaving college EXCEPT the:
a. time she will spend working on the app instead of
studying.
b. 90 credit hours she has already completed for her
degree.
c. tuition costs she has already paid to her college.
d. skills she may gain from her final year of economics
courses.
2. You like to read GQ (Gentlemen's Quarterly) and Golf Digest. You have only $6 to spend and can buy only
one magazine, so you buy only Golf Digest. Which economic concept does this statement BEST represent?
a. scarcity
b. equilibrium
c. the marginal
principle
d. specialization
3. A social media influencer is quickly gaining followers, and he's offered his first brand deals. Each deal offers
a $175 payment. In exchange, the influencer must advertise the brand by creating posts and responding to
comments. To have time for each deal, the influencer must give up additional time working at his primary job.
For the first brand deal, his total foregone earnings are $150. For the second and third brand deals, his total
foregone earnings are $375 and $675, respectively. How many brand deals should he accept?
a. zero
b. one
c. two
d. thre
e
4. A choice made using the marginal principle:
a. involves distinguishing between microeconomics and
macroeconomics.
b. is an analysis of costs, benefits, and trade-offs.
c. is a choice regarding whether to do a little more or a little less of an
activity.
d. involves comparing the costs and benefits of an activity.
,Name: Class: Date:
5. Gary is willing to pay $700 for a new iPad. The Apple Store is selling a new iPad for $600. It costs Apple
$400 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad?
a. $70
0
b. $60
0
c. $20
0
d. $10
0
6. Consider your decision to attend class each day or skip it. Which of the four core principles of economics
applies to the notion that by attending class you are not doing the next best activity you would prefer to do, such
as napping or going to the gym?
a. the cost-benefit principle
b. the opportunity cost
principle
c. the marginal principle
d. the interdependence
principle
7. Jeni is deciding the direction she wants to take her business, Jeni's Ice Cream, over the course of the next
year. She could develop a new flavor of ice cream to sell in grocery stores, or she could open a new company-
owned location. The cost of research, development, and bringing the new flavor to market would be $200,000.
Jeni spent $75,000 developing the last new flavor profile, which was unsuccessful. If she doesn't develop the
new flavor, the start-up cost for the new store location would be $50,000. Over the course of the next year,
operating costs for already existing locations will be $100,000. What is Jeni's opportunity cost of developing a
new ice cream flavor?
a. $150,00
0
b. $100,00
0
c. $200,00
0
d. $75,000
8. The cost-benefit principle states that a decision should be pursued only if the:
a. benefits are greater than the
costs.
b. costs are greater than the
benefits.
c. benefits are positive.
d. costs are negative.
9. In Saskatchewan, there has been a drought, and rural communities are fighting with urban areas over water.
Which economic concept does this statement BEST represent?
a. Scarcity
b. specializatio
,Name: Class: Date:
n
c. Incentives
d. equilibrium
10. Ron is buying jeans online and has to decide how many to buy. He should buy an additional pair if the:
a. marginal benefit of the next pair is less than the price of the jeans.
b. marginal benefit of the next pair is at least as high as the price of the jeans.
c. total benefit when purchasing one more pair is less than the total cost of the
jeans.
d. total benefit when purchasing one more pair is at least as high as the total cost of
the jeans.
11. The study of economics arises because of the necessity of choice, and the necessity of choice arises because
of the fundamental problem of:
a. inefficiency
.
b. equilibrium
.
c. inequity.
d. scarcity.
12. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring
efficient management of costs. In the past, if Nissan devoted all of its resources to manufacturing sedans, it
could produce 480,000 sedans per year at one manufacturing plant. If Nissan devoted all of its resources to
manufacturing trucks, it could produce 240,000 trucks per year. A new production technique now allows Nissan
to produce either 600,000 sedans or 360,000 trucks per year. How would Nissan's production possibilities
frontier reflect this new production technique?
a. A movement along the production possibilities frontier to manufacture more
sedans.
b. A movement along the production possibilities frontier to manufacture more
trucks.
c. An inward shift of the production possibilities frontier.
d. An outward shift of the production possibilities frontier.
13. While buying refreshments for an upcoming party, you notice that a six-pack of Labatt Blue beer costs $4
and that a six-pack of Moosehead beer costs $8. You buy the six-pack of Moosehead, although you wonder if
maybe two six-packs of Labatt Blue would have been a better choice. The opportunity cost of the Moosehead
beer is:
a. $8.
b. a six-pack of Labatt Blue.
c. two six-packs of Labatt Blue.
d. $8 and the six-pack of Labatt
Blue.
14. Nerida is thinking of buying a new car to avoid taking the bus to work. Each of these is a cost she should
consider when using the cost-benefit principle to evaluate this decision EXCEPT:
a. parking.
, Name: Class: Date:
b. car
insurance.
c. bus fare.
d. repairs.
15. There are many freshwater lakes in the United States. However, freshwater is scarce because:
a. it has no alternative uses.
b. there is not enough of it to meet all needs.
c. the government limits its use through
regulations.
d. it has a high opportunity cost.
16. Charles is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15
drinks that sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in
a single hour. The marginal benefit of each additional worker decreases by three drinks with each additional
hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles
hire for each hour?
a. Thre
e
b. Four
c. Five
d. Six
17. Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is
interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this
particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and
Samantha because _____ positive economic surplus from the transaction.
a. occurs; both Ivan and Samantha receive
b. occurs; only Samantha receives
c. does not occur; only Ivan receives
d. does not occur; neither Ivan nor Samantha
receives
18. Decisions should reflect the _____ costs, rather than just the _____ costs.
a. financial; marginal
b. opportunity;
nonfinancial
c. opportunity; financial
d. nonfinancial; financial
19. An investor is franchising a new type of fitness studio that will be the first in the city and must determine
how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and
two part-time employees who will earn $1,500 each per month. Additional operating costs, including rent and
utilities, will be $5,000 per month at each location. The investor projects that after the business gains traction,
the first location will have 1,100 members. The second location will bring in 900 members. The third and fourth
locations will bring in 400 and 200 members, respectively. The monthly membership fee will be $50 per
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