Test Bank for Principles of Microeconomics 10e 10th Edition by N. Gregory Mankiw. Full Chapters test bank are included with answers - Chapter 1 to 24
Part I: INTRODUCTION.
1. Ten Principles of Economics.
2. Thinking Like an Economist.
Appendix: Graphing: A Brief Review.
3. Interdependence an...
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Chap 01 10e Micro
Indicate whether the statement is true or false.
1. Trade can make everyone better off except in the case where one person is better at doing everything.
a. True
b. False
2. Trade with any nation can be mutually beneficial.
a. True
b. False
3. Market failure occurs when no individual has the ability to substantially influence market prices.
a. True
b. False
4. Economics is exclusively the study of how evenly goods and services are distributed within society.
a. True
b. False
5. Inflation increases the value of money.
a. True
b. False
6. Equality means distributing society’s resources in the most efficient manner.
a. True
b. False
7. If wages for accountants rose, then accountants’ leisure time would have a lower opportunity cost.
a. True
b. False
8. Economists study how people make decisions.
a. True
b. False
9. Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.
a. True
b. False
10. The opportunity cost of working out for one hour is the value of the next-best activity that you could have done
in that hour.
a. True
b. False
11. Market failure refers to a situation in which the market does not allocate resources efficiently.
a. True
b. False
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Chap 01 10e Micro
12. One way that governments can improve market outcomes is to ensure that individuals are able to own and
exercise control over their scarce resources.
a. True
b. False
13. If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be
irrational for the railroad to allow any passenger to ride for less than $75.
a. True
b. False
14. The business cycle refers to fluctuations in economic activity such as employment and production.
a. True
b. False
15. In the long run the primary effect of increasing the quantity of money is higher prices.
a. True
b. False
16. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
a. True
b. False
17. The "invisible hand" influences market behavior through trade.
a. True
b. False
18. With careful planning, we can usually get something that we like without having to give up something else that
we like.
a. True
b. False
19. The invisible hand ensures that economic prosperity is distributed equally.
a. True
b. False
20. Inflation is the primary determinant of a country's living standards.
a. True
b. False
21. Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.
a. True
b. False
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,Name: Class: Date:
Chap 01 10e Micro
22. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's
productivity.
a. True
b. False
23. A market economy cannot produce a socially desirable outcome because individuals are motivated by their own
selfish interests.
a. True
b. False
24. Inflation and unemployment both increase as the money supply increases.
a. True
b. False
25. To say people respond to incentives means that people may alter their decisions when the costs and benefits of
an action change.
a. True
b. False
26. The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are
willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.
a. True
b. False
27. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of
that activity.
a. True
b. False
28. The government can potentially improve market outcomes if market inequalities or market failure exists.
a. True
b. False
29. Market power and externalities are two possible causes of market failure.
a. True
b. False
30. Productivity is defined as the quantity of goods and services produced from each unit of labor input.
a. True
b. False
31. In the short-run, society faces a tradeoff between inflation and unemployment.
a. True
b. False
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Chap 01 10e Micro
32. Inflation measures the increase in the quantity of goods and services produced from each hour of a worker’s
time.
a. True
b. False
33. A marginal change is a small incremental adjustment to an existing plan of action.
a. True
b. False
34. Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.
a. True
b. False
35. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that
raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which
results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
a. True
b. False
36. Communist countries worked on the premise that government officials were in the best position to allocate the
economy’s scarce resources.
a. True
b. False
37. A tax on gasoline is an incentive that encourages people to drive smaller and more fuel-efficient cars.
a. True
b. False
38. The opportunity cost of working one hour is the sum of the values you would have received from all other
activities you could have done in that hour.
a. True
b. False
39. An individual deciding how to allocate one's limited time is dealing with both scarcity and trade-offs.
a. True
b. False
40. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
41. The cost of an action is measured in terms of foregone opportunities.
a. True
b. False
Page 4
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