Test Item File to Accompany

Principles of
Macroeconomics - Test
Item File 1
Ninth Edition

by

Case / Fair / Oster

Prentice Hall
c.2009
10/29/08

Contents


1 MultipleChoice
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andglobalaffairs
C) tobeaninformedvoter D) tolearnhowtomakelotsofmoney
Answer: D
Diff:1
Topic: WhyStudyEconomics?
Skill: Fact
2) Amongthefundamentalconceptsineconomicsare
A) opportunitycost. B) marginalism.
C) efficientmarkets. D) alloftheabove
Answer: D
Diff:1
Topic: WhyStudyEconomics?
Skill: Fact
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
Answer: A
Diff:2
Topic: WhyStudyEconomics?
Skill: Definition
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.

D) theadditionalcostsofconsuminganadditionalunitofaproduct.
Answer: A
Diff:2
Topic: WhyStudyEconomics?
Skill: Definition
8) Supposethatyoupurchasedatickettoajazzfestivalfor$100amonthago.Lastweek
someoneinvitedyoutoahockeygameonthesamenightasthejazzfestival.Youwouldmuch
rathergotothehockeygamethanthejazzfestival.Youhavetriedunsuccessfullytosellthe
jazzfestivalticket.Whichofthefollowingstatementsregardingthissituationiscorrect?
A) The$100youpaidforthejazzfestivalticketisrelevanttothedecision,asthisrepresents
theopportunitycostofattendingthehockeygame.
B) Youshouldbaseyourdecisiononwhetherornotthehockeygamewillprovide
youwith
morethan$100insatisfaction.
C) The$100youpaidforthejazzfestivalticketshouldbeirrelevantinyourdecision
making,becauseitisasunkcost.
D) The$100jazzfestivalticketshouldbeirrelevantinyourdecisionmaking,becauseit
representsthemarginalcostofattendingthehockeygame.
Answer: C
Diff:2
Topic: WhyStudyEconomics?
Skill: Conceptual
A
ACSB: ReflectiveThinking
2
9) YouhavedecidedthatyouwanttoattendacostumepartyasIronman.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: Definition
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.
Answer: B
Diff:1
Topic: WhyStudyEconomics?
Skill: Fact
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didnʹt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
Answer: D
Diff:3
Topic: WhyStudyEconomics?
Skill: Conceptual
A
ACSB: ReflectiveThinking
3
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$3000thissemester,thenyouropportunitycostofattendingcollege
thissemesteris
A) $5,600. B) $5,900. C) $10,100. D) $11,600.
Answer: C
Diff:3

Answer: B
Diff:2
Topic: WhyStudyEconomics?
Skill: Conceptual
A
ACSB: ReflectiveThinking
17) YouowntheStarWarssixDVDset.TheopportunitycostofwatchingtheseDVDsforthe
secondtime
A) iszero.
B) isone
-
halfthecostoftheDVDs,asthisisthesecondtimeyouhavewatchedit.
C) isthevalueofthealternativeuseofthetimeyouspendwatchingthe
DVDs.
D) cannotbecalculated.
Answer: C
Diff:2
Topic: WhyStudyEconomics?
Skill: Conceptual
A
ACSB: ReflectiveThinking
4
18) Thatwhichweforgo,orgiveup,whenwemakeachoiceordecisioniscalled
A) sunkcost. B) marginalcost.
C) realcost. D) opportunitycost.
Answer: D
Diff:1
Topic: WhyStudyEconomics?
Skill: Definition
19) Coststhatcannotbeavoided,regardlessofwhatisdoneinthefuture,becausetheyhave

A) alaissez
-
fairemarket. B) acapitalistmarket.
C) asocialistmarket. D) anefficientmarket.
Answer: D
Diff:2
Topic: WhyStudyEconomics?
Skill: Definition
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.
Answer: A
Diff:3
Topic: WhyStudyEconomics?
Skill: Conceptual
A
ACSB: ReflectiveThinking
5
24) Anefficientmarketisamarket
A) inwhicheveryonealwaysgetswhattheywant.
B) inwhichprofitopportunitiesareeliminatedalmostinstantaneously.
C) inwhichprofitsarealwaysveryhighandpersistent.
D) inwhichopportunitycostsarezero.
Answer: B
Diff:2
Topic: WhyStudyEconomics?
Skill: Definition
25) RelatedtotheEconomicsinPractice onp.6:Whichoneofthefollowingbestsupportsthe

from
partsmadeintheUnitedStatesandothercountries.
Answer: D
Diff:3
Topic: WhyStudyEconomics?:EconomicsinPractice
Skill:
A
nalytic
A
ACSB:
A
nalyticSkills
2 True/False
1) Resourcesareunlimitedinawealthysociety.
Answer: FALSE
Diff:1
Topic: WhyStudyEconomics?
Skill: Fact
6
2) Thevalueofthebestalternativeforegoneistheopportunitycostofmakingadecision.
Answer: TRUE
Diff:1
Topic: WhyStudyEconomics?
Skill: Definition
3) Opportunitycostsariseduetoscarceresources.
Answer: TRUE
Diff:1
Topic: WhyStudyEconomics?
Skill: Fact
4) Sunkcostsdonotaffectmarginaldecisionmaking.

Skill: Conceptual
A
ACSB: ReflectiveThinking
7
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.
Answer: B
Diff:1
Topic: TheScopeofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
4) Thestudyofhowbenefitsaredeterminedforcityemployeeswouldbeconsidered
A) microeconomics. B) macroeconomics.
C) descriptiveeconomics. D) institutionaleconomics.
Answer: A
Diff:1
Topic: TheScopeofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
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.
Answer: D
Diff:1
Topic: TheScopeofEconomics
Skill: Fact
2 True/False

C) anormativestatement. D) descriptiveeconomics.
Answer: D
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
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) Marxistideology.
C) anormativestatement. D) descriptiveeconomics.
Answer: A
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
4) Thecostinvolvedwhenchoosingbetweenalternativesisknownasthe
A) marginalcost. B) sunkcost.
C) opportunitycost. D) normativecost.
Answer: C
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
9
5) Positiveeconomicsisanapproachtoeconomicsthat
A) seekstounderstandbehaviorandtheoperationofsystemswhilemakingjudgments
abouttheirusefulnesstosociety.
B) analyzesoutcomesofeconomicbehavior,evaluatesthemasgoodorbad,andmay
prescribepreferredcoursesofaction.

Skill: Conceptual
A
ACSB: ReflectiveThinking
8) Whichofthefollowingisapositivequestion?
A) Willthelevelofteenageunemploymentincreaseiftheminimumwageisincreased?
B) Shouldtheminimumwagebesetatone
-
halftheaveragemanufacturingwageto
guaranteeindividualsadecentstandardofliving?
C) Wouldnʹtitbemoreequitableiftheminimumwageincreased
automaticallywiththe
costofliving?
D) Wouldnʹtitbebettertotrytoincreasepeopleʹswagesthroughjob
-
trainingprograms
ratherthanbyrequiringemployerstopayminimumwages?
Answer: A
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
10
9) HealthinsuranceshouldbeprovidedtoeverycitizeninawealthynationsuchastheUnited
States.Thisstatementisbestdescribedas
A) apositivestatement. B) anormativestatement.
C) adescriptiveeconomicsstatement. D) animplicationofanefficientmarket.
Answer: B
Diff:2
Topic: TheMethodofEconomics

industry.
C) triestounderstandtherelationshipbetweenthepriceofimportedagriculturalproducts
andthe
levelofemploymentintheU.S.farmingindustry.
D) triestodetermineifthereareanyregularpatternsintheemploymentlevelsinthe
farmingindustryandthenmakesgeneralizationsfromthesepatterns.
Answer: A
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
11
RefertoScenario1.1belowtoanswerthequestionsthatfollow.
SCENARIO1.1:Aneconomistwantstounderstandtherelationshipbetweenminimumwagesandthelevel
ofteenageunemployment.Theeconomistcollectsdataonthevaluesoftheminimumwageandthelevels
ofteenageunemploymentovertime.Theeconomistconcludesthat
a1%increaseinminimumwagecauses
a0.2%increaseinteenageunemployment.Fromthisinformationheconcludesthattheminimumwageis
harmfultoteenagersandshouldbereducedoreliminatedtoincreaseemploymentamongteenagers.
13) RefertoScenario1.1.Thestatementthata1%increaseintheminimumwagecauses
a0.2%
increaseinteenageunemploymentisanexampleof
A) descriptiveeconomics. B) normativeeconomics.
C) positiveeconomics. D) Marxisteconomics.
Answer: C
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A

ACSB: ReflectiveThinking
12
17) RefertoScenario1.1.Agraphofthevalueoftheminimumwageononeaxisandthelevelof
teenageunemploymentontheotheraxisisanexampleof
A) aneconomictheory. B) aneconomicmodel.
C) inductivereasoning. D) avariabletheory.
Answer: B
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
18) Toisolatetheimpactofonesinglefactor,economistsinvoketheassumptionof
A) inductivereasoning. B) Ockhamʹsrazor.
C) ceterisparibus. D) posthoc,ergoprompterhoc.
Answer: C
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
19) Theprinciplethatirrelevantdetailshouldnotbeincludedinamodelisknownas
A) SayʹsIdentity. B) ceterisparibus.
C) Ockhamʹsrazor. D) Hobsonʹschoice.
Answer: C
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
20) Economistsusethephraseʺceterisparibusʺtoexpresstheassumption
A) ʺallelseequal.ʺ B) ʺeverythingaffectseverythingelse.ʺ
C) ʺscarcityisafactoflife.ʺ D) ʺthereisnosuchthingasafreelunch.ʺ
Answer: A

paribusfallacy.
Answer: B
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
24) IhavelivedinahouseontheMississippiRiverformanyyearsandhaveneverseenaflood.
Therefore,thereisnoreasonforanyonetobuyfloodinsurance.Thisstatementisanexample
of
A) fallacyofcomposition. B) posthoc,ergoprompterhocfallacy.
C) fallacyofinductivereasoning. D) ceterisparibusfallacy.
Answer: A
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
25) TheeconomywasexpandingduringalloftheyearsthatIwasastudent,butassoonasI
graduated,theeconomycontracted.Therefore,thelabormarketwaswaitinguntilIstarted
lookingforajobtocontract.Thisstatementisanexampleof
A) ceterisparibusfallacy. B) posthoc,ergoprompterhocfallacy.
C) fallacy
ofcomposition. D) fallacyofinductivereasoning.
Answer: B
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking

29) Redistributionofincomefromtherichtothepoorisachievedfromataxsystemthatrequires
taxestorisewithincome.Whichofthefollowingcriteriabestexplainsthegoalofthistax
system?
A) efficiency B) equity C) growth D) stability
Answer: B
Diff:3
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
30) Youknowthatthecomputerlabatschoolgetsverycrowdedatabout3:00p.m.Toavoidthe
crowds,youstartgoingtothecomputerlabonehourearliereveryday.Howevermany
studentsmakethesamedecision,andnowthecomputerlabbecomesverycrowdedat2:00
p.m.Thisisan
exampleofthe
A) posthoc,ergoprompterhocfallacy. B) ceterisparibusfallacy.
C) fallacyofdivision. D) fallacyofcomposition.
Answer: D
Diff:3
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
15
31) Italwaysrainsaboutanhourafteryoufinishwashingyourcar.Concludingthatwashing
yourcarcausedittorainisanexampleofthe
A) fallacyofcomposition. B) posthoc,ergoprompterhocfallacy.
C) fallacyofinductivereasoning. D) ceterisparibusconditions.
Answer: B
Diff:2

C) fallacyofceterisparibus. D) posthoc,ergoprompterhocfallacy.
Answer: D
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
35) Twovariablesaresaidtobe________ifonevariablechangeswhentheothervariablechanges.
A) causallyrelated B) correlated
C) statisticallyrelated D) dependent
Answer: B
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
16
36) Thefallacyofcompositionis
A) thebeliefthatifEventAhappensbeforeEventBhappens,thenEventAcausesEventB
tooccur.
B) thebeliefthatwhatistrueforthewholeisnecessarilytrueoftheparts.
C) thebeliefthatwhatistrueforapartisnecessarilytrueforthe
whole.
D) thebeliefthatitisimpossibletodrawgeneralizationsaboutcauseandeffect.
Answer: C
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
37) Thecollectionanduseofdatatotesteconomictheoriesis
A) empiricaleconomics. B) descriptiveeconomics.
C) normativeeconomics. D) positiveeconomics.
Answer: A
Diff:2
Topic: TheMethodofEconomics

Skill: Fact
17
41) Thefourcriteriathatarefrequentlyusedinjudgingtheoutcomeofeconomicpolicyare
A) efficiency,equity,stability,andeconomicgrowth.
B) efficiency,equality,stability,andeconomicgrowth.
C) efficiency,equality,profitability,andstability.
D) efficiency,equity,profitability,andstability.
Answer: A
Diff:1
Topic: TheMethodofEconomics
Skill: Fact
42) Youhavenoticedthatthereisanincreaseinthenumberofhomelesspeopleinyourcity.At
thesametimeyouobservethattherearealsoanumberofvacantapartments.Youbelievethat
thegovernmentcouldreducethenumberofhomelesspeopleiflandlordswererequiredto
renttheirapartments
forlessthantheyarecurrentlycharging.Thispolicyrecommendation
wouldbemotivatedbyconcernsover
A) efficiency. B) equity.
C) economicgrowth. D) stability.
Answer: B
Diff:3
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
43) Thereisapossibilitythatanationalsalestaxwillbeimplemented.Manyeconomistsargue
thatitemssuchasfoodandclothingshouldbeexemptfromsuchataxbecauselow
-
income
peoplespendagreaterpercentageoftheirincomeonthesegoodsthandohigh

Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
2 True/False
1) Normativeeconomicslooksatoutcomesofeconomicbehaviorandevaluatesthemasgoodor
bad.
Answer: TRUE
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
2) Positiveeconomicslooksatoutcomesofeconomicbehaviorandevaluatesthemasgoodor
bad.
Answer: FALSE
Diff:2
Topic: TheMethodofEconomics
Skill: Conceptual
A
ACSB: ReflectiveThinking
3) Anefficienteconomyisonethatproduceswhatconsumersdemandanddoessoattheleast
possiblecost.
Answer: TRUE
Diff:2
Topic: TheMethodofEconomics
Skill: Definition
4) ʺCeterisparibusʺliterallytranslatedmeans,ʺbuyerbeware.ʺ
Answer: FALSE

C) eitheranegativeorapositive D) aninverse
Answer: B
Diff:2
Topic:
A
ppendix:HowtoReadandUnderstandGraphs
Skill:
A
nalytic
A
ACSB:
A
nalyticSkills
20
RefertotheinformationprovidedinFigure1.2belowtoanswerthequestionsthatfollow.
Figure1.2
2) RefertoFigure1.2.TheslopeofthelinebetweenPoints
A
andB is
A) 0.4. B) 1.2.
C) 2.5. D) indeterminatefromthisinformation.
Answer: A
Diff:2
Topic:
A
ppendix:HowtoReadandUnderstandGraphs
Skill:
A
nalytic
A

Diff:2
Topic:
A
ppendix:HowtoReadandUnderstandGraphs
Skill:
A
nalytic
A
ACSB:
A
nalyticSkills
5) RefertoFigure1.3.TheslopeofthelinebetweenPointsB andD is
A)
-
0.33. B)
-
3. C) 0.33. D) 3.
Answer: D
Diff:2
Topic:
A
ppendix:HowtoReadandUnderstandGraphs
Skill:
A
nalytic
A
ACSB:
A
nalyticSkills
6) RefertoFigure1.3.TheslopeofthelinebetweenPointsDandC is

ACSB:
A
nalyticSkills
22
8) RefertoFigure1.3.AtPoint
A
,
whatisthevalueof
Y
?
A) 10. B) 12.
C) 15. D) indeterminatefromthisinformation
Answer: B
Diff:2
Topic:
A
ppendix:HowtoReadandUnderstandGraphs
Skill:
A
nalytic
A
ACSB:
A
nalyticSkills
9) RefertoFigure1.3.AtPoint
A
theslopeofthelineis3,soatPointD theslopewouldbe
A) greaterthan3. B) lessthan3.
C) equalto3. D) indeterminatefromthisinformation.
Answer: C

23