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Copyright2014PearsonEducation,Inc.
Microeconomics,11e(Parkin)
Chapter1WhatIsEconomics?

1DefinitionofEconomics

1)Alleconomicquestionsareabout
A)howtomakemoney.
B)whattoproduce.
C)howtocopewithscarcity.
D)howtosatisfyallourwants.
Answer:C
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Alleconomicquestionsarisebecausewe
A)wantmorethanwecanget.
B)wantmorethanweneed.
C)haveanabundanceofresources.
D)havelimitedwantsthatneedtobesatisfied.
Answer:A
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

3)Economicsisbestdefinedasthestudyofhowpeople,businesses,governments,andsocieties
A)chooseabundanceoverscarcity.
B)makechoicestocopewithscarcity.
C)usetheirinfiniteresources.
D)attainwealth.
Answer:B
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

4)Scarcityisasituationinwhich
A)peoplecannotsatisfyalltheirwants.
B)mostpeoplecangetonlybarenecessities.
C)peoplecansatisfyalltheirwants.
D)somepeoplecangetalltheywantandsomecannot.
Answer:A
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2
Copyright2014PearsonEducation,Inc.
5)Economistspointoutthatscarcityconfronts
A)neitherthepoornortherich.
B)thepoorbutnottherich.
C)therichbutnotthepoor.
D)boththepoorandtherich.
Answer:D
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning

6)Scarcityis
A)ourinabilitytosatisfyallourwants.
B)asituationthatexistsduringeconomicrecessionsbutnotduringeconomicbooms.
C)eliminatedbychoices.
D)aneconomicproblemonlyforpoorpeople.
Answer:A
Topic:Scarcity
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking

7)Whenaneconomisttalksofscarcity,theeconomistisreferringtothe
A)abilityofsocietytoemployallofitsresources.
B)abilityofsocietytoconsumeallthatitproduces.
C)inabilityofsocietytosatisfyallhumanwantsbecauseoflimitedresources.
D)abilityofsocietytocontinuallymaketechnologicalbreakthroughsandincreaseproduction.
Answer:C
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

8)Fundamentaleconomicproblemsbasicallyarisefrom
A)thefactthatsocietyhasmorethanitneeds.
B)turmoilinthestockmarket.
C)theunequaldistributionofincome.
D)ourwantsexceedingourscarceresources.
Answer:D
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

3
Copyright2014PearsonEducation,Inc.
9)Scarcityexistsbecause
A)societyandpeoplearegreedyandwasteful.
B)ourwantsexceedtheresourcesavailabletosatisfythem.
C)oftheinefficientchoiceswemake.
D)poorpeopleneedmorefoodandothergoods.
Answer:B
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

10)Scarcitycanbeeliminatedthrough
A)theuseofmarketmechanisms.
B)explorationthathelpsusfindnewresources.
C)wiseuseofourresources.
D)Noneoftheabovebecausescarcitycannotbeeliminated.
Answer:D
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

11)Asaneconomicconcept,scarcityappliesto
A)bothmoneyandtime.
B)moneybutnottime.
C)timebutnotmoney.
D)neithertimenormoney.
Answer:A
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

12)Ineveryeconomicsystem,choicesmustbemadebecauseresourcesare________andourwantsare
________.
A)unlimited;limited
B)limited;unlimited
C)unlimited;unlimited
D)limited;limited
Answer:B
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

4
Copyright2014PearsonEducation,Inc.
13)Theproblemofscarcityapplies
A)onlyinindustriallydevelopedcountriesbecauseresourcesarescarceinthesecountries.
B)onlyinunderdevelopedcountriesbecausetherearefewproductiveresourcesinthesecountries.
C)onlyineconomicsystemsthatarejustbeginningtodevelopbecausespecializedresourcesarescarce.
D)toalleconomicsystems,regardlessoftheirlevelofdevelopment.
Answer:D
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

14)Scarcityrequiresthatpeoplemust
A)cooperate.
B)compete.
C)trade.
D)makechoices.
Answer:D
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

15)Peoplemustmakechoicesbecause
A)mostpeopleenjoyshopping.
B)ofscarcity.
C)therearemanygoodsavailable.
D)Noneoftheaboveanswersiscorrect.
Answer:B
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

16)Anincentive
A)couldbearewardbutcouldnotbeapenalty.
B)couldbeapenaltybutcouldnotbeareward.
C)couldbeeitherarewardorapenalty.
D)istheoppositeofatradeoff.
Answer:C
Topic:Incentive
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

5
Copyright2014PearsonEducation,Inc.
17)Aninducementtotakeaparticularactioniscalled
A)themarginalbenefit.
B)themarginalcost.
C)opportunitycost.
D)anincentive.
Answer:D
Topic:Incentive
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

18)Economicsisbestdefinedas
A)howpeoplemakemoneyandprofitsinthestockmarket.
B)makingchoicesfromanunlimitedsupplyofgoodsandservices.
C)makingchoiceswithunlimitedwantsbutfacingascarcityofresources.
D)controllingabudgetforahousehold.
Answer:C
Topic:DefinitionofEconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

19)Thestudyofeconomics
A)focusesmainlyonindividualconsumers.
B)arisesfromthefactthatourwantsexceedavailableresources.
C)recognizesthatscarcitydoesnotaffectrichnations.
D)dealsmainlywithmicroeconomics.
Answer:B
Topic:DefinitionofEconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

20)Economicsisbestdefinedasthescienceofchoiceandhowpeoplecopewith
A)differencesinwants.
B)differencesinneeds.
C)scarcity.
D)differenteconomicsystems.
Answer:C
Topic:DefinitionofEconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

6
Copyright2014PearsonEducation,Inc.
21)Economicsisthestudyof
A)thedistributionofsurplusgoodstothoseinneed.
B)affluenceinamorallybankruptworld.
C)thechoiceswemakebecauseofscarcity.
D)waystoreducewantstoeliminatetheproblemofscarcity.
Answer:C
Topic:DefinitionofEconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

22)Thestudyofthechoicesmadebyindividualsispartofthedefinitionof
A)microeconomics.
B)positiveeconomics.
C)macroeconomics.
D)normativeeconomics.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

23)Inpart,microeconomicsisconcernedwith
A)howabusinessfirmdecidesupontheamountitproducesandthepriceitsets.
B)changesintheeconomystotaloutputofgoodsandservicesoverlongperiodsoftime.
C)factorsthatexplainchangesintheunemploymentrateovertime.
D)theFederalReservespolicydecisions.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

24)Thestudyofthedecisionsofindividualunitsintheeconomyisknownas
A)macroeconomics.
B)microeconomics.
C)thestudyofincentives.
D)ceterisparibusstudy.
Answer:B
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

7
Copyright2014PearsonEducation,Inc.
25)Studyingthedeterminationofpricesinindividualmarketsisprimarilyaconcernof
A)positiveeconomics.
B)negativeeconomics.
C)macroeconomics.
D)microeconomics.
Answer:D
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

26)Theanalysisofthebehaviorofindividualdecisionmakingunitsisthedefinitionof
A)microeconomics.
B)positiveeconomics.
C)macroeconomics.
D)normativeeconomics.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

27)Whichofthefollowingisamicroeconomictopic?
A)HowatradeagreementbetweentheUnitedStatesandMexicoaffectsbothnationsunemployment
rates.
B)Comparinginflationratesacrosscountries.
C)Howrentceilingsimpactthesupplyofapartments.
D)Howataxrateincreasewillimpacttotalproduction.
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

28)WhichofthefollowingquestionsisNOTamicroeconomicquestion?
A)CantheFederalReservekeepincomegrowingbycuttinginterestrates?
B)HowwouldataxonecommerceaffecteBay?
C)WhatisBritneysopportunitycostofhavinganotherbaby?
D)DoestheUnitedStateshaveacomparativeadvantageininformationtechnologyservices?
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

8
Copyright2014PearsonEducation,Inc.
29)Whichofthefollowingisanexampleofamicroeconomicdecision?
A)anindividualdecidinghowtoallocatethetimeheorshehasforworkandleisure
B)asmallshoefactorydecidinghowmuchleathertopurchaseforthenextquartersproductionneed
C)amultinationalcompanydecidingwheretorelocateitsworldheadquarter
D)Alloftheaboveanswersarecorrect.
Answer:D
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

30)Whichofthefollowingisamicroeconomictopic?
A)ThereasonswhyKathybuyslessorangejuice.
B)Thereasonsforadeclineinaverageprices.
C)Thereasonswhytotalemploymentdecreases.
D)Theeffectofthegovernmentbudgetdeficitoninflation.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

31)Whichofthefollowingquestionsisatopicthatwouldbestudiedbymicroeconomics?
A)Whydidproductionandthenumberofjobsshrinkin2009?
B)Willthecurrentbudgetdeficitaffectthewellbeingofthenextgeneration?
C)Howwillalowerpriceofdigitalcamerasaffectthequantityofcamerassold?
D)WhatisthecurrentunemploymentrateintheUnitedStates?
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

32)Anexampleofaquestionthatmightbeexploredinmicroeconomicsistodetermine
A)thenumberofworkersemployedbyIntel.
B)savingsbythehouseholdsector.
C)whytheU.S.economyhasgrownmorerapidlythantheJapaneseeconomy.
D)thetotalemploymentwithintheU.S.economy.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

9
Copyright2014PearsonEducation,Inc.
33)Inpart,microeconomicsisconcernedwiththestudyof
A)unemploymentandeconomicgrowth.
B)theFederalReservespolicies.
C)theeffectgovernmentregulationhasonthepriceofaproduct.
D)nationaloutputofgoodsandservices.
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

34)Thebranchofeconomicsthatdealswiththeanalysisofthewholeeconomyiscalled
A)macroeconomics.
B)marginalanalysis.
C)microeconomics.
D)metroanalysis.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

35)Macroeconomicsisconcernedwith
A)individualconsumers.
B)governmentdecisionmakingconcerningfarmpricesupports.
C)economywidevariables.
D)theeffectsonFordMotorofastrikebytheUnitedAutoWorkers.
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

36)Macroeconomicsdiffersfrommicroeconomicsinthat:
A)macroeconomicsstudiesthedecisionsofindividuals.
B)microeconomicslooksattheeconomyasawhole.
C)macroeconomicsstudiesthebehaviorofgovernmentwhilemicroeconomicslooksatprivate
corporations.
D)macroeconomicsfocusesonthenationaleconomyandtheglobaleconomy.
Answer:D
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

10
Copyright2014PearsonEducation,Inc.
37)Whichofthefollowingisamacroeconomicdecisionorconcept?
A)thepriceofoil
B)howmanytelevisionsetstoproduce
C)theunemploymentratefortheentireeconomy
D)theunemploymentrateforeachfirm
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

38)Whichofthefollowingquestionsisamacroeconomicissue?
A)Howmanymorepoundsofcookieswillaconsumerpurchaseifthepriceofcookiesdecreases?
B)WhateffectwouldacureforMadCowDiseasehaveonthemarketforbeef?
C)Whatisthefuturegrowthprospectforaneconomy?
D)Howmanyworkersshouldtheownerofabusinesshire?
Answer:C
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

39)Inbroadtermsthedifferencebetweenmicroeconomicsandmacroeconomicsisthat
A)theyusedifferentsetsoftoolsandideas.
B)microeconomicsstudiesdecisionsofindividualpeopleandfirmsandmacroeconomicsstudiesthe
entirenationaleconomy.
C)macroeconomicsstudiestheeffectsofgovernmentregulationandtaxesonthepriceofindividual
goodsandserviceswhereasmicroeconomicsdoesnot.
D)microeconomicsstudiestheeffectsofgovernmenttaxesonthenationalunemploymentrate.
Answer:B
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

40)Whichofthefollowingisamacroeconomicissue?
A)Howariseinthepriceofsugaraffectsthemarketforsodas.
B)Howfederalgovernmentbudgetdeficitsaffectinterestrates.
C)Whatdeterminestheamountafirmwillproduce.
D)Thecauseofadeclineinthepriceofpeanutbutter.
Answer:B
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

11
Copyright2014PearsonEducation,Inc.
41)Whichofthefollowingisamacroeconomicissue?
A)Thepurchasingdecisionsthatanindividualconsumermakes.
B)Theeffectofincreasingthemoneysupplyoninflation.
C)Thehiringdecisionsthatabusinessmakes.
D)Theeffectofanincreaseinthetaxoncigarettesoncigarettesales.
Answer:B
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

42)Macroeconomictopicsinclude
A)total,nationwideemployment.
B)studyingwhatfactorsinfluencethepriceandquantityofautomobiles.
C)studyingthedeterminationofwagesandproductioncostsinthesoftwareindustry.
D)theimpactofgovernmentregulationofmarkets.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

43)Thefactthatwantscannotbefullysatisfiedwithavailableresourcesreflectsthedefinitionof
A)thewhattradeoff.
B)scarcity.
C)thebigtradeoff.
D)forwhomtoproduce.
Answer:B
Topic:StudyGuideQuestion,DefinitionofEconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

44)Studyingtheeffectschoiceshaveontheindividualmarketswithintheeconomyispartof
A)scarcity.
B)microeconomics.
C)macroeconomics.
D)incentives.
Answer:B
Topic:StudyGuideQuestion,Macroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

12
Copyright2014PearsonEducation,Inc.
45)Economicscanbedefinedasthesocialsciencethatexplainsthe________.
A)choicesmadebypoliticians
B)choiceswemakewhenwetradeinmarkets
C)choicesthatwemakeaswecopewithscarcity
D)choicesmadebyhouseholds
Answer:C
Topic:MyEconLabQuestions
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

46)Scarcityisasituationinwhich________.
A)somepeoplearepoorandothersarerich
B)somethingisbeingwasted
C)weareunabletosatisfyallourwants
D)longlinesformatgasstations
Answer:C
Topic:MyEconLabQuestions
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

47)Microeconomicsisthestudyof________.
A)thechoicesthatindividualsandbusinessesmake
B)allaspectsofscarcity
C)theglobaleconomy
D)thenationaleconomy
Answer:A
Topic:MyEconLabQuestions
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2TwoBigEconomicQuestions

1)Whenaneconomyproducesmorehousesandfewertypewriters,itisansweringthe________partof
oneofthetwobigeconomicquestions.
A)what
B)how
C)where
D)forwhom
Answer:A
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

13
Copyright2014PearsonEducation,Inc.
2)Whenfirmsinaneconomystartproducingmorecomputersandfewertelevisions,theyareanswering
the________partofoneofthetwobigeconomicquestions.
A)when
B)forwhom
C)what
D)where
Answer:C
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

3)IfTacoBelldecidestoproducemoretacosandfewerburritos,TacoBellisansweringthe________part
ofoneofthetwobigeconomicquestions.
A)what
B)why
C)when
D)scarcity
Answer:C
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

4)Whenafarmerdecidestoraisehogsinsteadofcattle,thefarmerisansweringthe________partofone
ofthetwobigeconomicquestions.
A)what
B)forwhom
C)how
D)why
Answer:A
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

5)Whenacountrydecidestoproducefewerbombersandmorepublichousingprojects,itisanswering
the________partofoneofthetwobigeconomicquestions.
A)how
B)what
C)defense
D)forwhom
Answer:B
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

14
Copyright2014PearsonEducation,Inc.
6)Whenafirmdecidestoproducemoreelectriccarsandfewergasguzzlers,itismostdirectlyanswering
the________partofoneofthetwobigeconomicquestions.
A)how
B)scarcity
C)what
D)forwhom
Answer:C
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

7)U.S.producersdecidetoproducemorecompactcarsandfewerSUVsasthepriceofgasolinerises.
Producersareansweringthe________partofoneofthetwobigeconomicquestions.
A)what
B)how
C)when
D)howmany
Answer:A
Topic:WhatGoodsandServicesAreProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

8)Whichofthefollowingstatementsiscorrect?
A)TheUnitedStatesproducesmoregoodsthanservices.
B)TheUnitedStatesproducesmoreservicesthangoods.
C)ThepercentageofpeopleproducinggoodsintheUnitedStateshassteadilyincreasedoverthelast60
years.
D)TheUnitedStatesproducesanequalamountofgoodsandservices.
Answer:B
Topic:TrendsinProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

9)IntheU.S.economy,whichofthefollowingstatementsistrue?
A)Moregoodsareproducedthanservices.
B)Moreservicesareproducedthangoods.
C)Productionisdividedevenlybetweengoodsandservices.
D)Theeconomyistoocomplextodeterminetheproportionofproductionthatisdevotedtoproducing
services.
Answer:B
Topic:TrendsinProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

15
Copyright2014PearsonEducation,Inc.
10)ThelargestpartofwhattheUnitedStatesproducestodayis________suchas________.
A)goods;foodandelectronicequipment
B)goods;educationandentertainment
C)services;tradeandhealthcare
D)services;textbooksandcomputers
Answer:C
Topic:TrendsinProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

11)WhenChinabuildsadamusingfewmachinesandagreatdealoflabor,itisansweringthe________
partofoneofthetwobigeconomicquestions.
A)what
B)how
C)where
D)forwhom
Answer:B
Topic:HowAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

12)Whenatextilecompanykeepstrackofitsinventoryusingacomputeranditscompetitorusesapad
ofpaperandapencil,theyarebothansweringthe________partofoneofthetwobigeconomic
questions.
A)what
B)how
C)forwhom
D)where
Answer:B
Topic:HowAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

13)WhenaCaliforniafarmerdecidestoharvestlettuceusingmachinesinsteadofbymigrantworkers,
thefarmerisansweringthe________partofoneofthetwobigeconomicquestions.
A)how
B)forwhom
C)scarcity
D)what
Answer:A
Topic:HowAreGoodsProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

16
Copyright2014PearsonEducation,Inc.
14)Anartmuseumdecidestooffertoursbyhavingvisitorslistentocassettetapesratherthanhavetour
guides.Themuseumisansweringthe________partofoneofthetwobigeconomicquestions.
A)scarcity
B)what
C)why
D)how
Answer:D
Topic:HowAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

15)Thefactthatpeoplewithhigherincomesgettoconsumemoregoodsandservicesaddressesthe
________partofoneofthetwobigeconomicquestions.
A)forwhom
B)when
C)where
D)how
Answer:A
Topic:ForWhomAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:EthicalReasoning

16)WhichofthefollowingisNOTafactorofproduction?
A)thewaterusedtocoolanuclearpowerplant
B)theeffortoffarmersraisingcattle
C)thewagespaidtoworkers
D)themanagementskillofasmallbusinessowner
Answer:C
Topic:FactorsofProduction
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

17)Whichofthefollowingareconsideredfactorsofproductionusedtoproducegoodsandservices?
I. Land
II. Labor
III. Capital
IV. Entrepreneurship
A)IandIIonly
B)IandIIIonly
C)I,IIandIIIonly
D)I,II,IIIandIV
Answer:D
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

17
Copyright2014PearsonEducation,Inc.
18)Whichofthefollowingiscorrect?Factorsofproductionare
A)land,labor,thepricesystem,andcapital.
B)theinputsusedtoproducegoodsandservices.
C)thefundamentalsourceofabundance.
D)onlylandandlabor.
Answer:B
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

19)Factorsofproductioninclude
A)theeconomicsystem.
B)land,labor,capitalandentrepreneurship.
C)laborandcapital(notland,whichisfixed).
D)onlycapital,land,andlabor.
Answer:B
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

20)FactorsofproductionincludeallofthefollowingEXCEPT
A)machinesmadeinpastyears.
B)money.
C)entrepreneurship.
D)awheatfieldthatisnotirrigated.
Answer:B
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

21)Factorsofproductionaregroupedintofourcategories:
A)land,labor,capital,entrepreneurship.
B)land,labor,capital,money.
C)land,capital,money,entrepreneurship.
D)labor,capital,money,entrepreneurship.
Answer:A
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

18
Copyright2014PearsonEducation,Inc.
22)WhichofthefollowingisNOTafactorofproduction?
A)vansusedbyabakerycompanyfordeliveries
B)apersondevelopingaproductionscheduleforanewproduct
C)175sharesofMicrosoftstock
D)wildernessareasthathaveyettobedeveloped
Answer:C
Topic:FactorsofProduction
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

23)Keepinginmindeconomistsdefinitionoffactorsofproduction,whichofthefollowingisNOTa
factorofproduction?
A)money
B)lowskilledlabor
C)coal
D)anengineer
Answer:A
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

24)WhichofthefollowingisNOTafactorofproduction?
A)mineralresources
B)auniversityprofessor
C)anapartmentbuilding
D)100sharesofMicrosoftstock
Answer:D
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

25)Theincomeearnedbythepeoplewhoselltheservicesofthefactorofproduction________iscalled
________.
A)capital;rent
B)entrepreneurship;wages
C)land;profit
D)entrepreneurship;profit
Answer:D
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

19
Copyright2014PearsonEducation,Inc.
26)Whichfactorofproductionearnsprofit?
A)land
B)humancapital
C)money
D)entrepreneurship
Answer:D
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

27)WhichfactorofproductionearnsmostincomeintheUnitedStates?
A)capital
B)labor
C)money
D)entrepreneurship
Answer:B
Topic:FactorsofProduction
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

28)Whichofthefollowingbestdefinescapitalasafactorofproduction?
A)Thegiftsofnaturethatbusinessesusetoproducegoodsandservices.
B)Theknowledgeandskillsthatpeopleobtainfromeducationanduseinproductionofgoodsand
services.
C)Financialassetsusedbybusinesses.
D)Instruments,machines,andbuildingsusedinproduction.
Answer:D
Topic:CapitalStock
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

29)Ineconomics,thetermlandmeans
A)onlylandthatisusedinagriculturalproduction.
B)land,mineralresources,andnaturesotherbounties.
C)landthatisdevotedtoeconomicpursuits.
D)landusedforagriculturalandurbanpurposes.
Answer:B
Topic:Land
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

20
Copyright2014PearsonEducation,Inc.
30)Anaturalresource,suchasfishingterritories,isconsideredanexampleof
A)bothlandandlabor.
B)land,labor,capitalandentrepreneurship.
C)landonly.
D)onlycapital.
Answer:C
Topic:Land
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

31)Thegiftsofnatureareincludedaspartofwhichfactorofproduction?
A)labor
B)land
C)capital
D)entrepreneurship
Answer:B
Topic:Land
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

32)Copperfallsintowhichfactorofproductioncategory?
A)land
B)labor
C)capital
D)entrepreneurship
Answer:A
Topic:Land
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

33)OvertimeworkedbyaJCPenneyassociateisconsidered________andearns________.
A)labor;wages
B)entrepreneurship;profit
C)humancapital;interest
D)labor;profit
Answer:A
Topic:Labor
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

21
Copyright2014PearsonEducation,Inc.
34)Thetermhumancapitalrefersto
A)laborresourcesusedtomakecapitalequipment.
B)buildingsandmachinery.
C)peoplesknowledgeandskill.
D)entrepreneurshipandrisktaking.
Answer:C
Topic:HumanCapital
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

35)Humancapitalis
A)allcapitalownedbyindividuals,butnotbycorporationsorgovernments.
B)allcapitalownedbyindividualsorcorporations,butnotbygovernments.
C)machinerythatmeetsorexceedsfederalsafetystandardsforusebyhumans.
D)theskillandknowledgeofworkers.
Answer:D
Topic:HumanCapital
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

36)Joyistrainingtobecomeachef.Theskillssheisobtainingfromhertrainingandeducationwill
increaseJoys________.
A)humancapital
B)physicalcapital
C)entrepreneurship
D)Noneoftheaboveanswersarecorrect.
Answer:A
Topic:HumanCapital
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

37)WhichofthefollowingisNOTaninvestmentinhumancapital?
A)abusinessstudenttakesaseminarinusingalaptopcomputer
B)astudentpurchasesalaptopcomputer
C)acomputersciencestudentlearnshowtorepairalaptopcomputer
D)acomputersciencestudenttakesacourseonprogrammingalaptopcomputer
Answer:B
Topic:HumanCapital
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

22
Copyright2014PearsonEducation,Inc.
38)Samanthagoestocollegetobecomeanengineer.Thisisanexampleofan
A)investmentinphysicalcapital.
B)investmentinhumancapital.
C)increaseinentrepreneurship.
D)increaseinlabor.
Answer:B
Topic:HumanCapital
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

39)Ineconomics,thetermcapitalrefersto
A)themoneyinonespocket.
B)buildingsandequipment.
C)mineralresources.
D)consumergoods.
Answer:B
Topic:Capital
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

40)Humanresourcesthatperformthefunctionsoforganizing,managing,andassemblingtheother
resourcesarecalled
A)physicalcapital.
B)venturecapital.
C)entrepreneurship.
D)productivecapital.
Answer:C
Topic:Entrepreneurship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

41)Theeconomicresourcethatorganizestheuseofothereconomicresourcesiscalled
A)labor.
B)capital.
C)entrepreneurship.
D)land.
Answer:C
Topic:Entrepreneurship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

23
Copyright2014PearsonEducation,Inc.
42)EntrepreneursdoallofthefollowingEXCEPT
A)organizelabor,land,andcapital.
B)comeupwithnewideasaboutwhatandhowtoproduce.
C)bearriskfrombusinessdecisions.
D)ownalltheotherresourcesusedintheproductionprocess.
Answer:D
Topic:Entrepreneurship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

43)EntrepreneursdirectlydoallofthefollowingEXCEPT
A)createnewideasaboutwhatandhowtoproduce.
B)makebusinessdecisions.
C)facerisksthatarisefrommakingbusinessdecisions.
D)decideforwhomgoodsandservicesareproduced.
Answer:D
Topic:Entrepreneurship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

44)Differencesinincomearemostdirectlyrelatedtowhichofthefollowingeconomicquestion?
A)Whatgoodsandservicesareproduced?
B)Inwhatquantitiesarevariousgoodsandservicesproduced?
C)Howaregoodsandservicesproduced?
D)Whoconsumesthegoodsandservicesthatareproduced?
Answer:D
Topic:ForWhomAreGoodsandServicesProduced?
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

45)Thefactthatsomepeoplecanaffordtoliveinbeautifulhomeswhileothersarehomeless,ismost
directlyanexampleofaneconomyfacingthe________partofoneofthetwobigeconomicquestions.
A)forwhom
B)when
C)how
D)why
Answer:A
Topic:ForWhomAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:EthicalReasoning

24
Copyright2014PearsonEducation,Inc.
46)Thefactthatarockstarearns$5millionayearwhileateacherearns$25,000annuallyismostdirectly
anexampleofaneconomyansweringthe________partofoneofthetwobigeconomicquestions.
A)when
B)forwhom
C)how
D)why
Answer:B
Topic:ForWhomAreGoodsandServicesProduced?
Skill:Conceptual
Status:Modified10thedition
AACSB:EthicalReasoning

47)Oneeconomistsaysthatraisingtaxesongaswouldbeinthesocialinterest.Whatdoesthiseconomist
mean?
A)Highertaxesongaswouldbenefitsocietyasawhole.
B)Raisingtaxesongaswouldbenefitmostofthepeople.
C)Highertaxesongaswouldbenefiteveryone.
D)BothanswersAandCarecorrect.
Answer:A
Topic:SocialInterest
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

48)Anoutcomeisconsideredefficientif
A)itisnotpossibletomakesomeonebetteroffwithoutmakinganyoneelseworseoff.
B)itisthebestavailablechoiceforanindividual.
C)itresultsinfairsharesforeveryoneinvolved.
D)itispossibletomakesomeonebetteroffwithoutmakinganyoneelseworseoff.
Answer:A
Topic:SelfInterestandSocialInterest
Skill:Definition
Status:New
AACSB:ReflectiveThinking

49)SupposeCompanyAsprofitsincreaseby$10millionandnobodyismadeworseoff.TheCEOof
CompanyAkeepsall$10millionforherself.Thissituation
A)isdefinitelyefficient.
B)isdefinitelynotintheselfinterestofCompanyA.
C)isdefinitelynotinthesocialinterest.
D)isdefinitelyfair.
Answer:A
Topic:SelfInterestandSocialInterest
Skill:Conceptual
Status:New
AACSB:AnalyticalSkills

25
Copyright2014PearsonEducation,Inc.
50)TheOccupyWallStreetmovementadvocates
A)ashiftawayfrommarketcapitalism.
B)ashifttowardsmoremarketcapitalism.
C)centrallyplannedsocialism.
D)followingtheteachingsofAdamSmith.
Answer:A
Topic:AtIssue:TheProtestAgainstMarketCapitalism
Skill:Conceptual
Status:New
AACSB:AnalyticalSkills

51)Aneconomicsysteminwhichthegovernmentdecideswhat,how,andforwhomtoproduce,directs
workerstojobs,andownsallthelandandcapitalis
A)centrallyplannedsocialism.
B)marketcapitalism.
C)mixedeconomy.
D)supportedbyeconomistsasthebestsystemavailable.
Answer:A
Topic:AtIssue:TheProtestAgainstMarketCapitalism
Skill:Definition
Status:New
AACSB:ReflectiveThinking

52)AccordingtoAdamSmith,
A)governmentinterventioninmarketsisnotdesirablebecauseaninvisiblehandleadsdecisionsmadein
pursuitofselfinteresttounintentionallypromotethesocialinterest.
B)politiciansarewellequippedtoregulatecorporationsandinterveneinmarketstoimprovemarket
outcomes.
C)whenbigcorporationspursuetheirselfinterestofmaximumprofit,theywillinevitablyconflictwith
socialinterest.
D)inamarkettransactionbuyerscaneithergetwhattheywantforlessthantheywouldbewillingto
payorsellerscanearnaprofit,butbothbuyersandsellerscantgainsimultaneously.
Answer:A
Topic:AtIssue:TheProtestAgainstMarketCapitalism
Skill:Conceptual
Status:New
AACSB:ReflectiveThinking

53)The2010PatientProtectionandAffordableCareAct(Obamacare)containsaprovisionthatmay
requireindividualstoeitherpurchaseprivatehealthinsuranceorpayatax.Thisisanexampleof
A)amixedeconomy.
B)marketcapitalism.
C)centrallyplannedsocialism.
D)theinvisiblehand.
Answer:A
Topic:AtIssue:TheProtestAgainstMarketCapitalism
Skill:Conceptual
Status:New
AACSB:AnalyticalSkills

26
Copyright2014PearsonEducation,Inc.
54)Accordingtoeconomists,
A)marketcapitalismisthebestsystemavailableandsomegovernmentinterventionandregulationcan
eitherhelporharmthesocialinterest.
B)marketcapitalismisthebestsystemavailableandanygovernmentinterventionandregulationwill
inevitablyharmthesocialinterest.
C)centrallyplannedsocialismisthebestsystemavailablesincegovernmentsgenerallymakedecisions
thatareinsocialinterest.
D)centrallyplannedsocialismandpuremarketcapitalismareequallycapableofpromotingsocial
interest,butamixedeconomyisanundesirablecompromisebetweenthetwothatwillharmsocial
interest.
Answer:A
Topic:AtIssue:TheProtestAgainstMarketCapitalism
Skill:Conceptual
Status:New
AACSB:ReflectiveThinking

55)WhichofthefollowingisNOTpartofthefirstbigeconomicquestion?
A)Whatgoodsandservicesareproduced?
B)Howaregoodsandservicesproduced?
C)Forwhomaregoodsandservicesproduced?
D)Whydoincentivesaffectonlymarginalcosts?
Answer:D
Topic:StudyGuideQuestion,TwoBigEconomicQuestions
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

3TheEconomicWayofThinking

1)Ineconomicswelearnthat
A)tradeoffsallowustohavemoreofeverythingwevalue.
B)tradeoffsallowustoavoidtheproblemofopportunitycost.
C)opportunitycostsareallofthepossiblealternativesgivenupwhenwemakeachoice.
D)Noneoftheaboveanswersiscorrect.
Answer:D
Topic:Tradeoffs
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Becausewefacescarcity,everychoiceinvolves
A)money.
B)thequestionwhat.
C)givingupsomethingfornothing.
D)anopportunitycost.
Answer:D
Topic:TradeoffandOpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

27
Copyright2014PearsonEducation,Inc.
3)Thetermusedtoemphasizethatmakingchoicesinthefaceofscarcityinvolvesacostis
A)substitutioncost.
B)opportunitycost.
C)utilitycost.
D)accountingcost.
Answer:B
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

4)Thelossofthehighestvaluedalternativedefinestheconceptof
A)marginalbenefit.
B)scarcity.
C)entrepreneurship.
D)opportunitycost.
Answer:D
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

5)Opportunitycostmeansthe
A)accountingcostminusthemarginalcost.
B)highestvaluedalternativeforgone.
C)accountingcostminusthemarginalbenefit.
D)monetarycostsofanactivity.
Answer:B
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

6)Theopportunitycostofanyactionis
A)allthepossiblealternativesgivenup.
B)thehighestvaluedalternativegivenup.
C)thebenefitfromtheactionminusthecostoftheaction.
D)thedollarstheactioncost.
Answer:B
Topic:OpportunityCost
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking

28
Copyright2014PearsonEducation,Inc.
7)Theopportunitycostofsomethingyoudecidetogetis
A)allthepossiblealternativesthatyougiveuptogetit.
B)thehighestvaluedalternativeyougiveuptogetit.
C)thevalueoftheitemminusthecostyoupaidforit.
D)theamountofmoneyyoupaytogetit.
Answer:B
Topic:OpportunityCost
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking

8)Opportunitycostisbestdefinedas
A)howmuchmoneyispaidforsomething.
B)howmuchmoneyispaidforsomething,takinginflationintoaccount.
C)thehighestvaluedalternativethatisgivenuptogetsomething.
D)allthealternativesthataregivenuptogetsomething.
Answer:C
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

9)Whichofthefollowingstatementsarecorrect?
I. Thehighestvaluedalternativegivenuptogetsomethingistheopportunitycost.
II. Wealthyeconomiesdontexperienceopportunitycosts.
III. Scarcitycreatesopportunitycosts.
A)Ionly
B)IandII
C)IandIII
D)I,II,andIII
Answer:C
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

10)Opportunitycostisdefinedasthe
A)totalvalueofallthealternativesgivenup.
B)highestvaluedalternativegivenup.
C)costofnotdoingallofthethingsyouwouldliketodo.
D)lowestvaluedalternativegivenup.
Answer:B
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

29
Copyright2014PearsonEducation,Inc.
11)YouhavethechoiceofgoingonvacationtoFloridaforoneweek,stayingatworkfortheweek,or
spendingtheweekdoingfixupprojectsaroundyourhouse.IfyoudecidetogotoFlorida,the
opportunitycostofthetripis
A)workinganddoingfixupprojects.
B)workingordoingfixupprojects,dependingonwhichyouwouldhavedoneotherwise.
C)workingbecauseyouwouldbegivingupdollars.
D)nothing
becauseyouwillenjoythetriptoFlorida.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

12)Thenightbeforeamidtermexam,youdecidetogotothemoviesinsteadofstudyingfortheexam.
Youscore60percentonyourexam.Ifyouhadstudiedthenightbefore,youdhavescored70percent.
Whatwastheopportunitycostofyoureveningatthemovies?
A)10percentoffyourgrade
B)60percent
C)70percent
D)zero
Answer:A
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

13)OnSaturdaymorning,yourankyourchoicesforactivitiesinthefollowingorder:gotothelibrary,
workoutatthegym,havebreakfastwithfriends,andsleeplate.Supposeyoudecidetogotothelibrary.
Youropportunitycostis
A)workingoutatthegym,havingbreakfastwithfriends,andsleepinglate.
B)workingoutatthegym.
C)zerobecauseyoudonothavetopaymoneytousethelibrary.
D)notclearbecausenotenoughinformationisgiven.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

30
Copyright2014PearsonEducation,Inc.
14)FredandAnnarebothgivenfreeticketstoseeamovie.Bothdecidetoseethesamemovie.Weknow
that
A)bothbearanopportunitycostofseeingthemoviebecausetheycouldhavedoneotherthingsinstead
ofseeingthemovie.
B)bothbearthesameopportunitycostofseeingthemoviebecausetheyaredoingthesamething.
C)itisnotpossibletocalculatetheopportunitycostofseeingthemoviebecausetheticketswerefree.
D)theopportunitycostofseeingthemovieiszerobecausetheticketswerefree.
Answer:A
Topic:OpportunityCost
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

15)YouhavethechoiceofgoingtoHawaiiforaweek,stayingatworkfortheweek,orspendingthe
weekskiing.IfyoudecidetogotoHawaii,theopportunitycostis
A)thevalueofworkingandskiing.
B)thevalueofworkingorskiing,dependingonwhichyouwouldhavedoneratherthangotoHawaii.
C)working,becauseyouwouldbegivingupaweekspay.
D)NoneoftheaboveifyouenjoythetimespentinHawaii.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

16)Today,Julieattendedher12:30Economicsclass.Ifshehadntgonetoclass,Juliewouldhavegoneout
tolunchwithfriends.Shehadotheroptions;shecouldhaveworkedorsleptin.Juliesopportunitycostof
goingtoclassisthe
A)incomeshegaveup.
B)lunchshegaveup.
C)sleepshegaveup.
D)income,pleasure,andsleepshegaveup.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

17)Joelikestosleeplateinthemorningsandplaytennisintheafternoons.TheopportunitycostofJoe
attendinghismorningclassforonehouris
A)anhouroftennisgivenup.
B)anhourofsleepgivenup.
C)boththetennisgivenupandthesleepgivenup.
D)nothingbecauseheispayingforhisclass.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

31
Copyright2014PearsonEducation,Inc.
18)Johnhastwohoursoffreetimethisevening.Herankedhisalternatives,firstgotoaconcert,second
gotoamovie,thirdstudyforaneconomicsexam,andfourthanswerhisemail.Whatistheopportunity
costofattendingtheconcertforJohn?
A)attendingamovie
B)studyingforaneconomicsexam
C)answeringhisemail
D)attendingamovie,studyingforaneconomicsexam,andansweringhisemail
Answer:A
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

19)Youdecidetotakeavacationandthetripcostsyou$2,000.Whileyouareonvacation,youdonotgo
toworkwhereyoucouldhaveearned$750.Intermsofdollars,theopportunitycostofthevacationis
A)$2,000.
B)$750.
C)$2,750.
D)$1,250
Answer:C
Topic:OpportunityCost
Skill:Conceptual
Status:Modified10thedition
AACSB:AnalyticalSkills

20)Theopportunitycostofattendingcollegeincludesthecostof
A)thetuitionbutnotthejobatwhichyouwouldotherwisehaveworked.
B)thehighestvaluedalternativetoattendingcollege.
C)thehighestvaluedalternativetoattendingcollegeplusthecostoftuition.
D)tuition,books,andthelostwagesforthehoursspentstudying.
Answer:C
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

21)Mistyhastheoptionofpurchasingoneofthreeproducts:BrandA,BrandB,orBrandC.Eachcosts
tendollars.IfshedecidesthatBrandAmeetsherneedsbest,thentheopportunitycostofthisdecisionis
A)BrandBplusBrandC.
B)twentydollars.
C)BrandA.
D)BrandBorBrandC,dependingonwhichisconsideredthehighestvaluealternativeforgone.
Answer:D
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

32
Copyright2014PearsonEducation,Inc.
22)WhichofthefollowingisNOTanexampleofanopportunitycost?
A)ByspendingThursdaynightstudyingforaneconomicsexam,astudentwasunabletocompletea
homeworkassignmentforcalculusclass.
B)BecauseDavidusedallofhisvacationtimetopainthishouse,hewasunabletovisittheCaribbeanlast
year.
C)BecauseMaryisnowbeingpaidahigherwage,shecanaffordtobuyanewcareventhoughsheis
movingintoabiggerapartment.
D)Bychoosingtoattendcollege,Jeanwasnotabletocontinueworkingasanelectrician;asaresult,she
gaveupmorethan$85,000inearningswhileshewasincollege.
Answer:C
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

23)From8to11p.m.,Samcaneitherattendabasketballgame,ahockeymatchorthesymphony.
SupposethatSamdecidestoattendthehockeymatchandthinkstoherselfthatifshedidnotgotothe
matchshewouldgotothesymphony.Thentheopportunitycostofattendingthehockeymatchis
A)goingtothesymphonyandthebasketballgame.
B)goingtothesymphony.
C)goingtothebasketballgame.
D)threehoursoftime.
Answer:B
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

24)Afteryougraduate,youhavedecidedtoacceptapositionworkingattheBureauofLaborStatistics
for$45,000.00ayear.ThetwootheroffersyoureceivedwereworkingforWalMartfor$38,000and
workingforErnstandYoungconsultingfor$42,000.Ofthesetwooffers,youwouldhavepreferredthe
jobatErnstandYoung.WhatistheopportunitycostofacceptingthepositionattheBureauofLabor
Statistics?
A)the$45,000youarepaidforworkingattheBureauofLaborStatistics
B)the$42,000youwouldhavebeenpaidworkingforErnstandYoung
C)the$38,000youwouldhavebeenpaidworkingforWalMart
D)the$42,000youwouldhavebeenpaidworkingforErnstandYoungandthe$38,000youwouldhave
beenpaidworkingforWalMart
Answer:B
Topic:OpportunityCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

33
Copyright2014PearsonEducation,Inc.
25)BillBonecrushergraduatesfromcollegewithachoiceofplayingprofessionalfootballat$2milliona
yearorcoachingfor$50,000ayear.Hedecidestoplayfootball,buteightyearslater,thoughhecould
continuetoplayfootballat$2millionayear,hequitsfootballtomakemoviesfor$3millionayear.His
opportunitycostofplayingfootballatgraduationwas________andeightyearslatertheopportunitycost
ofmakingmovieswas________.
A)$50,000;$2million
B)$2million;$2million
C)$2million;$3million
D)$50,000;$50,000
Answer:A
Topic:OpportunityCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

26)Duringthesummeryouhavemadethedecisiontoattendsummerschool,whichpreventsyoufrom
workingatyourusualsummerjobinwhichyounormallyearn$6,000forthesummer.Yourtuitioncost
is$3,000andbooksandsuppliescost$1,300.Intermsofdollars,theopportunitycostofattending
summerschoolis
A)$10,300.
B)$6,000.
C)$4,300.
D)$3,300.
Answer:A
Topic:OpportunityCost
Skill:Analytical
Status:Modified10thedition
AACSB:AnalyticalSkills

27)Thetermopportunitycostpointsoutthat
A)theremaybesuchathingasafreelunch.
B)notallindividualswillmakethemostoflifesopportunitiesbecausesomewillfailtoachievetheir
goals.
C)executivesdonotalwaysrecognizeopportunitiesforprofitasquicklyastheyshould.
D)anydecisionregardingtheuseofaresourceinvolvesacostlychoice.
Answer:D
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

34
Copyright2014PearsonEducation,Inc.
28)Whenthegovernmentchoosestouseresourcestobuildadam,thesesourcesarenolongeravailable
tobuildahighway.Thischoiceillustratestheconceptof
A)amarketmechanism.
B)macroeconomics.
C)opportunitycost.
D)afallacyofcomposition.
Answer:C
Topic:OpportunityCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
29)Jill,aneconomicsstudent,hasalreadyspent5hourscleaningherroom.Indecidingwhetherornotto
continuecleaningforanotherhour,sheappliestheeconomicprincipleof
A)scarcity.
B)ceterisparibus.
C)choosingatthemargin.
D)productivity.
Answer:C
Topic:ChoicesattheMargin
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

30)Marginalbenefitisthebenefit
A)thatyouractivityprovidestosomeoneelse.
B)ofanactivitythatexceedsitscost.
C)thatarisesfromthesecondaryeffectsofanactivity.
D)thatarisesfromanincreaseinanactivity.
Answer:D
Topic:MarginalBenefit/MarginalCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

31)Abenefitfromanincreaseinactivityiscalledthe
A)marginalbenefit.
B)economicbenefit.
C)totalbenefit.
D)opportunitybenefit.
Answer:A
Topic:MarginalBenefit
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking

35
Copyright2014PearsonEducation,Inc.
32)Themarginalbenefitisthe
A)additionalgainfromonemoreunitofanactivity.
B)additionalcostfromonemoreunitofanactivity.
C)lossofthehighestvaluedalternative.
D)additionalgainfromonemoreunitofanactivityminustheadditionalcostfromonemoreunitofthe
activity.
Answer:A
Topic:MarginalBenefit
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking
33)Intermsofdollars,themarginalbenefitofworkingfivedaysaweekinsteadoffourdaysaweekis
A)thewagesreceivedforthefifthdayofwork.
B)thewagesreceivedfor5daysofwork.
C)thewagesreceivedfor4daysofwork.
D)Noneoftheaboveanswersiscorrect.
Answer:A
Topic:MarginalBenefit
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

34)Youremployerhasaskedyoutostartworkingovertimeandhasofferedtopay$18perhourforevery
houryouworkbeyondfortyhoursaweek.Thewagerateforeachofthefirstfortyhourswillcontinueto
betheusual$15perhour.Intermsofdollars,whatisthemarginalbenefitofworkingeachhourof
overtime?
A)zero
B)$3.00
C)$15.00
D)$18.00
Answer:D
Topic:MarginalBenefit
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

35)Astudentisstudyingforanexam2hoursadayandisdebatingwhethertostudyanextrahour.The
studentsmarginalbenefit
A)dependsonthegradethestudentearnsontheexam.
B)isthebenefitthestudentreceivesfromstudyingall3hours.
C)isthebenefitthestudentreceivesfromstudyingtheextrahour.
D)isgreaterthanthestudentsmarginalcost.
Answer:C
Topic:MarginalBenefit
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

36
Copyright2014PearsonEducation,Inc.
36)Astudentathleteisdecidingwhethertoworkoutforanextrahour.Hermarginalbenefitfrom
anotherhourofexercise
A)isthebenefitshegetsfromallthehoursshesworkedoutallweek.
B)isthebenefitshereceivesfromexercisingtheadditionalhour.
C)islessthanthemarginalcostoftheadditionalhour.
D)dependsonthecostoftheworkout.
Answer:B
Topic:MarginalBenefit
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
37)Supposethatyouarespendingtwohoursadaystudyingeconomics,andyourgradeis85percent.
Youwantahighergradeanddecidetostudyforanextrahouraday.Asaresult,yourgraderisesto90
percent.Yourmarginalbenefitisthe
A)5pointincreaseinyourgrademinustheopportunitycosttoyouofspendingthehourstudying.
B)extrahourperdayyouspendonstudying.
C)5pointincreaseinyourgrade.
D)threehoursperdayyouspendonstudying.
Answer:C
Topic:MarginalBenefit
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

38)Marginalcostisthecost
A)thatyouractivityimposesonsomeoneelse.
B)thatarisesfromanincreaseinanactivity.
C)ofanactivitythatexceedsitsbenefit.
D)thatarisesfromthesecondaryeffectsofanactivity.
Answer:B
Topic:MarginalCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

39)Acostduetoanincreaseinactivityiscalled
A)anincentiveloss.
B)amarginalcost.
C)anegativemarginalbenefit.
D)thetotalcost.
Answer:B
Topic:MarginalCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

37
Copyright2014PearsonEducation,Inc.
40)Marginalcostisthe
A)costofanincreaseinanactivity.
B)totalcostofanactivity.
C)costofanactivityminusthebenefitsoftheactivity.
D)costofallforgonealternatives.
Answer:A
Topic:MarginalCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
41)LauraisamanagerforHP.WhenLauramustdecidewhethertoproduceafewadditionalprinters,
sheischoosingatthemarginwhenshecompares
A)thetotalrevenuefromsalesofprinterstothetotalcostofproducingalltheprinters.
B)theextrarevenuefromsellingafewadditionalprinterstotheextracostsofproducingtheprinters.
C)theextrarevenuefromsellingafewadditionalprinterstotheaveragecostofproducingtheadditional
printers.
D)HPsprinterstoprintersfromcompetingcompanies,suchasLexmark.
Answer:B
Topic:MarginalAnalysis
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

42)Alawnserviceisdecidingwhethertoaddanadditionalemployeetoitssummercrew.Themarginal
costofhiringthisworkerdependsonthe
A)totalamountpaidtoonlythenewworker.
B)totalamountpaidtoallpreviouslyhiredworkers.
C)thetotalamountpaidtoalltheworkers,boththenewoneandthepreviouslyhiredworkers.
D)theadditionalrevenuecreatedbyhavinganadditionalworkerminusthecostofhiringtheworker.
Answer:A
Topic:MarginalCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

43)Ifthemarginalcostofanactivityexceedsthemarginalbenefit,then
A)theactivitywilloccurbecausethehighmarginalcostmeansitmustbehighlyvalued.
B)theforgonealternativescostsmustbeincreased.
C)analternativeactionwillbeselected.
D)thepersonmustconcentrateontheactivitystotalbenefits.
Answer:C
Topic:MarginalBenefit/MarginalCost
Skill:Conceptual
Status:Modified10thedition
AACSB:AnalyticalSkills

38
Copyright2014PearsonEducation,Inc.
44)Astoreremainsopenfrom8a.m.to4p.m.eachweekday.Thestoreownerisdecidingwhetherto
stayopenanextrahoureachevening.Theownersmarginalbenefit
A)isthebenefittheownerreceivesfromstayingopenfrom8a.m.to5pm.
B)dependsontherevenuestheownermakesduringtheday.
C)mustbegreaterthanorequaltotheownersmarginalcostiftheownerdecidestostayopen.
D)isthebenefittheownerreceivesfromstayingopenfrom8a.m.to6pm.
Answer:C
Topic:MarginalBenefit/MarginalCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
45)Whichofthefollowingcreatesanincentivetoincreasetheamountofanactivity?
A)anincreaseinthemarginalcostoftheactivityandadecreaseinthemarginalbenefitoftheactivity
B)adecreaseinthemarginalcostoftheactivityandanincreaseinthemarginalbenefitoftheactivity
C)constantmarginalcostandconstantmarginalbenefitoftheactivity
D)Noneoftheabovecreateanincentivetoincreasetheamountofanactivity.
Answer:B
Topic:Incentives,MarginalCostandMarginalBenefit
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

46)SupposethatthegovernmentofNewYorkstatepromisestodecreasetaxestoafirmifitdecidesto
stayinNewYorkinsteadofmovingtoanotherstate.Thispolicyonthepartofthestateconstitutes
________,tomakethe________ofthefirmremaininginNewYork.
A)anincentive;marginalbenefitexceedthemarginalcost
B)anincentive;marginalcostexceedthemarginalbenefit
C)acommand;marginalbenefitexceedthemarginalcost
D)acommand;marginalcostexceedthemarginalbenefit
Answer:A
Topic:Incentives,MarginalCostandMarginalBenefit
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

47)Jedhadanexamscoreof50percentagepoints.ThereisanextracreditassignmentthatJedcan
completethatwillraisehisexamscoreby20percentagepoints.Jedhasdeterminedthattheextracredit
assignmentwilltake10hoursofhistime.Jedwillcompletetheassignmenthevaluesthe
A)20percentagepointsmorethanthe10hoursofhistime.
B)10hoursofhistimemorethanthe20percentagepoints.
C)70percentagepointsmorethanthe10hoursofhistime.
D)wantsahigherscore.
Answer:A
Topic:Incentives,MarginalCostandMarginalBenefit
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

39
Copyright2014PearsonEducation,Inc.
48)From8P.M.to10P.M..,Susancanattendamovie,study,ortalkwithfriends.SupposethatSusan
decidestogotothemoviebutthinksthat,ifshehadnt,shewouldotherwisehavetalkedwithfriends.
Theopportunitycostofattendingthemovieis
A)talkingwithfriendsandstudying.
B)studying.
C)talkingwithfriends.
D)twohoursoftime.
Answer:C
Topic:StudyGuideQuestion,OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
49)Whenthegovernmenthirespeopletoserveinthearmy,thesepeoplearenolongeravailabletodo
otherwork.Thischoiceillustratestheconceptof
A)anincentive.
B)asocialinterest/privateinterestconflict.
C)opportunitycost.
D)marginalbenefit.
Answer:C
Topic:StudyGuideQuestion,OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

50)Whenthegovernmentchoosestospendthetaxdollarsthatitcollectsonhomelandsecurity,itschoice
________.
A)involvesatradeoffofothergoodsandservicessuchaseducationformorehomelandsecurity
B)illustratesthatscarcitydoesnotalwaysexist
C)involvesnotradeoffbecausethedefenseisnecessary
D)primarilyaffectswhogetsthegoodsandservicesproduced.
Answer:A
Topic:MyEconLabQuestions
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

51)Makingachoiceatthemarginmeans________.
A)lettingsomeoneelsechooseforyou
B)waitinguntilthelastminutetomakeachoice
C)decidingtodoalittlebitmoreoralittlebitlessofanactivity
D)makingachoicebycomparingthetotalbenefitandthetotalcost
Answer:C
Topic:MyEconLabQuestions
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

40
Copyright2014PearsonEducation,Inc.
52)Supposethatforthepasttwomonths,youhavestudiedeconomicsonehouraday.Younowdecide
tostudyeconomicstwohoursaday.Forthepasttwomonths,________.
A)yourmarginalcostofstudyingeconomicsforanhourmusthaveexceededitsmarginalbenefit
B)themarginalcostofstudyingeconomicsmusthavefallen
C)yourmarginalbenefitfromstudyingeconomicsanhourmusthavebeengreaterthanitsmarginalcost
D)theopportunitycostofstudyingeconomicsmusthaverisen.
Answer:C
Topic:MyEconLabQuestions
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
4EconomicsasSocialScienceandPolicyTool

1)Ineconomics,positivestatementsareabout
A)thewaythingsoughttobe.
B)thewaythingsare.
C)macroeconomics,notmicroeconomics.
D)microeconomics,notmacroeconomics.
Answer:B
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Apositivestatementis
A)aboutwhatoughttobe.
B)aboutwhatis.
C)theresultofamodelsnormativeassumptions.
D)validonlyinthecontextofamodelwithsimpleassumptions.
Answer:B
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

3)Apositivestatementis
A)aboutwhatoughttobe.
B)aboutwhatis.
C)alwaystrue.
D)onethatdoesnotusemarginalconcepts.
Answer:B
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

41
Copyright2014PearsonEducation,Inc.
4)Whichofthefollowingaretrueregardingpositivestatements?
I. Theydescribewhatoughttobe.
II. Theydescribewhatisbelievedabouthowtheworldappears.
III. Theycanbetestedastotheirtruthfulness.
A)IandII
B)IIandIII
C)IandIII
D)I,IIandIII
Answer:B
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
5)Positiveandnormativestatementsdifferinthat
A)positivestatementscanbetested,whereasnormativestatementscannot.
B)normativestatementscanbetested,whereaspositivestatementscannot.
C)normativestatementsdepictwhatisandpositivestatementsdepictwhatoughttobe.
D)normativestatementsneverusethewordshould.
Answer:A
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

6)Positiveeconomicstatements
A)prescribewhatshouldbe.
B)arerelatedonlytomicroeconomics.
C)canbetestedagainstthefacts.
D)cannotbetestedagainstthefacts.
Answer:C
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

7)Whichofthefollowingisapositivestatement?
A)Anunemploymentrateof9percentisanationaldisgrace.
B)Unemploymentisamoreimportantproblemthaninflation.
C)Whenthenationalunemploymentrateis9percent,theunemploymentrateforinnercityyouthis
oftencloseto40percent.
D)Unemploymentandinflationareequallyimportantproblems.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

42
Copyright2014PearsonEducation,Inc.
8)Whichofthefollowingisapositivestatement?
A)TheUnitedStatesshouldfightinflationevenifitraisesunemployment.
B)WhattodowithSocialSecurityisthemostimportanteconomicissuetoday.
C)A5percentincreaseinincomeleadstoa3percentincreaseintheconsumptionoforangejuice.
D)Becausetheydecreaseproductivity,laborunionsshouldbeeliminated.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
9)Whichofthefollowingisapositivestatement?
A)Peoplebuymoreofagoodorservicewhenitspricefalls.
B)Thedistributionofincomeisfair.
C)Thegovernmentoughttoprovidehealthcaretoeveryone.
D)Corporationsshouldbemoresociallyresponsible.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

10)Whichofthefollowingisanexampleofapositivestatement?
A)Governmentshouldnotredistributeincome.
B)Businessfirmsoughttocontributemoretocharities.
C)Householdsaretheprimarysourceofsaving.
D)Theforeignsectorshouldbemoretightlycontrolled.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

11)Whichofthefollowingisanexampleofapositivestatement?
A)Weshouldcutbackonouruseofcarbonbasedfuelssuchascoalandoil.
B)Increasingtheminimumwageresultsinmoreunemployment.
C)EveryAmericanshouldhaveequalaccesstohealthcare.
D)TheFederalReserveoughttocuttheinterestrate.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

43
Copyright2014PearsonEducation,Inc.
12)Whichofthefollowingisapositivestatement?
A)Taxesshouldbelowerbecausethenpeoplegettokeepmoreofwhattheyearn.
B)Myeconomicsclassshouldlastfortwotermsbecauseitismyfavoriteclass.
C)A10percentincreaseinincomeleadstoa4percentincreaseintheconsumptionofbeef.
D)Giventheirnegativeimpactonproductivity,thegovernmentshouldeliminatelaborunions.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
13)Whichofthefollowingisapositivestatement?
A)Ourplanetiswarmingbecauseofanincreasedcarbondioxidebuildupintheatmosphere.
B)Aminimumwageof$7.50perhourisashameforarichcountryliketheUnitedStates.
C)Bothofthesestatementsarepositive.
D)Neitherofthesestatementsispositive.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

14)Whichofthefollowingisapositivestatement?
A)Thegovernmentmustlowerthepriceofapizzasothatmorestudentscanaffordtobuyit.
B)Thebestleveloftaxationiszeropercentbecausethenpeoplegettokeepeverythingtheyearn.
C)Myeconomicsclassshouldlastfortwotermsbecauseitismyfavoriteclass.
D)Anincreaseintuitionmeansfewerstudentswillapplytocollege.
Answer:D
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

15)Whichofthefollowingisapositivestatement?
A)Lowrentsdecreasetheamountofhousinglandlordsmakeavailableforrent.
B)Lowrentsaregoodbecausetheymakeapartmentsmoreaffordable.
C)Housingcoststoomuch.
D)Ownersofapartmentbuildingsoughttobefreetochargewhateverrenttheywant.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

44
Copyright2014PearsonEducation,Inc.
16)WhenAlmakesthestatement,Thecostoflivinghasincreased10percentoverthepast10years,he
is
A)makinganormativestatement.
B)makingapositivestatement.
C)testinganeconomicmodel.
D)facingthestandardoflivingtradeoff.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
17)Whichofthefollowingisapositivestatement?
A)Statelotteriesaregoodmethodstouseforraisingrevenues.
B)Increasedprisonsentencesarethebestwaytoreducethecrimerate.
C)Anincreaseingaspricesleadspeopletocarpoolmore.
D)Inflationisamoreseriousproblemthanisdeflation.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

18)ThestatementManagerswithacollegeeducationearn$18anhourwhileskiinstructorswhodidnot
completecollegeearn$10is
A)apoliticalstatement.
B)apositivestatement.
C)anormativestatement.
D)anethicalstatement.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

19)ThestatementAnincreaseinthepriceofgasolinewillleadtoadecreaseintheamountpurchasedis
A)apoliticalstatement.
B)apositivestatement.
C)anormativestatement.
D)ascientificstatement.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

45
Copyright2014PearsonEducation,Inc.
20)ThestatementTheunemploymentrateforteensishigherthanthatforadultsis
A)apoliticalstatement.
B)apositivestatement.
C)anormativestatement.
D)anethicalstatement.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
21)WhichofthefollowingisNOTanormativestatement?
A)Peoplebuymoreofagoodorservicewhenitspricefalls.
B)Thedistributionofincomeisfair.
C)Thegovernmentoughttoprovidehealthcaretoeveryone.
D)Corporationsshouldbemoresociallyresponsible.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

22)Anormativestatementconcerns
A)whatisprovable.
B)whatiscorrect.
C)whatisincorrect.
D)avaluejudgment.
Answer:D
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

23)Normativeeconomicstatements
A)describewhatoughttobe.
B)describewhatisratherthanwhatoughttobe.
C)describetheprocessofeconomicpolicymaking.
D)dealwitheconomichypothesesthatarenotwellestablishedlaws.
Answer:A
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

46
Copyright2014PearsonEducation,Inc.
24)Thestatementthatpeachicecreamisbetterthanchocolateicecream
A)canbetestedusingthescientificapproach.
B)isanormativestatement.
C)isapositivestatement.
D)providesabasisforpredictingwhichtypeoficecreamwillexhibitthemostsales.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
25)ThestatementUnemploymentshouldbebelow6percentis
A)apositivestatement.
B)anormativestatement.
C)aprediction.
D)anassumption.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

26)Statementsaboutwhatoughttobearecalled
A)positivestatements.
B)normativestatements.
C)assumptions.
D)implications.
Answer:B
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

27)Normativestatementsarestatementsabout
A)prices.
B)quantities.
C)whatis.
D)whatoughttobe.
Answer:D
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

47
Copyright2014PearsonEducation,Inc.
28)Anormativestatementis
A)aboutwhatoughttobe.
B)aboutwhatis.
C)alwaystrue.
D)onethatdoesnotusemarginalconcepts.
Answer:A
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
29)Ineconomics,normativestatementsareabout
A)thewaythingsoughttobe.
B)thewaythingsare.
C)marginalbenefits,notmarginalcosts.
D)marginalcosts,notmarginalbenefits.
Answer:A
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

30)Whichofthefollowingisanormativestatement?
A)Thepriceofcandybarsis$1.25each.
B)Candybarsaremoreexpensivethannewspapers.
C)Youshouldeatlesscandy.
D)Popcornandcandyaresoldinmovietheaters.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

31)Whichofthefollowingisanormativestatement?
A)Theunemploymentrateistoohigh.
B)Fortypercentofthepublicbelievesthattheunemploymentrateistoohigh.
C)Theunemploymentrateroselastmonth.
D)Noneoftheabovearenormativestatements.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

48
Copyright2014PearsonEducation,Inc.
32)Whichofthefollowingisanormativestatement?
A)TheUnitedStateshasacomparativeadvantagecomparedtotheEuropeanUnionintheproductionof
wheat.
B)ThemainreasonwhytheUnitedStateshasatradedeficitwithChinaisbecauseChinastrade
practicesareunfair.
C)Boththesestatementsarenormative.
D)Neitherofthesestatementsisnormative.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
33)Governmentshouldacttoreducepovertylevels.
A)Thisstatementisanormativestatement.
B)Thisstatementisapositivestatement.
C)Thisstatementisanexampleofthefallacyofcomposition.
D)Thisstatementisanexampleoftheposthocfallacy.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

34)WhenSusanmakesthestatement,Thegovernmentshouldspendlessmoneytotakecareofnational
parks,sheis
A)makinganormativestatement.
B)makingapositivestatement.
C)testinganeconomicmodel.
D)notdealingwithscarcity.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

35)Therichshouldpayhigherincometaxratesthanthepoorisanexampleofa
A)normativestatement.
B)positivestatement.
C)descriptivestatement.
D)theoreticalstatement.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

49
Copyright2014PearsonEducation,Inc.
36)Whichofthefollowingisanormativestatement?
A)StudyingmorehoursleadstoanincreaseinyourGPA.
B)Anincreaseintaxratesmeanspeopleworkfewerhours.
C)TakingextravitaminCpreventscatchingacold.
D)Statesshouldrequireallmotorcycleriderstowearhelmetstoreducethenumberofriderskilled.
Answer:D
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
37)Whichofthefollowingisanormativestatement?
A)Lowrentswillrestrictthesupplyofhousing.
B)Lowrentsaregoodbecausetheymakeapartmentsmoreaffordable.
C)Housingcostsarerising.
D)Ownersofapartmentbuildingsarefreetochargewhateverrenttheywant.
Answer:B
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

38)Whichofthefollowingisanormativestatement?
A)Nextyearsinflationratewillbeunder4percent.
B)ConsumerswillbuymoregasolineovertheChristmasholidayevenifthepriceofgasis10cents
higherthanitwasduringtheThanksgivingholiday.
C)Thegovernmentscutsinwelfarespendingimposeanunfairhardshiponthepoor.
D)Thecurrentbuttersurplusistheresultoffederalpolicies.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

39)Economicmodels
A)areessentiallydifferentfromthoseusedinothersciences.
B)alwaysusegraphs.
C)simplifyreality.
D)includeallrelevantfacts.
Answer:C
Topic:ModelBuilding
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

50
Copyright2014PearsonEducation,Inc.
40)Agoodeconomicmodel
A)describeseveryaspectoftheeconomicworld,withnoexception.
B)includesallthosefeaturesoftheworldthatcanbedescribednumerically.
C)includesonlythosefeaturesoftheworldthatareneededforthepurposeathand.
D)shouldnotincludemorethantwovariables.
Answer:C
Topic:ModelBuilding
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
41)Aneconomicmodelis
A)ageneralizationthatsummarizesallthenormativeassumptionswemakeaboutaparticularissue.
B)adescriptionofsomeaspectoftheeconomicworldthatincludesonlythosefeaturesoftheworldthat
areneededforthepurposeathand.
C)astatementthatdescribeshowtheworldshouldbe.
D)acollectionoffactsthatdescribetherealworld.
Answer:B
Topic:Models
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

42)Anormativestatementis
A)aboutwhatoughttobe.
B)aboutwhatis.
C)alwaystrue.
D)onethatisbasedonaneconomicexperiment.
Answer:A
Topic:StudyGuideQuestion,PositiveandNormative
Skill:Recognition
Status:Modified10thedition
AACSB:ReflectiveThinking

43)Whichofthefollowingisapositivestatement?
A)Thegovernmentmustprovidehealthinsurancesothatthepoorcanobtaindecentmedicaltreatment.
B)Thegovernmentshouldspendmoreoneducation.
C)Myfavoritedinnerispizzaandsoda.
D)Anincreaseinthepriceofpizzawillleadfewerstudentstobuypizza.
Answer:D
Topic:StudyGuideQuestion,PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

51
Copyright2014PearsonEducation,Inc.
44)Aneconomicmodelincludes
A)onlynormativestatements.
B)nouseofmarginalconcepts.
C)allknowndetailsinordertoincreaseitsaccuracy.
D)onlydetailsconsideredessential.
Answer:D
Topic:StudyGuideQuestion,EconomicModel
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
45)Thestatementthat________isapositivestatement.
A)morestudentsshouldstudyeconomics
B)thepriceofgasolineistoohigh
C)toomanypeopleintheUnitedStateshavenohealthcareinsurance
D)thepriceofsugarintheUnitedStatesishigherthanthepriceinAustralia
Answer:D
Topic:MyEconLabQuestions
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

5NewsBasedQuestions

1)BenBernanke,ChairmanoftheFederalReserve,mustchoosewhethertomorrowhemeetswiththe
SecretaryoftheTreasuryorwiththeCongressregardingthefinancialcrisis.Thischoicereflectsthe
A)factthatBernankefacesscarcity.
B)conceptofentrepreneurship.
C)factthatBernankerespondstoincentives
D)useofcapital.
Answer:A
Topic:Scarcity
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

2)WhenthepresidentoftheBankofAmericaaddressesCongressregardinglendingstandardsinthat
industry,heisdiscussing
A)amacroeconomictopic.
B)amicroeconomictopic.
C)incentives.
D)thebigtradeoff.
Answer:B
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

52
Copyright2014PearsonEducation,Inc.
3)WhenBenBernanke,ChairmanoftheFederalReserve,addressesCongressregardingtheUnitedStates
roleintheworldeconomy,heisdiscussing
A)amacroeconomictopic.
B)amicroeconomictopic.
C)scarcity.
D)incentives.
Answer:A
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking
4)DellComputersdecidestoproducePCsandsellthemdirectlyovertheInternetandviaBestBuy.This
isanexampleof
A)incentives.
B)amicroeconomicdecision.
C)amacroeconomicdecision.
D)scarcity.
Answer:B
Topic:Microeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

5)Considerthefollowingevents:
I. SamsunghiresassociatestomarkettheirHDTVsetstoBestBuy.
II. TheDallasCowboysbuildanewfootballstadium.
III. eBayfires10percentofitsworkforce.
IV. TenmillionstocksweretradedontheNewYorkStockExchangeinoneday.
V. Pennsylvaniabuildsanewstatepark.

Whichoftheeventsdescribeuseoffactorsofproduction?
A)I,II,III,andV
B)II,IV,andV
C)IandIIIonly
D)IVonly
Answer:A
Topic:FactorsofProduction
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

53
Copyright2014PearsonEducation,Inc.
6)PanasonicsendsitsHDTVsalespeopletotrainingsessions.Thisisanexampleof
A)amacroeconomicdecision.
B)scarcity.
C)afirminvestinginworkershumancapital
D)entrepreneurship.
Answer:C
Topic:HumanCapital
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

7)WhenOPECincreasesthesupplyofoiltothemarket,thepriceofgasolinefalls.Thisisanexampleof
A)anormativestatement.
B)thefailureofopportunitycosttodetermineprices.
C)apositivestatement.
D)amacroeconomicstatement.
Answer:C
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking
8)Aspartofthefinancialcrisisbailoutplanin2009,theFederalReserveboughtstakesinbanks.This
policywillresultinanincreaseintheinflationrate.Thisisanexampleof
A)apositivestatement.
B)anormativestatement.
C)amicroeconomicstatement.
D)aneconomicmodel.
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

9)Aspartofthefinancialcrisisbailoutplanin2008,theFederalReserveshouldnotbailoutbanksthat
maderiskyloans.Thisisanexampleof
A)apositivestatement.
B)theFederalReservetakingactionsthatarenotatthemargin.
C)opportunitycosts.
D)anormativestatement.
Answer:D
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

54
Copyright2014PearsonEducation,Inc.
10)OPECshouldsupplymoreoilsothattheworldseconomiescangrowmorerapidly.Thisisan
exampleof
A)anormativestatement.
B)apositivestatement.
C)adecisionatthemargin.
D)OPECovercomingscarcity
Answer:A
Topic:PositiveandNormative
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

6EssayQuestions

1)Whatdoeconomistsmeanwhentheydiscussscarcity?
Answer:Scarcityoccurswheneverpeopleswantsexceedtheabilityoftheavailableresourcestomeet
thesewants.Becausepeopleswantsareeffectivelyinfiniteitisalwayspossibletoimaginemoregood
thingstowanttohavewantswillalwaysexceedwhatcanbeproducedwiththeavailableresources,
andsoscarcitywillalwaysbepresent.
Topic:Scarcity
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication
2)Whatistherelationshipbetweenwants,factorsofproduction,scarcity,andchoices?Discussthe
relationshipforanindividualandforasociety.
Answer:Apersonfacesscarcitywheneverhisorherwantsexceedwhatheorshecanobtainusinghisor
herresources.Becausethepersoncannotfulfillallofhisorherwants,thepersonisforcedtochoose
whichwantswillbesatisfiedandwhichwantswillremainunsatisfied.Thesameresultsholdtruefora
society.Allsocietiesfacescarcitybecausepeopleswantsareessentiallyinfinite,sothatthefactorsof
productionavailablearenotsufficienttofulfilleveryoneswants.Becauseofthisfact,societiesmustmake
choicesaboutwhich(andwhose)wantswillbesatisfiedandwhich(andwhose)wantswillremain
unsatisfied.
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

55
Copyright2014PearsonEducation,Inc.
3)Whydoeconomistssaythatevenveryrichpeoplefacescarcity?
Answer:Apersonfacesscarcitywheneverhisorherwantsexceedwhatheorshecanobtainusinghisor
herresources.Evenveryrichpeoplewantthingsthattheycannothave.Anolderrichperson,for
instance,mightwanttohaveallofhisorheryouthfulenergy,butmedicalsciencecannot(yet)provide
thisservice.Alternatively,anotherrichpersonmightenjoylifesomuchthatheorshewants25hoursina
dayinordertohavemoretimeformoreenjoyment.But,suchawantisimpossible.Bywayofanother,
perhapsmorerealisticexample,MalcolmForbeswasthefounderofForbesmagazineandwasveryrich.
However,hedidnotwineverypieceofartthathebiduponatauctions.EventhoughMr.Forbeswas
veryrich,hestillpassedonsomeartwhenthepricegotsohighthathethoughtgivenhisresources,the
priceexceededwhathewaswillingtopay.Mr.Forbeswantedtheart,buthewasnotwillingtobid
higherinordertowinit.Mr.Forbesfacedscarcity.
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning

4)Explainwhybothrichandpoorpeopleexperiencescarcity.
Answer:Scarcityexistswhenpeopleswantsexceedtheirabilitytosatisfythewants.Peopleswantsare
literallyinfinite,sojustasapoorpersoncanwantmore,sotoocanaricherperson.Therefore,bothrich
andpoorexperiencescarcity.
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning

5)Whatisthedifferencebetweenscarcityandpoverty?
Answer:Scarcityexistswhenavailabilityislessthanpeoplewant.Povertyexistswhenavailabilityisless
thanpeopleneed.Everyonesuffersscarcity;onlyanunfortunateminoritysufferspoverty.
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning
6)Defineeconomicsanddescribeitsbranchesofstudy.
Answer:Economicsisthesocialsciencethatstudiesthechoicesmadebyindividuals,businesses,
government,andentiresocietiesastheycopewithscarcity.Ithastwobranches,microeconomicsand
macroeconomics.Microeconomicsisthestudyofthechoicesmadebyindividualsandbusinesses,the
waytheyinteract,andtheinfluencethatgovernmentsexertonthesechoices.Macroeconomicsisthe
studyoftheaggregate(total)effectsonthenationaleconomyandtheglobaleconomyofthechoicesthat
individuals,businesses,andgovernmentsmake.
Topic:DefinitionofEconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

56
Copyright2014PearsonEducation,Inc.
7)Whatisthedifferencebetweenmicroeconomicsandmacroeconomics?
Answer:Microeconomicsstudiesthedecisionsofsmallereconomicactors,suchasindividualconsumers
orindividualfirms,andhowthegovernmentcanaffectthesedecisions,saythroughhowitregulatesan
industry.Macroeconomicsstudiestheaggregate,oreconomywide,consequencesofthedecisionsmade
byindividualsandfirms.Macroeconomicsalsostudiestheaggregateeffectsofgovernmentpolicies,such
astheFederalReservesdecisionstoraiseorlowerinterestrates.
Topic:MicroeconomicsandMacroeconomics
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

8)Whatisthedifferencebetweenmicroeconomicsandmacroeconomics?Giveanexampleofanissue
eachstudies.
Answer:Essentiallymicroeconomicsstudiesindividualunitswithintheeconomy,suchasthechoices
madebyindividualconsumersorindividualfirms.Macroeconomicsstudiestheoveralloraggregate
economy.Microeconomicsexaminesthefactorsthataffectemploymentatanindividualfirm.
Macroeconomicsexaminesthefactorsthataffecteconomywideunemployment.
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

9)BelowisastudentsanswertothequestionWhatismicroeconomics?Ifyouweretheinstructor,how
wouldyoucorrectthestudentsanswer?
Microeconomicsisthestudyofhowgovernmentinfluencesthechoicesmadebyindividualsand
businessesandoftheperformanceofthewholenationaleconomy.
Answer:Theanswerispartiallycorrect.Microeconomicsisthestudyofthechoicesthatindividualsand
businessesmake,thewaythesechoicesinteractinmarkets,andtheinfluenceofthegovernment.Butthe
performanceofthenationaleconomyisthesubjectofmacroeconomics,notmicroeconomics.
Topic:MicroeconomicsandMacroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication
10)Chinaspopulationisover1.5billion,whilethepopulationoftheUnitedStatesisabout300million.
ThisfactmeansthatChinahasmuchmorehumancapitalthantheU.S.does.Trueorfalse?Explainyour
answer.
Answer:False.Populationcanmeasurethequantityofanationslaborresource,butthepopulation
numbersdonttellusanythingaboutskillsthatthislaborforceobtainedfromeducation,onthejob
training,andworkexperience,whicharecalledhumancapital.Thus,thepopulationnumbersinthe
statementonlytellusthatChinaislikelytohavemorelaborthantheUnitedStates,butitdoesnot
necessarilymeanthatitalsohasmorehumancapital.
Topic:HumanCapital
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

57
Copyright2014PearsonEducation,Inc.
11)Explainwhatentrepreneurshipisandwhyitisconsideredafactorofproduction.
Answer:Entrepreneurshipistheresource(thepeople)thatrunsbusinesses.Entrepreneursorganizethe
otherresources,land,labor,andcapital.Itisafactorofproductionbecausepeoplewiththedesireand
talenttosuccessfullyorganizeabusinessareneededtorunbusinesses.
Topic:Entrepreneurship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

12)Ananalystonalocalnewschannelarguesthattherecentcorporatescandalsdemonstratedvery
clearlythatselfinterestalwayscontradictssocialinterest.Doyouagreeordisagree?Substantiateyour
answer.
Answer:Youshoulddisagree.Therecentcorporatescandalsonlyshowthatselfinterestmightcontradict
socialinterest.Buttheydontprovethatthisisnecessarilythecaseaswecanfindmanyrealworld
examplesofhowpeopleguidedbyselfinterestpromotesocietyswellbeing.Infact,underthemarket
systemthewholeeconomyoperatesthroughthedecisionsmadebyselfinterestedindividuals.And
countriessuchastheUnitedStateshaveproventobemoresuccessfulinpromotingsocialinterestthan
werecentrallyplanned,orcommunist,economieswherepeoplesselfinterestwassuppressedandall
importanteconomicdecisionsweremadebygovernment.
Topic:SelfInterestandSocialInterest
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning

13)Whatisatradeoff?Giveanexample.
Answer:Atradeoffoccurswhenonethingmustbegivenuptogetanother.Tradeoffsarepervasive;at
thepersonallevel,studentstradeofftimespentstudyingfortimetheyotherwisecouldhavespent
socializing.
Topic:Tradeoffs
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication
14)Whatisopportunitycost?
Answer:Opportunitycostisthehighestvaluedalternativegivenupwhenselectinganaction.For
instance,theopportunitycostofstudyinganhouriswhateverthehighestvaluedalternativewouldhave
beenforthehourspentstudying.
Topic:OpportunityCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

58
Copyright2014PearsonEducation,Inc.
15)Yourfriendispreparingforthisexamandinyourpracticesessionmakesthefollowingstatement:
Insteadofattendingmicroeconomicsclassfortwohours,Kikicouldhaveplayedtennisorwatcheda
movie.Therefore,theopportunitycostofattendingclassisthetennisandthemovieshehadtogiveup.
Isyourfriendsanalysiscorrectornot?Explainyouranswer.
Answer:Yourfriendsanalysisisincorrect.Theopportunitycostofanactionisthehighestvalued
alternativeforgone,notallalternativesforgone.Kikisopportunitycostofstudyingforherexamiseither
thetennisorthemovie,whichevershewouldhavedonehadshenotstudied.
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

16)Ratherthangoouttoeatbyyourself,youdecidetostayathomeandfixdinnerforyourselfandyour
tworoommates.Yourroommatesapplaudyourdecision.Yourfirstroommatetellsyouthatyour
decisiontoeatathomehasnoopportunitycostbecauseyoualreadyhaveallthedinneringredientsin
yourpantry.Isthisroommatescommentcorrect?
Answer:Yourfirstroommatescommentisincorrect.Theopportunitycostofpreparingdinnerathome
iswhateveristhehighestvaluedalternativeforgone,which,givenyourchoiceboileddowntostaying
homeorgoingout,isgoingouttoeat.Hencetheopportunitycostoffixingdinnerathomeisgoingoutto
eat.
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

17)Definemarginalcostandmarginalbenefit.
Answer:Marginalcostistheopportunitycostofanincreaseinanactivity.Marginalbenefitisthebenefit
ofanincreaseinanactivity.
Topic:MarginalBenefitandMarginalCost
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication
18)InNewState,thebottlinglawrequiresthatpeoplegetarefundoffivecentswhentheyreturnan
emptybottleorcan.Whydoesthestatepaypeopletoreturnbottles?Inyouranswer,besuretomention
theroleplayedbyincentives.
Answer:Policymakersknowthatpeoplemakingchoicesrespondtoincentives.Insteadofthrowing
awaybottlesandcans,peoplewillnowbringtheusedbottlesandcanstothedesignatedareasfor
recyclinginordertoreceivetheirpayment.Thuspolicymakershavetakenadvantageofpeoples
decisionmakingbyincreasingthemarginalbenefitofreturningbottlesinordertoreducelitterandclean
theenvironment.
Topic:Incentives,MarginalCostandMarginalBenefit
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

59
Copyright2014PearsonEducation,Inc.
19)Ifthegovernmentraisesthetaxoncigarettes,whatistheeffectonpeoplesincentivesandchoices?
Answer:Thegovernmentraisesthetaxoncigarettestodiscouragesmoking.Withahighertaxtheprice
ofcigarettesrises.Theopportunitycostofsmokingincreases,whichgivespeopleincentivetocuttheir
consumptionofcigarettes.
Topic:Incentives,MarginalCostandMarginalBenefit
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

20)Whatisthedifferencebetweenpositiveandnormativestatements?
Answer:Positivestatementstellwhatisandnormativestatementstellwhatoughttobe.Positive
statementscanbetestedtodetermineiftheyarecorrectornot,whilenormativestatementsusevalue
judgmentsandsocannotbetested.Forexample,twoeconomistsmightagreeonthepositiveassertion
thatifthegovernmentspentitsfundspurchasingpharmaceuticaldrugsforpoorolderAmericansrather
thanpoorchildren,thenpoorolderAmericanswouldusemoredrugsandpoorchildrenwoulduse
fewer.Buttheymightdisagreeonthenormativeconclusionofwhetherthegovernmentshouldpursue
thispolicy.OneeconomistmightargueItisnotfairtohaveseniorcitizenssufferbecausetheycannot
affordmedicineandtheothereconomistmightargueItisnotfairtohavechildrensufferbecausetheir
parentscannotaffordmedicine.
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

21)Thedifferencebetweenpositiveandnormativestatementsisthatapositivestatementisalwaystrue
whileanormativestatementmightormightnotbetrue.Trueorfalse?Explain.
Answer:False.Thedifferencebetweenpositiveandnormativestatementsisthatapositivestatementis
aboutwhatis,whileanormativestatementisaboutwhatoughttobe.Apositivestatementcanbetested
againstthefactsandmaybeprovedtoberightorwrong,whereasanormativestatementdependson
valuesandcannotbetested.
Topic:PositiveandNormative
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

60
Copyright2014PearsonEducation,Inc.
22)Twoeconomistscanagreethatraisingtheminimumwagecreatesunemploymentyetonemight
arguethatraisingtheminimumwageisagoodpolicyandtheotherthatitisabadpolicy.Whycanthis
differenceexist?Besuretousethetermspositiveandnormativeinyouranswer.
Answer:Positivestatementsarestatementsthatdescribehowtheworldis.Positivestatementscanbe
testedandso,ultimately,anydisagreementsaboutpositivestatementsshouldberesolved.Thestatement
thatRaisingtheminimumwagecreatesunemploymentisapositivestatementand,onthebasisof
repeatedtesting,mosteconomistsagreethatitisacorrectpositivestatement.Normativestatements,
however,arestatementsthatdescribehowtheworldoughttobe.Normativestatementsdependon
peoplesvaluesandcannotbetested.Sooneeconomistmightarguethatraisingtheminimumwageisa
goodpolicybecausethiseconomistthinksthat,althoughitisunfortunatethatsomepeoplelosetheir
jobs,thefactthatothersretaintheirjobsandtheirwagesrisemorethanoutweighstheharmcreatedby
theunemployment.Anothereconomistmightstronglydifferbecausethesecondeconomistthinksthat
theharminflictedonpeoplewholosetheirjobsmorethanoutweighsanygoodfromsomeworkersbeing
paidmore.Thisdifferenceofopinioncanlastindefinitelybecausethereisnowaytotestthetwo
economistsbeliefstodeterminewhichiscorrect.
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:EthicalReasoning

23)Explainwhetherthestatement,ThereislifeonMars,isanormativeorpositivestatement.
Answer:Thestatementisapositivestatementbecauseitdoesnotdependonavaluejudgment.Instead,
itisastatementthattriestodescribewhatisandhenceistestable.Ofcourse,inordertotestthe
assertion,itwouldbenecessarytogotoMarstoascertainifthereislifepresent.Whileitisdifficult(!)at
presenttoactuallycarryoutthetest,nonethelessthestatementistestableandhenceisapositive
statement.
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

24)Explainwhetherthestatement,HillaryClintonwaselectedPresidentoftheUnitedStatesin2012,is
anormativeorpositivestatement.
Answer:Thestatementisapositivestatementbecauseitdoesnotdependonavaluejudgment.Instead,
itisastatementthattriestodescribewhatisandhenceistestable.Now,itisindeedthecasethat
HillaryClintonwasnotelectedpresidentin2012,sowhenwetestthestatementwediscoverthatitis
incorrect.But,whetherthestatementiscorrectornothasnobearingonwhetherthestatementispositive
ornormative.Thus,thestatementHillaryClintonwaselectedPresidentin2012isapositive,albeit
incorrect,statement.
Topic:PositiveandNormative
Skill:Conceptual
Status:Revised
AACSB:Communication

61
Copyright2014PearsonEducation,Inc.
25)Whatisanormativestatement?Giveanexample.
Answer:Anormativestatementisastatementaboutwhatoughttobe.Itisavaluejudgmentoropinion
andsocannotbeproventrueorfalse.AnexampleofanormativestatementisStudentsshouldattend
schoolyearroundtoreceiveabettereducation.
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

26)ExplainwhetherthestatementThegovernmentshouldincreasetariffsonJapanesecarstoprotectthe
Americancarindustryfromcompetition,isanormativeorpositivestatement.
Answer:Thestatementisnormative.Thestatementisanormativestatementbecauseitdependsona
valuejudgment,namelythatthegovernmentshouldprotecttheAmericancarindustryfromcompetition.
Topic:PositiveandNormative
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:Communication

7NumericandGraphingQuestions

1)Supposeyouareworkingfournightsperweekatyourcoursesandyourgradepointaverageis3.5.
Youwantahighergradeanddecidetostudyanextranighteachweek.YourGPAnowrisesto3.8.What
isyourmarginalbenefitfromstudyingforoneadditionalnightaweek?
Answer:Marginalbenefitisthebenefitthatarisesfromanincreaseinanactivity.Yourmarginalbenefit
isthe0.3increaseinyourgrade.Itsnotthe3.8gradebecauseyoualreadyhavethebenefitfromstudying
forfournightsaweekandshouldnotcountthisbenefitasresultingfromthedecisionyouarenow
making.
Topic:MarginalBenefit
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

2)Jerryisstudyingthreenightsperweekandhisgradepointaverageis3.1.HewantsahigherGPAand
decidestostudyanextranighteachweek.HisGPAnowrisesto3.5.HadJerrynotdecidedtostudyan
extranight,hewouldhavespentthisnightwithhisfriends.WhatisJerrysmarginalbenefitfrom
studyingforoneadditionalnightaweek?Whatishismarginalcostofincreasingthestudytimebyone
nightperweek?WhydoesJerrydecidetostudyanextranight?
Answer:Marginalbenefitisthebenefitthatarisesfromanincreaseinanactivity.Jerrysmarginalbenefit
isthe0.4increaseinhisgrade.Marginalcostistheopportunitycostofanincreaseinanactivity.Jerrys
marginalcostisanightspentwithhisfriendsthathegivesup.Jerrydecidestostudanextranight
becausehevaluesthemarginalbenefitfromit(the0.4increaseinhisgrade)morehighlythanits
marginalcost(anightspentwithhisfriends).
Topic:MarginalBenefitandMarginalCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

62
Copyright2014PearsonEducation,Inc.
8TrueorFalse

1)Scarcityappliestoboththerichandthepoor.
Answer:TRUE
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Scarcityaffectsonlythosewhoareinneed.
Answer:FALSE
Topic:Scarcity
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

3)Microeconomicsisthestudyoftopicssuchasnationalproductionandunemployment.
Answer:FALSE
Topic:Microeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

4)Macroeconomicsisthestudyofaggregatevariablessuchasnationalproductionandunemployment.
Answer:TRUE
Topic:Macroeconomics
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

5)Thetools,instruments,machines,andbuildingsthatpeopleusetoproducegoodsandservicesare
calledhumancapital.
Answer:FALSE
Topic:HumanCapital
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

6)MostincomeintheUnitedStatesisearnedbybusinessownersasprofit.
Answer:FALSE
Topic:Labor
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

7)TheUnitedStatesproducesmoreservicesthangoods.
Answer:TRUE
Topic:ProductionTrends
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

63
Copyright2014PearsonEducation,Inc.
8)WhenIbuyan$8.00movieticketratherthantwopaperbackbooks,theopportunitycostofgoingto
themovieisthetwopaperbackbooksIdidnotbuy.
Answer:TRUE
Topic:OpportunityCost
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

9ExtendedProblems

1)Supposeyouplantogotoschoolthissummer.Thecostoftuitionandtextbooksis$1,400andhousing,
board,andentertainmentwillcostyou$500.Ifyoudidntgotoschool,youdliveinyourparentshouse
forfree,butyourotherlivingexpenseswouldbeaboutthesame.Also,ifyoudidntgotoschoolyoud
workfulltimeandcouldearn$8,000.Youcanstillworkparttimewhileattendingthesummerschool,
butyouwillearnonly$3,000.
a) Whatwillthesummerschoolcostyouintermsofmoneyexplicitlypaid?
b) Whataretheopportunitycostsofgoingtosummerschoolthatyoudontpayexplicitly?Explain.
c) Whatisyourtotalopportunitycostsofgoingtoschoolthissummer?Explainyouranswer.
Answer:
a) Youexplicitlypaythecostoftuitionandtextbooks($1,400)andthecostofhousing($500),soyour
totalexplicitcostsare$1,900.
b) Youropportunitycostiswhatyourgiveuptogotosummerschool.Youforegoafulltimejob,at
whichyouwouldearn$8,000,inexchangeforaparttimejob,whereyouearn$3,000,whichmeansyou
giveup$5,000.Althoughyoudontpaythismoneyexplicitly,youlosetheopportunitytoearnitandso
itsanopportunitycostofattendingsummerschool.
c) First,youropportunitycostincludesthecostthatyoupayexplicitly($1,900),whichyouhavetopay
onlyifyougotoschool.Ifyoudecidenottogotoschool,youcanusethismoneytobuysomething
elseanopportunityyouaregivingup.Second,asexplainedinthepreviouspart,youarealsogivingup
$5,000,althoughnotpayingthismoneyexplicitly.Soyourfullopportunitycostofgoingtoschoolis
$1,900+$5,000=$6,900.
Topic:OpportunityCost
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

64
Copyright2014PearsonEducation,Inc.
2)Janeisdecidingwhethertogotoschoolfor8weeksthissummer.Thecostoftuitionandtextbooksis
$1,700andhousingandotherexpenseswillcosther$600.Ifshedoesnotgotoschool,shewillliveinher
parentshouseforfreeandtheywillcoverherfoodandotherexpensesforher.Also,ifJanedoesnotgo
tosummerschoolshecouldworkfulltime.Butthebestjobshecangetpaysonly$600perweek,andJane
wouldonlyagreetogiveupherfreetimefornolessthan$750perweek.However,ifshegoestosummer
school,shellhavetospend40hoursaweekattendingclassesandstudying.
a) WhatwillthesummerschoolcostJaneintermsofmoneyspent?
b) WhataretheopportunitycostsofgoingtosummerschoolthatJanedoesnotpayexplicitly?Explain.
c) WhatisJanestotalopportunitycostofgoingtoschoolthissummer?Explainyouranswer.
d) SupposethatifJanedoesnotgotosummerschool,shewilleventuallytaketheclassesanyway.What
isJanesmarginalbenefitofgoingtosummerschool?
e) SupposeJanedecidestogotoschoolinthesummer.Explainherdecisionusingtheconceptsof
marginalcostandmarginalbenefit.
Answer:
a) Janeexplicitlypaysthecostoftuitionandtextbooks($1,700)andthecostofhousing($600),soher
totalexplicitcostsare$2,300.
b) Janesopportunitycostiswhatshegivesup(herbestalternativeforgone)togotosummerschool.In
thiscasesheforgoes40hoursperweekofherfreetime,whichshevaluesmorehighlythentheincome
fromthebestjobshecouldfind.Toplaceadollarvalueonthistime,noticethatthevaluethatsheplaces
onthistimeistheamountofmoneysheiswillingtoaccepttogiveitup:$750perweek.Sofortheeight
weeks,herfreetimehasavalueof$7508=$6,000.Althoughshedoesnotpay$6,000explicitly,she
givesupthisvalueofherfreetimeandhenceitsanopportunitycosttoher.
c) Janestotalopportunitycostincludesthecostthatshepaysexplicitly,$2,300,whichshehastopay
onlyifshegoestoschool.Also,asexplainedinthepreviouspart,Janeisgivingupthevalueofherfree
time,$6,000.Thus,herfullopportunitycostofgoingtoschoolis$2,300+$6,000=$8,300.
d) Janesmarginalbenefitofgoingtosummerschoolisthepossibilityofgettingherdegreefaster.For
instance,ifthesummerschoolallowshertograduateonesemesterearlier,shecanstarttoworkandearn
incomeearlier.Theadditionalincomeandworkexperiencethatshegetsbecauseofherearlier
graduationiswhatshegainsifshedecidestogotoschoolinthesummer.
e) Janedecidestogotoschoolinthesummerifhermarginalbenefitfromthisdecision,thevalueof
extraincomeandworkexperiencethatshegetsifshegraduatesearlier,isgreaterthanthemarginalcost
ofhersummerschool,$8,300.
Topic:MarginalAnalysis
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

65
Copyright2014PearsonEducation,Inc.
3)SupposeCanonInc.decidedtoinvest45billionyenindevelopingandlaunchinganewmodelofits
digitalcamera,expectingthatitwillbringadditionalsalesof60billionyen.Thecompanyhasalready
invested38billionyenwhenthemarketingdepartmentsuddenlyfindsoutthattheintroductionofa
similarcamerabySonywillreduceCanonsexpectedadditionalsalesto30billionyen.Thecompanys
managementistryingtodecidewhethertocontinueinvestinginthenewproductorclosetheproject.
Canonhiresyouasaneconomicconsultant.So,thinklikeaneconomisttohelpthecompanys
managementmaketheirdecision:
a) Atthispointintime,whatisCanonsmarginalcostofintroducingthenewproduct?
b) WhatisCanonsmarginalbenefitfromintroducingthenewproduct?
c) WillyouadviseCanontofinishtheprojectandintroducethenewproduct?Whyorwhynot?What
principlesofeconomicthinkingwillhelpyouanalyzethesituationandmaketherightchoice?
Answer:
a) Canonsmarginalcostistheadditionalinvestmentneededtofinishtheproject,whichis7billionyen.
b) Canonsmarginalbenefitisthebenefitthatarisesfromthenewproduct,theadditionalrevenuefrom
sales,whichinthechangedsituationisexpectedtobe30billionyen.
c) Theprincipleofchoosingatthemarginwillhelp.Accordingtothisprinciple,theamountofmoney
alreadyspentisirrelevanttothedecisionyouaremakingnow.Thatis,youshouldonlyconsiderthe
marginalcostsandmarginalbenefitsthatwillresultfromthedecisioninquestion.Now,ifCanongoes
ahead,finishestheprojectandintroducesthenewcamera,itwillcostthemadditional7billionyen,but
theywillgainadditionalsalesof30billionyen.Themarginalbenefitofintroducingthenewproduct
exceedsthemarginalcost,whichmeansthecompanyshouldinvest7billionyentofinishdevelopment
andintroducethenewproduct.NoticealsothatifCanonabandonstheproject,therewillbeno
additionalmoneycosts,buttheopportunitycostwillbetheadditionalsales(30millionyen)thatthe
companyispotentiallylosing.Thus,theconceptofopportunitycostalsohelpstoclarifythesituation.
Topic:MarginalAnalysis
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

66
Copyright2014PearsonEducation,Inc.
4)Yourstudentassociationislookingforanauditoriumtorentforanalldayconference.Theuniversitys
PerformingArtsCenterisvacantonthatday,sotheassociationwantstorentit.Thephysicalplant
managertellsyouthatthedailyrentis$660,whichincludes$400tocoverpartofthecostpaidtobuild
theCenter,$40tocoverpartofitsregularmaintenancecost,$50tohelppayforthebuildingsinsurance,
$100tocovertheextracostofelectricitythattheuniversitywouldincurbecauseoftheconference,and
$70topayforadditionaljanitorialservicesfortheconference.Youknowthatnooneelsewantstorent
theCenteronthatdayandyouthinkthatthepricethatthemanagerchargesistoohigh.Buthowmuch
shouldyoupay?Usetheeconomicwayofthinkingtoanswerthisquestionandtoconvincethemanager
toacceptyouroffer:
a) IfyourenttheCenter,whatwillbetheuniversitysmarginalcostofrentingthecentertoyou?
b) IfyourenttheCenter,whatwillbetheuniversitysmarginalbenefitofrentingthecentertoyou?
c) Whatamountofrentshouldyouoffer?Convincethemanagertoacceptyouroffer.
Answer:
a) Theuniversitysmarginalcostis$170.Thesearetheextracostofelectricity($100)andjanitorial
services($70)thattheuniversitywillonlypayifyourenttheCenter.ThecostsofbuildingtheCenter,
insurance,andregularmaintenancecostsarenotextracostsincurredbecauseyourenttheCenter.The
universityhasalreadypaidforbuildingitandpaysthecostofinsuranceandregularmaintenanceno
matterwhetheryourenttheCenterornot.Thereforethesecostsarenotmarginalcostsofrentingthe
centertoyou.
b) Theuniversitysmarginalbenefitistheamountofrentthatyoupay.
c) Youshouldstartnegotiatingfrom$171.Becausetheuniversitysmarginalcostis$170andthe
amountyoupayisitsmarginalbenefit,theuniversitywillbebetteroffifitacceptsanyamountgreater
than$170.Ifthemanagerisstillnotconvinced,tellthemanagerthat,sincenooneelsewantstorentthe
Centeronthatday,decliningyourofferisnotcostfree.Theopportunitycostofnotacceptingitwillbe
thedifferencebetweentheofferedrentand$170.Inpractice,ofcourse,therearetransactioncosts,suchas
thetimespentbybothpartiestonegotiateandsigntheagreement,andacceptingyourofferwillcostthe
managersomeextratimeandorganizationaleffort.Also,asyoulearntinthischapter,peopleareguided
byselfinterestwhentheymaketheirdecisionsandthemanagersselfinterestisnotnecessarilythesame
astheuniversitysinterest.Ontheotherhand,youmightwanttosupportyouruniversity.Thereforethe
amountofrentyouwillagreeuponislikelytobehigherthan$171.
Topic:MarginalAnalysis
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

10Appendix:GraphingData

1)Thehorizontalaxisinagraph
A)measurestimeinascatterdiagram.
B)measuresthequalityofavariable.
C)isnamedtheyaxis.
D)isnamedthexaxis.
Answer:D
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

67
Copyright2014PearsonEducation,Inc.
2)Theverticalaxisinagraph
A)isnamedtheyaxis.
B)isnamedthexaxis.
C)isnotusedinascatterdiagram.
D)hasnoorigin.
Answer:A
Topic:GraphingData
Skill:Recognition
Status:Modified10thedition
AACSB:AnalyticalSkills

3)Thevalueoftheycoordinateofapointinagraphisthelengthofalinefromthepointtothe
A)origin.
B)scalar.
C)xaxis.
D)yaxis.
Answer:C
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

4)Thevalueofthexcoordinateofapointinagraphisthelengthofalinefromthepointtothe
A)origin.
B)scalar.
C)xaxis.
D)yaxis.
Answer:D
Topic:GraphingData
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

5)Onthehorizontalaxisofagraph,generally
A)valuesincreasefromlefttoright.
B)valuesincreasefromrighttoleft.
C)valuescanbepositiveand/ornegative.
D)BothanswersAandCarecorrect.
Answer:D
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

68
Copyright2014PearsonEducation,Inc.

6)Intheabovefigure,thexcoordinateofpointbis
A)1.
B)2.
C)3.
D)14.
Answer:C
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

7)Intheabovefigure,theycoordinateofpointbis
A)1.
B)2.
C)3.
D)14.
Answer:D
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

69
Copyright2014PearsonEducation,Inc.

8)Intheabovefigure,whenincomeiszero,householdexpendituresequal
A)0.
B)$1000.
C)$4000.
D)$8000.
Answer:D
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

70
Copyright2014PearsonEducation,Inc.

9)Inthefigureabove,thevalueonthexaxisincreasesaswemovefrom
A)pointGtopointA.
B)pointCtopointA.
C)pointFtopointA.
D)pointEtopointA.
Answer:A
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

10)Inthefigureabove,thevalueontheyaxisdecreasesaswemovefrom
A)pointGtopointA.
B)pointCtopointA.
C)pointFtopointA.
D)pointEtopointA.
Answer:D
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

11)Inthefigureabove,pointBis
A)onthexaxis.
B)ontheyaxis.
C)attheorigin.
D)acoordinate.
Answer:A
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

71
Copyright2014PearsonEducation,Inc.

12)Usingtheabovefigure,theoriginisatwhichpoint?
A)Pointa
B)Pointb
C)Pointc
D)Noneofthepointsinthefigureistheorigin.
Answer:B
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

13)Usingtheabovefigure,whichofthefollowingistrue?
A)Axis1istypicallycalledtheyaxis.
B)Axis1isalsoknownastheorigin.
C)Axis2istypicallycalledthexaxis.
D)Pointbisknownastheorigin.
Answer:D
Topic:GraphingData
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

72
Copyright2014PearsonEducation,Inc.
14)Ascatterdiagramshowsthe
A)levelofonevariableovertime.
B)changeinonevariableovertime.
C)relationshipbetweentwovariables.
D)evolutionofavariable.
Answer:C
Topic:ScatterDiagrams
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
15)Ascatterdiagramwillbemostuseful
A)indiscerningapossiblerelationshipbetweenheightandweightforindividuals.
B)inresolvingadisputeovertwonormativeassertions.
C)inpredictingnextyearsrateofunemployment.
D)Alloftheabovearecorrect.
Answer:A
Topic:ScatterDiagrams
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

16)Younoticethatwheninterestratesincreases,newresidentialhousingpricestendtodecrease.This
observationindicatesthat
A)theremustbefalsecausalitybetweeninterestratesandhousingprices.
B)higherinterestratesmustcauselowhousingprices.
C)ascatterdiagrambetweeninterestratesandhousingpriceswillshowanegativerelationship.
D)ascatterdiagrambetweeninterestratesandhousingpriceswillshowadirectrelationship.
Answer:C
Topic:ScatterDiagrams
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

73
Copyright2014PearsonEducation,Inc.

17)Theabovefigureplotsincomeandconsumptioninanation.In2007
A)consumptionwasequalto$25,000andincomewasequalto$28,000.
B)consumptionwasequalto$28,000andincomewasequalto$25,000.
C)consumptionwasequalto$25,000andincomewasequalto$25,000.
D)consumptionwasequalto$27,000andincomewasequalto$31,000.
Answer:A
Topic:ScatterDiagrams
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

74
Copyright2014PearsonEducation,Inc.

18)Theabovefiguregraphsthepriceofabushelofwheatandhousingstarts.Thegraphshowsthe
variablesare
A)stronglypositivelyrelated.
B)stronglynegativelyrelated.
C)notrelated.
D)relatedviaanindirectrelationship.
Answer:C
Topic:ScatterDiagrams
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

75
Copyright2014PearsonEducation,Inc.

19)Thefigureaboveshowsthatin1996,unemploymentwasequaltoabout________andtheinflation
ratewasequaltoabout________.
A)7.0percent;3.0percent
B)3.0percent;5.5percent
C)5.5percent;3.0percent
D)6.0percent;4.0percent
Answer:C
Topic:ScatterDiagrams
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

76
Copyright2014PearsonEducation,Inc.

20)Theabovefigurereveals
A)norelationshipbetweenhouseholdincomeandaveragehouseholdexpenditureonautomobiles.
B)thatashouseholdincomeincreasestheaveragehouseholdexpenditureonautomobilesdecreases.
C)thatashouseholdincomeincreasestheaveragehouseholdexpenditureonautomobilesincreases.
D)Alloftheabovearepossible.
Answer:C
Topic:ScatterDiagrams
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

77
Copyright2014PearsonEducation,Inc.

21)Intheabovefigure,theaxisbreaksareused
A)tocreateamisleadinggraph.
B)toindicatethattherearejumpsfromtheorigin,0,tothefirstvaluesrecordedalongtheaxes.
C)toindicatethattherearenotenoughdatatobeincludedinthegraph.
D)toshowthattherearenodataavailablefortheomittedranges.
Answer:B
Topic:BreaksintheAxes
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

78
Copyright2014PearsonEducation,Inc.

22)Intheabovefigure,theaxisbreakinthexaxis
A)reflectsthefactthatfortheyearscoveredinthefigure,theunemploymentratewasneverlessthan3
percent.
B)showsthatthereisnorelationshipbetweeninflationandunemployment.
C)misleadinglyshowsthatinflationhaschangedverylittleeventhoughtheunemploymentratehas
increasedagreatdeal.
D)impliesthatfortheyearscoveredinthefigure,theinflationratewasalwaysgreaterthan1percent.
Answer:A
Topic:BreaksintheAxes
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

23)Onagraph,highcorrelationbetweenthevariablemeasuredalongthexaxisandthevariable
measuredalongtheyaxis
A)meansthatchangesinthevariablemeasuredalongthexaxismustcausechangesinthevariable
measuredalongtheyaxis.
B)meansthatchangesinthevariablemeasuredalongtheyaxismustcausechangesinthevariable
measuredalongthexaxis.
C)meansthatchangesineithervariablemustcausechangesintheothervariable.
D)doesNOTmeanthatachangeinthevariablemeasuredalongthexaxismustcauseachangeinthe
variablemeasuredalongtheyaxis.
Answer:D
Topic:CorrelationandCausation
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

79
Copyright2014PearsonEducation,Inc.
24)Younoticethatwhentheinflationrateincreases,theinterestratetendstoincrease.Thisobservation
indicatesthat
A)theremightbefalsecausalitybetweeninflationandtheinterestrate.
B)higherinflationratesmustcauseahigherinterestrate.
C)ascatterdiagramoftheinflationrateandtheinterestratewillshowapositiverelationship.
D)thevariableshaveaninverserelationship.
Answer:C
Topic:StudyGuideQuestion,ScatterDiagrams
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

25)Inthefigureabove,whenincomeequals$20,000,whatdoesconsumptionequal?
A)$0
B)$10,000
C)$20,000
D)impossibletotell
Answer:D
Topic:StudyGuideQuestion,ScatterDiagrams
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

80
Copyright2014PearsonEducation,Inc.
11Appendix:GraphsUsedinEconomicModels

1)Iftwovariablesarepositivelyrelated,then
A)theymoveinoppositedirections.
B)theyareindependentofeachother.
C)theymoveinthesamedirection.
D)theirgraphwillhaveanegativeslope.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

2)Iftwovariablesbothincreaseatthesametimeordecreaseatthesametime,theyare
A)unrelatedtoeachother.
B)positivelyrelated.
C)negativelyrelated.
D)converselyrelated.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

3)Ifthereisadirectrelationshipbetweentwovariables,
A)thegraphoftherelationshipwillbeupwardsloping.
B)thegraphoftherelationshipwillbedownwardsloping.
C)theslopeoftheline(ortheslopeofatangentlinetothecurve)willbenegative.
D)BothanswersAandCarecorrect.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

4)Thevariablemeasuredontheyaxisincreaseswheneverthevariablemeasuredonthexaxisincreases.
Asaresult,therelationshipbetweenthevariableswill
A)benegativelysloped.
B)haveaslopeofzero.
C)beaverticalline.
D)benoneoftheabove.
Answer:D
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

81
Copyright2014PearsonEducation,Inc.
5)Apositiverelationshipexistsbetweentwovariablesif
A)onevariablehaspositivelynoeffectontheothervariable.
B)areductioninonevariableisassociatedwithanincreaseintheothervariable.
C)areductioninonevariableisassociatedwithadecreaseintheothervariable.
D)bothvariablesareinflationdistorted.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

6)Iftheslopeofalinethatgraphstherelationshipbetweenvariablexandvariableyispositive,thenwe
knowthat
A)whenthevalueofvariablexincreases,thenthevalueofvariableydecreases.
B)whenthevalueofvariablexdecreases,thenthevalueofvariableydecreases.
C)thetwovariablesareunrelated.
D)thetwovariableshaveaninverserelationship.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

7)FortheJoneshouseholdithasbeenestimatedthatforeverytendegreesincreaseintheoutdoor
temperaturetheconsumptionoficeteaincreasesby5glasses.Whattypeofrelationshipexistsbetween
temperaturechangeandtheconsumptionoficetea?
A)negativerelationship
B)positiverelationship
C)norelationship
D)maximumrelationship
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

82
Copyright2014PearsonEducation,Inc.

8)Intheabovefigure,whichcurveshowsapositiverelationshipbetweenxandy?
A)OnlycurveA.
B)OnlycurveB.
C)OnlycurveC.
D)Allthecurvesshowapositiverelationship.
Answer:D
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

9)Intheabovefigure,whichcurveshowsanegativerelationshipbetweenxandy?
A)OnlycurveA.
B)OnlycurveB.
C)OnlycurveC.
D)Noneofthecurvesshowanegativerelationship.
Answer:D
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

83
Copyright2014PearsonEducation,Inc.
10)AscatterdiagramwiththepriceofvacationstoMexicoontheverticalaxisandthepriceofvacations
toCaliforniaonthehorizontalaxisshowsapositiverelationship.IfthepriceofvacationstoMexicowere
placedonthehorizontalaxis,andthepriceofvacationstoCaliforniaontheverticalaxis,therelationship
wouldbe
A)negativerelationship,alsocalledadirectrelationship.
B)negativerelationship,alsocalledaninverserelationship.
C)positiverelationship,alsocalledadirectrelationship.
D)positiverelationship,alsocalledaninverserelationship.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

11)Thefigureaboveshows________relationshipbetweenthetwovariables.
A)apositive
B)anegative
C)no
D)aninverse
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
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84
Copyright2014PearsonEducation,Inc.
12)Asyoudevotemorehourstostudying,yourGPAincreases.Agraphofthisrelationshipwould
show
A)apositiverelationship.
B)adirectrelationship.
C)aninverserelationship.
D)BothanswersAandBarecorrect.
Answer:D
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

13)Asinterestratesrise,peoplesavemoremoney.Agraphdisplayingthisrelationshipwouldshow
A)aninverserelationship.
B)apositiverelationship.
C)acrosssectiongraph.
D)apositivethenanegativerelationship.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

14)Ifyouhire1worker,theworkercanproduce20pizzasaday.Ifyouhirea2ndworker,thatworker
canproduce10morepizzas.Ifyouhirea3rdworker,thatworkercanproduce2morepizzasaday.A
graphdisplayingthisrelationshipbetweenthenumberofemployeesandtotalpizzaoutputperday
wouldshow
A)apositivelinearrelationship.
B)anupwardslopingcurvethatbecomeslesssteep.
C)anegativelinearrelationship.
D)anegativelyslopedcurvethatbecomeslesssteep.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

15)Ifyoustudy3hoursforanexam,youcanraiseyourscoreby30points.Ifyoustudyforanother3
hoursyourscoreincreasesby10points.Andifyoustudyforanother3hours,yourscorewillincreaseby
5morepoints.Agraphdisplayingthisrelationshipbetweenthenumberofhoursstudiedandyourtotal
examscorewouldshow
A)apositivelinearrelationship.
B)anupwardslopingcurvethatbecomeslesssteep.
C)anegativelinearrelationship.
D)anupwardslopingcurvethatbecomesmoresteep.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

85
Copyright2014PearsonEducation,Inc.
16)Supposeyouproduce10bikesadayforatotalcostof$1000.Totalcostsincreaseto$1100whenyou
produce15bikes.Finally,totalcostsincreaseto$1300ifyoumake20bikes.Agraphshowingthe
relationshipbetweentotalcostsandthenumberofbikesproducedwouldbe
A)anegativelyslopedlinethatbecomessteeper.
B)apositivelyslopedlinethatbecomessteeper.
C)anegativelyslopedlinethatbecomesflatter.
D)apositivelyslopedlinethatbecomesflatter.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

Totalhouseholdincome
(dollars)
Totalconsumption
(dollars)
30,000 27,000
40,000 35,000
50,000 38,000

17)ThedatainthetableaboveshowstherelationshipbetweentheJonesestotalconsumptionandtotal
householdincome.Basedonthesedata,totalconsumptionvaries
A)directlywiththeirtotalhouseholdincome.
B)independentlyoftheirtotalhouseholdincome.
C)inverselywiththeirtotalhouseholdincome.
D)negativelywiththeirincome.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

86
Copyright2014PearsonEducation,Inc.

x y
0 0
2 6
4 12
6 18
8 24
10 30

18)Intheabovetable,whenxincreasesfrom4unitsto6units,ychangesby________units.
A)2
B)2
C)6
D)6
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
19)Theabovetableindicatesthatvariablesxandyare
A)positivelyrelated.
B)inverselyrelated.
C)negativelyrelated.
D)notrelated.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Modified10thedition
AACSB:AnalyticalSkills

87
Copyright2014PearsonEducation,Inc.

x y
0 2
1 5
2 8
3 11
4 14
5 17

20)Giventheinformationintheabovetable,therelationshipbetweenxandyis
A)positive,andthecurvebecomesflatterasxincreases.
B)positive,andthecurvebecomessteeperasxincreases.
C)positiveandlinear.
D)negativeandlinear.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

21)Intheabovefigure,therelationshipbetweenxandyis
A)positive,andthecurvebecomesflatterasxincreases.
B)positive,andthecurvebecomessteeperasxincreases.
C)positiveandlinear.
D)negativeandlinear.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

88
Copyright2014PearsonEducation,Inc.

22)TheabovefigureshowstherelationshipbetweentheJonesestotalconsumptionandtotalhousehold
income.ThefigureillustratesthattheJonesestotalconsumptionvaries
A)directlywiththeirtotalhouseholdincome.
B)independentlyoftheirtotalhouseholdincome.
C)inverselywiththeirtotalhouseholdincome.
D)negativelywiththeirincome.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

89
Copyright2014PearsonEducation,Inc.

23)Therelationshipdepictedintheabovefigureis
A)anegativelinearrelationship.
B)apositivelinearrelationship.
C)apositivebecominglesssteeprelationship.
D)apositivebecomingsteeperrelationship.
Answer:C
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

24)Wheneveronevariableincreases,anothervariabledecreases.Thetwovariablesare
A)definitelyrelatedthroughathirdvariable.
B)negativelyrelated.
C)positivelyrelated.
D)unrelatedtoeachother.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

25)Ifvariablexalwaysincreaseswhenvariableydecreases,xandyaresaidtobe
A)positivelyrelated.
B)negativelyrelated.
C)unrelated.
D)trendrelated.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

90
Copyright2014PearsonEducation,Inc.
26)Ifthereisaninverserelationshipbetweenvariablexandvariabley,thenanincreaseinthevalueof
variablexwillbeaccompaniedby
A)anincreaseinthevalueofvariabley.
B)adecreaseinthevalueofvariabley.
C)nochangeinthevalueofvariabley.
D)variableyreachingitsmaximumvalue.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

27)Ifthereisaninverserelationshipbetweentwovariables,thegraphofthisrelationship
A)willbeahorizontalline.
B)willbedownwardsloping.
C)mightbehorizontal.
D)willbeupwardsloping.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Modified10thedition
AACSB:AnalyticalSkills

28)Anegativerelationshipexistsbetweenthevariablemeasuredalongtheyaxisandthevariable
measuredalongthexaxisif
A)areductioninthevariablemeasuredalongthexaxisisassociatedwithareductioninthevariable
measuredalongtheyaxis.
B)anincreaseinthevariablemeasuredalongthexaxisisassociatedwithanincreaseinthevariable
measuredalongtheyaxis.
C)thevariablemeasuredalongthexaxisandthevariablemeasuredalongtheyaxismoveinthe
oppositedirection.
D)thevariablemeasuredalongthexaxisandthevariablemeasuredalongtheyaxismoveinthesame
direction.
Answer:C
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

29)Alongacurve,whenonevariableincreases,theothervariabledecreases.Thecurveshowingthis
relationship
A)mightbehorizontal.
B)hasapositiveslope.
C)hasanegativeslope.
D)hasanincreasingthenadecreasingslope.
Answer:C
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Modified10thedition
AACSB:AnalyticalSkills

91
Copyright2014PearsonEducation,Inc.
30)Asthepriceofgasolineincreases,fewerpeoplebuycarsthataregasguzzlers.Agraphshowingthis
relationshipwouldhave
A)anegativeslope.
B)apositiverelationship.
C)adirectrelationship.
D)ahorizontalline.
Answer:A
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

31)AgraphshowsthatasfeestouseATMmachinesincrease,peopleusethemlessfrequently.Thegraph
ofthisrelationshipwouldshow
A)aninverserelationship.
B)anegativerelationship.
C)adirectrelationship.
D)BothanswersAandBarecorrect.
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

32)Asthenumberofdayswithoutrainincreases,theamountofwheatperacregrowndeclines.Agraph
showingthisrelationshipwouldhaveacurve
A)thatisahorizontalline.
B)thatisaverticalline.
C)showingapositiverelationship.
D)Noneoftheaboveanswersarecorrect.
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Modified10thedition
AACSB:AnalyticalSkills

33)AsafirmproducesmoreandmoreCDs,theaveragecostofproducingeachCDfalls.Acurve
showingthebehavioroftheaveragecostofaCDasmoreCDsareproduced
A)wouldbepositivelyandthennegativelysloped.
B)wouldbepositivelysloped.
C)wouldbehorizontal.
D)wouldbenegativelysloped.
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

92
Copyright2014PearsonEducation,Inc.
34)Supposethatwefindthatstudentgradesandtimespentatpartiesmoveinoppositedirections.A
graphoftherelationshipbetweenthesetwovariableswouldcurve
A)upwardandbelinear.
B)upwardandmaybelinearornonlinear.
C)downwardandbelinear.
D)downwardandmaybelinearornonlinear.
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

35)Thefasteranautomobileisdriven(speed),thelowerthemilespergallon(mpg)forthatautomobile.
Giventhisinformation,wesaythatanautomobilesspeedandmpghave
A)adirectrelationship.
B)aninverserelationship.
C)alinearrelationship.
D)amaximumrelationship.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

36)Ifthequantityofwoodpurchaseddecreaseswhenthepriceofwoodrises,agraphrepresentingthese
variableswouldhave
A)timeontheverticalaxis.
B)theslopeontheverticalaxis.
C)anegativeslope.
D)apositiveslope.
Answer:C
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

37)Ascatterdiagramwiththepriceofpeanutbutterontheverticalaxisandthepriceofjellyonthe
horizontalaxisshowsanegativerelationship.Ifthepriceofjellywasplacedontheverticalaxisandthe
priceofpeanutbutterwasplacedonthehorizontalaxis,therelationshipwouldbea
A)negativerelationship,alsocalledadirectrelationship.
B)negativerelationship,alsocalledaninverserelationship.
C)positiverelationship,alsocalledadirectrelationship.
D)positiverelationship,alsocalledaninverserelationship.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

93
Copyright2014PearsonEducation,Inc.

38)Intheabovefigure,ifthereisanegativerelationshipbetweenthevariablesxandy,whichofthe
graphsabovecanbeusedtoindicatethis?
A)FigureA
B)FigureB
C)FigureC
D)bothFigureAandFigureC
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

39)Intheabovefigure,whichofthegraphsdemonstratesacurvewithadecreasingslope,thatis,aslope
gettingsmallerinmagnitudeasxincreases?
A)FigureA
B)FigureB
C)FigureC
D)FigureD
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

94
Copyright2014PearsonEducation,Inc.

40)Intheabovefigure,anegativerelationshipisdemonstratedinwhichofthegraphs?
A)FigureA
B)FigureB
C)FigureC
D)FigureD
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

95
Copyright2014PearsonEducation,Inc.

41)Theabovefiguredepictsa
A)positivenonlinearrelationshipbetweenageandthenumberofhamburgerspurchasedperyear.
B)negativenonlinearrelationshipbetweenageandthenumberofhamburgerspurchasedperyear.
C)positivelinearrelationshipbetweenageandthenumberofhamburgerspurchasedperyear.
D)negativelinearrelationshipbetweenageandthenumberofhamburgerspurchasedperyear.
Answer:D
Topic:VariablesThatMoveinOppositeDirections
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

96
Copyright2014PearsonEducation,Inc.

42)Intheabovefigure,therelationshipbetweencostsandquantityisnegative
A)betweenpointAandpointB.
B)betweenpointBandpointC.
C)alongtheentirecurve.
D)nowherealongthecurve.
Answer:A
Topic:VariablesThatMoveinOppositeDirections
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

97
Copyright2014PearsonEducation,Inc.

43)Intheabove,apositiverelationshipbetweenpriceandquantityisshownin
A)FigureA.
B)FigureB.
C)bothFigureAandFigureB.
D)neitherFigureAnorFigureB.
Answer:B
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

44)Intheabovefigure,anegativerelationshipbetweenpriceandquantityisshownin
A)FigureA.
B)FigureB.
C)BothFigureAandFigureB.
D)NeitherFigureAnorFigureB.
Answer:A
Topic:VariablesThatMoveinOppositeDirections
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

45)Ifagraphshowsanegativerelationshipbetweentwovariableswhichthenbecomesapositive
relationship,thiscurvewould
A)alwaysbeanupwardslopingline.
B)haveaminimumpoint.
C)haveamaximumpoint.
D)alwaysbeadownwardslopingline.
Answer:B
Topic:MaximumandMinimumPoints
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

98
Copyright2014PearsonEducation,Inc.
46)Asafirmexpandsitsoutput,costperunitofoutput(averagecost)decreasesandthenincreases.
Averagecostandoutputhave
A)arelationshipwithaminimum.
B)arelationshipwithamaximum.
C)norelationship.
D)alinearpositiverelationship.
Answer:A
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

47)Intheabovefigure,therelationshipbetweenthetaxrateandtaxrevenueispositiveandbecoming
lesssteepbetweentaxratesof
A)0percentand30percent.
B)30percentand100percent.
C)0percentand100percent.
D)Noneoftheaboveanswersarecorrect.
Answer:A
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

99
Copyright2014PearsonEducation,Inc.
48)Intheabovefigure,ifthetaxrateisincreasedfrom20percentto30percent,taxrevenue
A)decreases.
B)isconstant.
C)increases.
D)mayincreaseordecrease.
Answer:C
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

49)Intheabovefigure,taxrevenueisatamaximumwhenthetaxrateis
A)0percent.
B)30percent.
C)50percent.
D)100percent.
Answer:B
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

50)Asacurveapproachesamaximumpoint,theslopewill
A)bepositive,thennegativeafterthemaximumpoint.
B)benegative,thenpositiveafterthemaximumpoint.
C)remainconstantoneithersideofthemaximumpoint.
D)increasebeforeandafterthemaximumpoint.
Answer:A
Topic:MaximumandMinimumPoints
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

100
Copyright2014PearsonEducation,Inc.

51)Inthefigureabove,therelationshipbetweenthexvariableandtheyvariable
A)ispositive.
B)isnegative.
C)startsbybeingpositiveandthenbecomesnegative.
D)startsbybeingnegativeandthenbecomespositive.
Answer:C
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

101
Copyright2014PearsonEducation,Inc.

Totalnumber
ofworkers
Averagecostof
producinga
televisionset
(dollars)
4 125
10 75
13 77
15 85

52)Graphingthedataintheabovetablewiththenumberofworkersonthehorizontalaxisandthe
averagecostontheverticalaxis,thegraphwouldshow
A)firstanegativeandthenapositiverelationship.
B)ahorizontalline.
C)norelationship.
D)alinearrelationship.
Answer:A
Topic:VariablesThatHaveaMaximumorMinimum
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
53)Ifacurverisesandthenfalls,itshowsa
A)maximum.
B)minimum.
C)linearrelationship.
D)constantsloperelationship.
Answer:A
Topic:MaximumandMinimumPoints
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

54)Ifacurvefallsandthenrises,itshows
A)amaximum.
B)aminimum.
C)alinearrelationship.
D)aconstantsloperelationship.
Answer:B
Topic:MaximumandMinimumPoints
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

102
Copyright2014PearsonEducation,Inc.
55)Whenychanges,xstaysthesame.Thelinedepictingthisrelationshipwouldbe
A)vertical.
B)horizontal.
C)linearwithanegativeslope.
D)linearwithapositiveslope.
Answer:A
Topic:VariablesThatAreUnrelated
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

56)Agraphmeasuresyontheverticalaxisandxonthehorizontal.Thecurveonthegraphisa
horizontalline.Fromthisfactweknowthat
A)thevalueofxneverchanges.
B)thevalueofydoesnotdependonthevalueofx.
C)theratioofxtoyisconstant.
D)theslopeofthelineisnotdefinedbecauseyneverchanges.
Answer:B
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
57)Agraphmeasuresyontheverticalaxisandxonthehorizontal.Thecurveonthegraphisavertical
line.Fromthisfactweknowthat
A)thevalueofxdoesnotchangewhenthevalueofychanges.
B)thevalueofyisconstant.
C)theratioofxtoyisconstant.
D)theratioofytoxisconstant.
Answer:A
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

58)Thegraphoftwovariables,xandy,isahorizontalline.Thisresultindicatesthatxandyare
A)positivelyrelated.
B)negativelyrelated.
C)notrelated.
D)falselyrelated.
Answer:C
Topic:VariablesThatAreUnrelated
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

103
Copyright2014PearsonEducation,Inc.
59)Adiagramshowsthequantityoftomatoesonthehorizontalaxisandthequantityofcoffeeonthe
verticalaxis.Thequantityoftomatoesremainsconstantasthequantityofcoffeeincreases.Thegraphof
thesedatais
A)ahorizontalline.
B)averticalline.
C)apositivelyslopedline.
D)anegativelyslopedline
Answer:B
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

60)Agraphshowsthepriceofapoundofcucumbersontheverticalaxisandthequantityofnewcars
soldbyGMonthehorizontalaxis.Thepriceofapoundofcucumbersremainsconstantasthequantityof
newcarssoldincreases.Thegraphofthesedatais
A)ahorizontalline.
B)averticalline.
C)acurvewithamaximum.
D)apositivelyslopedline.
Answer:A
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
61)Iftwovariablesareunrelated,ascatterdiagramofthosevariableswill
A)beaverticalline.
B)beahorizontalline.
C)beeitheraverticalorhorizontalline.
D)haveaconstantpositiveslope.
Answer:C
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

104
Copyright2014PearsonEducation,Inc.

62)Whichofthefollowingcorrectlydescribestheabovefigure?
I. Thereisnorelationshipbetweenthepriceofanavocadoandastudentsgradeineconomics.
II. Thevalueofvariablemeasuredontheyaxisisconstantasthevariablemeasuredonthexaxis
increases.
III. Asastudentsgradeineconomicsincreases,thepriceofanavocadoincreases.
A)I
B)IandII
C)IIandIII
D)I,II,andIII
Answer:B
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

105
Copyright2014PearsonEducation,Inc.

63)Intheabove,astheyvariableincreases
A)thexvariableisconstant.
B)thexvariableincreases.
C)thexvariabledecreases.
D)thexvariableatfirstincreasesbutthendecreases.
Answer:A
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

106
Copyright2014PearsonEducation,Inc.

64)Whichofthefollowingcorrectlydescribestheabovefigure?
A)Thereisnorelationshipbetweenxandy.
B)Thereisapositiverelationshipbetweenxandy.
C)Thereisanegativerelationshipbetweenxandy.
D)Noneoftheaboveanswersarecorrect.
Answer:A
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

107
Copyright2014PearsonEducation,Inc.

65)Intheabovefigure,whichcurveindicatesthattheleveloffoodproductiondoesnotaffectthe
populationgrowthrate?
A)F
B)G
C)H
D)I
Answer:C
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

108
Copyright2014PearsonEducation,Inc.

66)Intheabovefigure,therelationshipbetweenincomeandexpendituresis
A)positive.
B)negative.
C)independent.
D)random.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

67)Therelationshipintheabovefiguresuggeststhatwhentheinterestrateis5percent,
A)adecreaseinincomewillbeassociatedwithadecreaseinexpenditures.
B)adecreaseinincomewillbeassociatedwithanincreaseinexpenditures.
C)anincreaseinincomewillbeassociatedwithadecreaseinexpenditures.
D)Thereisnorelationshipbetweenexpendituresandincome.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

68)Ifvariablesxandymoveupanddowntogether,theyare
A)positivelyrelated.
B)negativerelated.
C)unrelated.
D)trendrelated.
Answer:A
Topic:StudyGuideQuestion,VariablesThatMoveSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

109
Copyright2014PearsonEducation,Inc.
69)Thetermdirectrelationshipmeansthesameas
A)correlation.
B)trend.
C)positiverelationship.
D)negativerelationship.
Answer:C
Topic:StudyGuideQuestion,VariablesThatMoveSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

70)Therelationshipbetweenincomeandconsumptionillustratedinthefigureaboveis
A)positiveandlinear.
B)positiveandnonlinear.
C)negativeandlinear.
D)negativeandnonlinear.
Answer:A
Topic:StudyGuideQuestion,VariablesThatMoveSameDirection
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

110
Copyright2014PearsonEducation,Inc.

71)Thefigureaboveshows
A)apositiverelationship.
B)adirectrelationship.
C)anegativerelationship.
D)norelationshipbetweenthevariables.
Answer:C
Topic:StudyGuideQuestion,VariablesThatMoveOppositeDirection
Skill:Analytical
Status:Modified10thedition
AACSB:AnalyticalSkills

72)Therelationshipbetweentwovariables,xandy,isaverticalline.Thusxandyare
A)positivelycorrelated.
B)negativelycorrelated.
C)notrelated.
D)falselyrelated.
Answer:C
Topic:StudyGuideQuestion,VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

111
Copyright2014PearsonEducation,Inc.
12Appendix:TheSlopeofaRelationship

1)Theslopeofalineequalsthe
A)changeinthevariablemeasuredalongthexaxisdividedbythechangeinthevariablemeasured
alongtheyaxis.
B)changeinthevariablemeasuredalongtheyaxisdividedbythechangeinthevariablemeasuredalong
thexaxis.
C)changeinthevariablemeasuredalongthexaxisminusthechangeinthevariablemeasuredalongthe
yaxis.
D)changeinthevariablemeasuredalongthexaxismultipliedbythechangeinthevariablemeasured
alongtheyaxis.
Answer:B
Topic:TheSlopeofaRelationship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

2)Acurveisplottedwithymeasuredontheverticalaxisandxmeasuredonthehorizontalaxis.The
slopeofthecurveequals
A)ydividedbyx.
B)thechangeinydividedbyx.
C)thechangeinydividedbythechangeinx.
D)ydividedbythechangeinx.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Recognition
Status:Modified10thedition
AACSB:AnalyticalSkills

3)Theslopeofaline
A)canneverequalzero.
B)isalwaysaconstant.
C)measurestheratioofthechangeinthevalueoftheyaxisvariablerelativetothechangeinthevalueof
thexaxisvariable.
D)measuresthevalueoftheyaxisvariablerelativetothevalueofthexaxisvariable.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

112
Copyright2014PearsonEducation,Inc.
4)Theslopeofapositiverelationshipis
A)positive.
B)undefined.
C)positivetotherightofthemaximumpointandnegativetotheleft.
D)constantaslongastherelationshipisnonlinear.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
5)Inwhichofthefollowingcasesistheslopeofalinepositive?
A)Asxincreases,yincreases.
B)Asxincreases,ydecreases.
C)Asxincreases,yremainsthesame.
D)Asxincreases,yequalsapositivenumber.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

6)Ifalargechangeinthevariablemeasuredonthexaxisisassociatedwithasmallchangeofthe
variablemeasuredontheyaxis,thelineis________andtheslopeis________.
A)downwardsloping;large
B)downwardsloping;small
C)upwardsloping;small
D)eitherdownwardorupwardsloping;small
Answer:D
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

7)Supposeweareconsideringtherelationshipbetweentwovariablesyandx.yismeasuredontheyaxis
andxismeasuredonthexaxis,andtherelationshipbetweenthenisastraightline.Supposethatthe
slopeofthelineispositiveandislessthan1.Thisslopemeansthatachangeinxisassociatedwith
A)abiggerchangeiny.
B)asmallerchangeiny.
C)nochangeiny.
D)anequalchangeiny.
Answer:B
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

113
Copyright2014PearsonEducation,Inc.
8)Supposeweareconsideringtherelationshipbetweentwovariablesyandx.yismeasuredontheyaxis
andxismeasuredonthexaxis,andtherelationshipbetweenthenisastraightline.Supposethatthe
slopeofthelineisequalto1.Thisslopemeansthat
A)achangeinxisassociatedwithabiggerchangeiny.
B)achangeinxisassociatedwithasmallerchangeiny.
C)achangeinxisassociatedwithnochangeiny.
D)achangeinxisassociatedwithanequalchangeiny.
Answer:D
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
9)Supposeweareconsideringtherelationshipbetweentwovariablesyandx.yismeasuredontheyaxis
andxismeasuredonthexaxis,andtherelationshipbetweenthenisastraightline.Supposethatthe
slopeofthelineisgreaterthan1.Thisslopemeansthat
A)achangeinxisassociatedwithabiggerchangeiny.
B)achangeinxisassociatedwithasmallerchangeiny.
C)achangeinxisassociatedwithnochangeiny.
D)achangeinxisassociatedwithanequalchangeiny.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

10)Inwhichofthefollowingcasesistheslopeofalinepositiveandlessthaninfinity?
A)Asthevariablemeasuredonthexaxisdecreases,thevariablemeasuredontheyaxisdecreases.
B)Asthevariablemeasuredonthexaxisincreases,thevariablemeasuredontheyaxisdecreases.
C)Asthevariablemeasuredontheyaxisincreases,thevariablemeasuredonthexaxisdoesnotchange.
D)Asthevariablemeasuredontheyaxisincreases,thevariablemeasuredonthexaxisdecreases.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

11)Inagraph,alinehasanegativeslopeif
A)thelineisvertical.
B)thelineishorizontal.
C)thelinerisesfromrighttoleft.
D)thelinerisesfromlefttoright.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

114
Copyright2014PearsonEducation,Inc.
12)Supposethatforacurve,asthevariablemeasuredonthexaxisincreases,thevariablemeasuredon
theyaxisdecreases.Thecurvehasa________slope.
A)tangent
B)positive
C)negative
D)hypothetical
Answer:C
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
13)Iftheslopeoftherelationshipbetweensavingsandinterestratesis0.5,then
A)savingsandinterestrateshaveapositiverelationship.
B)savingsandinterestrateshaveanegativerelationship.
C)savingsandinterestrateshavenorelationship.
D)savingsandinterestrateshaveaninverserelationship.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

14)Ifanincreaseinx(thevariableonthehorizontalaxis)from6to8unitscausesadecreaseiny(the
variableontheverticalaxis)from4to3units,theslopeequals
A)2.
B)2.
C)1/2.
D)1/2.
Answer:D
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

115
Copyright2014PearsonEducation,Inc.

x y
0 0
2 6
4 12
6 18
8 24
10 30

15)Inthetableabove,yismeasuredalongtheyaxisandxalongthexaxis.Theslopeoftherelationship
betweenx=0andx=2is
A)6.
B)2.
C)3.
D)6.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

x y
10 50
9 70
8 100
7 130
6 170
5 220

16)Inthetableabove,yismeasuredalongtheyaxisandxalongthexaxis.Whatisthevalueoftheslope
betweenthex=8andx=6?
A)0.057
B)19.28
C)35
D)70
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

116
Copyright2014PearsonEducation,Inc.

Point X Y
a 100 50
b 200 75
c 300 100
d 400 100
e 500 75
f 600 50

17)Inthetableabove,YismeasuredalongtheyaxisandXalongthexaxis.Theslopebetweenpointsa
andbis
A)25.
B)4.
C)0.25.
D)0.25.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
18)Inthetableabove,YismeasuredalongtheyaxisandXalongthexaxis.Theslopebetweenpointsc
anddis
A)100.
B)0.
C)0.25.
D)4.
Answer:B
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

19)Inthetableabove,YismeasuredalongtheyaxisandXalongthexaxis.Theslopebetweenpointse
andfis
A)25.
B)4.
C)0.25.
D)0.25.
Answer:D
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

117
Copyright2014PearsonEducation,Inc.

20)Intheabovefigure,thecurvehasaslopethatis________.
A)positiveandbecominglargerinmagnitude
B)positiveandbecomingsmallerinmagnitude
C)negativeandbecominglargerinmagnitude
D)negativeandbecomingsmallerinmagnitude
Answer:A
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

118
Copyright2014PearsonEducation,Inc.

21)Intheabovefigure,thecurvehasaslopethatis________.
A)positiveandbecominglargerinmagnitude
B)positiveandbecomingsmallerinmagnitude
C)negativeandbecominglargerinmagnitude
D)negativeandbecomingsmallerinmagnitude
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

x y
0 4
1 5
2 8
3 13
4 20

22)Intheabovetable,therelationshipbetweenxandyis________and,withymeasuredonthevertical
axis,theslopebetweeny=5andy=8isequalto________.
A)negative;8
B)negative;6
C)positive;5
D)positive;3
Answer:D
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

119
Copyright2014PearsonEducation,Inc.
23)Theslopeofastraightlineis
A)variable.
B)increasing.
C)decreasing.
D)constant.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

24)Theslopeofastraightlineis
A)alwaysequaltozero.
B)calculatedasy/xatanypoint.
C)constant.
D)alwaysgreaterthanzero.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

25)Withymeasuredontheverticalaxisandxmeasuredonthehorizontalaxis,theslopeofastraightline
isdefinedas
A)y/x.
B)x/y.
C)(changeiny)/(changeinx).
D)(changeinx)/(changeiny).
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

26)Alongastraightline,whenxequals90,thenyequals30.Whenxequals120,thenyequals40.The
slopeofthestraightlineis
A)1/3.
B)1/3.
C)3.
D)3.
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

120
Copyright2014PearsonEducation,Inc.
27)Alongastraightline,thevalueofyisalwaysequaltothevalueofx.Theslopeofthelineis
A)1.
B)0.
C)1.
D)infinite.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

x y
0 0
1 3
2 6
3 9
4 12
5 15

28)Usingthedatainthetableabove,withymeasuredontheverticalaxis,theslopeofthelinerelatingy
toxis
A)1/3.
B)1.
C)3.
D)6.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

121
Copyright2014PearsonEducation,Inc.

xvariable
(onthehorizontalaxis)
yvariable
(ontheverticalaxis)
10 28
15 31
20 34

29)Theabovetableshowsdataontwovariables.Ifthesedataweregraphed,theslopeofthelinewould
be
A)3/5.
B)3.
C)5/3.
D)impossibletodeterminefromtheinformationgiven.
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

xvariable
(onthehorizontalaxis)
yvariable
(ontheverticalaxis)
8 14
10 18
12 22

30)Theabovetablegivesdataontwovariables.Ifthesedataweregraphed,theslopeofthelinewouldbe
A)1.
B)2.
C)2.
D)4.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

31)Theabovetablegivesdataontwovariables.Ifthesedataweregraphed,theirrelationshipwould
A)beastraightline.
B)beacurvedline.
C)showanegativerelationship.
D)nonexistent.
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

122
Copyright2014PearsonEducation,Inc.
xvariable
(onthehorizontalaxis)
yvariable
(ontheverticalaxis)
100 50
200 125
300 200

32)Theabovetableshowsdataontwovariables.Ifthesedataweregraphed,theslopeofthelinewould
be
A)1/2.
B)4/3.
C)2/3.
D)3/4.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

Quantity Price
0 50
8 40
16 30
24 20
32 10
36 5

33)Usingthedataintheabovetable,
A)thevariablesquantityandpricearepositivelyrelated.
B)thevariablesquantityandpricearenegativelyrelated.
C)thevariablesquantityandpriceareneitherpositivelynornegativelyrelated.
D)anincreaseinpriceislikelytocauseanincreaseinquantity.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

34)Ifweusethenumbersintheabovetabletodrawagraph,withthepriceontheverticalaxisandthe
quantityonthehorizontalaxis,thelinerelatingpriceandquantityhasaslopeof
A)0.8.
B)8.0.
C)1.25.
D)8.0.
Answer:C
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

123
Copyright2014PearsonEducation,Inc.

Income
(dollarsper
month)
Amountspenton
restaurantmeals
(dollarspermonth)
50 20
100 40
150 60
200 80

35)Usingthedataintheabovetable,ifincomeisonthexaxisandtheamountspentonrestaurantmeals
isontheyaxis,thegraphofthetwovariableswouldbe
A)upwardsloping.
B)downwardsloping.
C)vertical.
D)horizontal.
Answer:A
Topic:VariablesThatMoveintheSameDirection
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
36)Usingthedataintheabovetable,ifincomeisonthexaxisandtheamountspentonrestaurantmeals
isontheyaxis,theslopeofthestraightlinegraphequals
A)0.2.
B)0.4.
C)0.5.
D)2.5.
Answer:B
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

124
Copyright2014PearsonEducation,Inc.

x y
100 500
200 300
300 100
400 100

37)Basedontheinformationinthetableabove,whatistherelationshipbetweenxandy?
A)direct
B)inverse
C)positive
D)Norelationshipexistsbetweenxandy.
Answer:B
Topic:VariablesThatMoveinOppositeDirections
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

38)Usingtheinformationinthetableabove,whatdoestheslopeofthelinebetweenxandyequal?
A)5
B)0.5
C)2
D)2
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Modified10thedition
AACSB:AnalyticalSkills

125
Copyright2014PearsonEducation,Inc.

39)Intheabove,whichfigureshowsalinearrelationship?
A)FigureA
B)FigureB
C)bothFigureAandFigureB
D)neitherFigureAnorFigureB
Answer:C
Topic:LinearRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

40)Intheabove,whichfigureshowsalinewithaslopeof1.0?
A)FigureA
B)FigureB
C)bothFigureAandFigureB
D)neitherFigureAnorFigureB
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

126
Copyright2014PearsonEducation,Inc.

41)Theslopeofthelineshownintheabovefigureis
A)1/3.
B)5.
C)1.
D)3.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

127
Copyright2014PearsonEducation,Inc.

42)Theslopeofthelineshownintheabovefigureis
A)5.
B)2/5.
C)2/3.
D)5/2.
Answer:B
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

128
Copyright2014PearsonEducation,Inc.

43)Theslopeofthelineshownintheabovefigureis
A)11/3.
B)12/3.
C)1.25.
D)0.80.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

129
Copyright2014PearsonEducation,Inc.

44)Theslopeofthelineshownintheabovefigureis
A)2.
B)0.75.
C)0.25.
D)11/3.
Answer:B
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

130
Copyright2014PearsonEducation,Inc.

45)Theslopeofthelineshownintheabovefigureis
A)0.90.
B)1.5.
C)1.11.
D)2.
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

131
Copyright2014PearsonEducation,Inc.

46)Theslopeofthelineintheabovefigureis
A)1/2.
B)3.
C)4.
D)1/3.
Answer:B
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

132
Copyright2014PearsonEducation,Inc.

47)Theslopeofthelineintheabovefigureis
A)8.
B)0.05.
C)0.125.
D)0.10.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

133
Copyright2014PearsonEducation,Inc.

48)Theslopeofthelineintheabovefigureis
A)2/5=0.4.
B)5/2=2.5.
C)2/5=0.4.
D)5/2=2.5.
Answer:A
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

134
Copyright2014PearsonEducation,Inc.

49)Theslopeofthelineintheabovefigureis
A)1/2=0.5.
B)2.
C)1/2=0.5.
D)2.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

135
Copyright2014PearsonEducation,Inc.

50)Theslopeofthelineintheabovefigureis
A)10.
B)10.
C)5.
D)5.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

136
Copyright2014PearsonEducation,Inc.

51)Theslopeofthelineshownintheabovefigureis
A)13/8.
B)12/3.
C)5/8.
D)0.625.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

137
Copyright2014PearsonEducation,Inc.

52)Theslopeofthelineshownintheabovefigureis
A)3/4.
B)2/3.
C)11/3.
D)13/4.
Answer:C
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

138
Copyright2014PearsonEducation,Inc.

53)Intheabovefigure,
A)consumptionexpendituresarealinearfunctionoflaborincome.
B)theslopeofthefunctiondepictedis0.9.
C)consumptionexpendituresarepositivelyrelatedtolaborincome.
D)Alloftheaboveanswersarecorrect.
Answer:D
Topic:Slope
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

139
Copyright2014PearsonEducation,Inc.

54)Theslopeofthelineintheabovefigureis
A)4.
B)2.5.
C)1.0.
D)1.0.
Answer:D
Topic:TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

55)Onagraph,anupwardslopingcurvethatisflatterasyoumoveawayfromtheoriginindicatesa
A)positiverelationshipwithanincreasingslope.
B)positiverelationshipwithadecreasingslope.
C)negativerelationshipwithanincreasingslope.
D)negativerelationshipwithadecreasingslope.
Answer:B
Topic:TheSlopeofaCurvedLine
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

140
Copyright2014PearsonEducation,Inc.

56)Intheabovefigure,thecurvesslopeis
A)positiveandisbecomingsteeper.
B)positiveandisbecominglesssteep.
C)negativeandisbecomingsteeper.
D)negativeandisbecominglesssteep.
Answer:B
Topic:SlopeofaCurvedLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

57)Ifthepriceofapplesisontheverticalaxisandthequantityofapplesdemandedisonthehorizontal
axis,theslopebetweentwopointsonthelinedescribingtherelationshipbetweenpriceandquantityis
A)thechangeinpricemultipliedbythechangeinquantity.
B)thechangeinpricedividedbythechangeinquantity.
C)thechangeinquantitydividedbythechangeinprice.
D)pricedividedbyquantity.
Answer:B
Topic:TheSlopeofaCurvedLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

141
Copyright2014PearsonEducation,Inc.
58)Theformulafortheslopeacrossanarcisusedtoapproximatetheslopefor
A)linearrelationshipsonly.
B)acurvedline.
C)apositiverelationshiponly.
D)anegativerelationshiponly.
Answer:B
Topic:TheSlopeAcrossanArc
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

59)Theslopeofacurvedlinecanbeapproximatedby
A)theaverageofthevariablemeasuredalongtheyaxisdividedbytheaverageofthevariablemeasured
alongthexaxis.
B)theinverseofthestraightlinemethod.
C)theaverageofthevariablemeasuredalongthexaxisdividedbytheaverageofthevariablemeasured
alongtheyaxis.
D)theslopeacrossanarcfromonepointonthecurvetoanotherpointonthecurve.
Answer:D
Topic:TheSlopeAcrossanArc
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

142
Copyright2014PearsonEducation,Inc.

60)Intheabovefigure,theslopeacrossthearcbetweencanddis
A)1/2.
B)1.
C)4/3.
D)2.
Answer:A
Topic:TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

61)Intheabovefigure,theslopeacrossthearcbetweenbandcis
A)1/2.
B)2/3.
C)1.
D)2.
Answer:C
Topic:TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

62)Intheabovefigure,theslopeacrossthearcbetweenaandbis
A)2/5.
B)1.
C)3/2.
D)5/2.
Answer:D
Topic:TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

143
Copyright2014PearsonEducation,Inc.
63)Intheabovefigure,theslopeatpointbis
A)1.
B)5/2.
C)between1and5/2.
D)greaterthan5/2.
Answer:C
Topic:TheSlopeataPoint
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

64)Intheabovefigure,therelationshipbetweenxandyis
A)positive,withslopedecreasingasxincreases.
B)negative,withslopedecreasingasxincreases.
C)negative,withslopeincreasingasxincreases.
D)positive,withslopeincreasingasxincreases.
Answer:A
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

65)Theslopeintheabovefigureis
A)negativeandincreasing.
B)negativeanddecreasing.
C)positiveandincreasing.
D)positiveanddecreasing.
Answer:D
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

144
Copyright2014PearsonEducation,Inc.

66)Intheabovefigure,usingtheslopeacrossanarc,theslopeofthecurvebetweenpointsbandcis
A)1/3.
B)1/3.
C)3.
D)3.
Answer:A
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

67)Intheabovefigure,usingtheslopeacrossanarc,theslopeofthecurvebetweenpointsaandcis
A)3/5.
B)3/5.
C)5/3.
D)5/3.
Answer:B
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

145
Copyright2014PearsonEducation,Inc.

68)Intheabovefigure,usingtheslopeacrossanarc,theslopeofthecurvebetweenpointsaandbis
A)1/2.
B)1/2.
C)2.
D)2.
Answer:B
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

69)Intheabovefigure,usingtheslopeacrossanarc,theslopeofthecurvebetweenpointsaandcis
A)3/5.
B)5/3.
C)3/5.
D)5/3.
Answer:D
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

146
Copyright2014PearsonEducation,Inc.

70)Intheabovefigure,theslopeacrossthearcbetweenaandbis
A)1.
B)4.
C)1/4.
D)1/4.
Answer:B
Topic:TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

147
Copyright2014PearsonEducation,Inc.

71)Intheabovefigure,theslopeacrossthearcbetweenbanddis
A)1/2.
B)1/3.
C)5/3.
D)6/5.
Answer:C
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

72)Intheabovefigure,theslopeatpointb
A)liesbetween1/3and1.
B)equals1.
C)liesbetween1and2.
D)exceeds2.
Answer:A
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

73)Intheabovefigure,theslopeacrossthearcbetweencanddis
A)1/6.
B)12/11.
C)3.
D)4.
Answer:C
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

148
Copyright2014PearsonEducation,Inc.
74)Intheabovefigure,theslopeacrossthearcbetweenaandbis
A)3.
B)1.
C)3/5.
D)1/3.
Answer:D
Topic:SlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

75)Alongacurvedline,theslopeatthemaximum
A)isgreaterthanzero.
B)iszero.
C)islessthanzero.
D)maybegreaterthan,lessthan,orequaltozero.
Answer:B
Topic:MaximumandMinimumPoints
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

76)Consideradiagraminwhichthevariablemeasuredontheyaxisremainsconstantwhilethevariable
measuredonthexaxisincreases.Thegraphisofthisrelationshipisa
A)perpendicularline.
B)linewithslopeequaltozero.
C)linethathaspositiveslope.
D)linethathasanegativeslope.
Answer:B
Topic:VariablesThatAreUnrelated
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

77)Theslopeofanegativerelationshipis
A)negative.
B)undefined.
C)positivetotherightofthemaximumpointandnegativetotheleft.
D)constantaslongastherelationshipisnonlinear.
Answer:A
Topic:StudyGuideQuestion,TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

149
Copyright2014PearsonEducation,Inc.
78)Alinearrelationship
A)alwayshasamaximum.
B)alwayshasaconstantslope.
C)alwaysslopesuptotheright.
D)neverhasaconstantslope.
Answer:B
Topic:StudyGuideQuestion,TheSlopeofaStraightLine
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

79)Intheabovefigure,betweenx=2andx=3,whatistheslopeoftheline?
A)1
B)1
C)2
D)3
Answer:A
Topic:StudyGuideQuestion,TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

150
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80)Intheabovefigure,howdoestheslopeofthelinebetweenx=4andx=5comparewiththeslope
betweenx=2andx=3?
A)Theslopeisgreaterbetweenx=4andx=5.
B)Theslopeisgreaterbetweenx=2andx=3.
C)Theslopeisthesame.
D)Theslopeisnotcomparable.
Answer:C
Topic:StudyGuideQuestion,TheSlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

81)Therelationshipbetweenxandyintheabovefigureis
A)positivewithanincreasingslope.
B)positivewithadecreasingslope.
C)negativewithanincreasingslope.
D)negativewithadecreasingslope.
Answer:A
Topic:StudyGuideQuestion,TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

151
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82)Intheabovefigure,theslopeacrossthearcbetweenpointsaandbequals
A)5.
B)4.
C)2.
D)1.
Answer:C
Topic:StudyGuideQuestion,TheSlopeAcrossanArc
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
13Appendix:GraphingRelationshipsAmongMoreThanTwoVariables

1)Ceterisparibuswhengraphingarelationshiprefersto
A)lettingallthevariableschangeatonce.
B)changingtheoriginofthegraph.
C)holdingconstantallbuttwovariables.
D)rescalingthecoordinates.
Answer:C
Topic:GraphingRelationships,Two+Variables,CeterisParibus
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Inevaluatingarelationshipbetweenxandy,ceterisparibusmeansothervariables
A)arenotrelevanttoxandy.
B)moveinoppositedirectionstoxandy.
C)arenotchangingwhilexandychange.
D)moveinthesamedirectionasxandy.
Answer:C
Topic:GraphingRelationships,Two+Variables,CeterisParibus
Skill:Conceptual
Status:Modified10thedition
AACSB:ReflectiveThinking

3)Onagraphshowingtherelationshipbetweenxandy,theceterisparibusconditionimpliesthat
A)noothervariablesarerelatedtoxandy.
B)thevalueofxisheldconstant.
C)thevalueofyisheldconstant.
D)othervariablesnotshownareheldconstant.
Answer:D
Topic:GraphingRelationships,Two+Variables,CeterisParibus
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

152
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4)Assumethatthequantityconsumedofpizzaisdependentonthreefactors:thepriceofapizza,the
incomeofpizzapurchasers,andconsumerstasteforpizza.Whengraphingtherelationshipbetweenthe
priceofapizzaandthequantityofpizzaconsumed,
A)thepriceofapizzaandtheincomeofpizzaconsumersaretheonlyvariablesthatareallowedto
change.
B)thepriceofpizzaandquantityconsumedofpizzaaretheonlyvariablesthatareallowedtochange.
C)consumerstasteforpizzaandtheincomeofpizzapurchasersaretheonlyvariablesthatareallowed
tochange.
D)Noneoftheaboveanswersarecorrect.
Answer:B
Topic:GraphingRelationships,Two+Variables,CeterisParibus
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
5)Tographarelationshipamongseveralvariables,weholdallbut________variable(s)constantanduse
the________assumption.
A)one;scarcity
B)two;ceterisparibus
C)three;marginalbenefit
D)one;ceterisparibus
Answer:B
Topic:GraphRelationshipsMorethanTwoVariables,CeterisParibus
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

153
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6)Intheabovefigure,whilemovingalongthelineshowingtherelationshipbetweenhouseholdincome
andexpenditure,
A)householdexpendituresareheldconstant.
B)householdincomeisheldconstant.
C)theinterestrateisheldconstant.
D)novariableisheldconstant.
Answer:C
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
7)Intheabovefigure,iftheinterestrateisnegativelyrelatedtohouseholdexpendituresforanygiven
levelofhouseholdincome,anincreaseintheinterestratewill
A)shiftthelineverticallyupward.
B)shiftthelineverticallydownward.
C)makethelinenegativelysloped.
D)causenochangeinthelinesposition.
Answer:B
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

154
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8)Theslopeofthelineintheabovefigureis
A)positive.
B)negative.
C)direct.
D)independent.
Answer:B
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills
9)Intheabovefigure,whentheinterestrateis8percentandhouseholdincomeis$40,000,household
consumptionis
A)$0.
B)$20,000.
C)$35.000.
D)$60,000.
Answer:B
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

155
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10)Therelationshipintheabovefigureindicatesthat
A)adecreaseintheinterestrateleadstoadecreaseinhouseholdincome.
B)adecreaseinhouseholdconsumptionleadstoadecreaseininterestrates.
C)adecreaseinhouseholdincomewillleadhouseholdconsumptiontoincrease.
D)noneoftheabove
Answer:D
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

11)Householdconsumptiondependsonbothincomeandinterestrates.Intheabovefigure
A)householdconsumptionisheldconstant.
B)interestratesareheldconstant.
C)householdincomeisheldconstant.
D)novariableisheldconstant.
Answer:C
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

12)Intheabovefigure,ifhouseholdconsumptionispositivelyrelatedtohouseholdincome,thenan
increaseinhouseholdincomewill
A)shiftthelinerightward.
B)shiftthelineleftward.
C)makethelinepositivelysloped.
D)causeamovementalongtheline.
Answer:A
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Modified10thedition
AACSB:AnalyticalSkills

156
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13)Theabovefigureshowshowmanypoundsofpeanutsfarmersarewillingtosellatdifferentprices
perpoundofpeanuts.Ifthepriceofapoundofpeanutsis$1andthepriceofapoundofpecansis$2,
peanutfarmersarewillingtosell
A)nopeanuts.
B)1000poundsofpeanuts.
C)2000poundsofpeanuts.
D)4000poundsofpeanuts.
Answer:A
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

14)Intheabovefigure,whiledrawingthelineshowingtherelationshipbetweenthepriceofapoundof
peanutsandthequantitysold,the
A)priceofapoundofpecansisheldconstant.
B)priceofapoundofpeanutsisheldconstant.
C)quantityofpeanutsthatfarmerssupplyisconstant.
D)BothanswersAandBaretrue.
Answer:A
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

157
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15)Inthefigureabove,supposethepriceofapoundofpecansisnegativelyrelatedtothequantityof
peanutsthatfarmersarewillingtosupply.Ifthepriceofpecansincreases,
A)thecurvewillshiftrightward.
B)thecurvewillshiftleftward.
C)thereisamovementalongthecurve.
D)thecurvewillbeunaffected.
Answer:B
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

16)Intheabovefigure,xis
A)positivelyrelatedtoyandnegativelyrelatedtoz.
B)positivelyrelatedtobothyandz.
C)negativelyrelatedtoyandpositivelyrelatedtoz.
D)negativelyrelatedtobothyandz.
Answer:C
Topic:StudyGuideQuestion,GraphingRelationshipsAmong2+Var.
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

158
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17)Inthefigureabove,ceterisparibus,anincreaseinxisassociatedwith
A)anincreaseiny.
B)adecreaseiny.
C)adecreaseinz.
D)Noneoftheaboveanswersiscorrect.
Answer:A
Topic:StudyGuideQuestion,GraphingRelationshipsAmong2+Var.
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

18)Inthefigureabove,anincreaseinzleadstoa
A)movementupalongoneofthelinesshowingtherelationshipbetweenxandy.
B)movementdownalongoneofthelinesshowingtherelationshipbetweenxandy.
C)rightwardshiftofthelineshowingtherelationshipbetweenxandy.
D)leftwardshiftofthelineshowingtherelationshipbetweenxandy.
Answer:C
Topic:StudyGuideQuestion,GraphingRelationshipsAmong2+Var.
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

14Appendix:EssayQuestions

1)Whydoeconomistsusegraphs?
Answer:Graphshelpeconomists,andothers,tovisualizetherelationshipsbetweeneconomicvariables.
Graphsthatplotvariablestogetherhelpeconomistsunderstandifthevariablesarerelatedandhowthey
arerelated.Graphsalsohelpprovideavisualpictureofeconomicmodelsthatlinkdifferentvariables.
Indeed,manyotherdisciplinesusesuchvisualmodels.Forexample,architectsworkwithblueprints
(theirmodel)andtheblueprintsrepresenteverydetailofabuilding.Economistsmodelsdonotreflectof
everydetailoftherealworld,butthegraphsthattheyusenonethelessarevaluablebecausetheyhelp
clarifythelinkagesbetweenthevariables.
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

2)Whatarethetwodifferenttypesofrelationshipsthatvariablescanhave?Explaineach.Whatdothese
relationshipslooklikewhentheyaregraphed?
Answer:Variablescanhavetworelationships:positive(ordirect)andnegative(orinverse).Apositive
relationshipoccurswhenthevariablesmoveinthesamedirection,sothatwhenoneincreases,theother
alsoincreases.Anegativerelationshipoccurswhenthevariablesmoveintheoppositedirection,sothat
whenoneincreases,theotherdecreases.Whenapositiverelationshipisgraphed,thelineslopesupward
totheright.Whenanegativerelationshipisgraphed,thelineslopesdownwardtotheright.
Topic:Relationships
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

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3)Whatisthedifferencebetweenapositiveandanegativerelationship?
Answer:Twovariablesarepositivelyrelatedwhenanincrease(decrease)inoneisassociatedwithan
increase(decrease)intheother.Inthiscase,thevariablesmovetogether,inthesamedirection.Two
variablesarenegativelyrelatedwhenanincrease(decrease)inoneisassociatedwithadecrease
(increase)intheother.Inthiscase,thevariablesmoveintheoppositedirection.
Topic:Relationships
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

4)Agraphoftwovariablesisaverticalline.Whatistheinterpretationofthisresult?
Answer:Whenthegraphoftwovariablesisaverticalline,thevariablesarenotrelatedbecause,with
thisgraph,wheneverthevariablemeasuredalongtheverticalaxischanges,thevariablemeasuredalong
thehorizontalaxisdoesnotchange.
Topic:UnrelatedVariables
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

5)Whatdoestheslopeofastraightlineequal?Howistheslopeofacurvedlinecalculatedatapointon
thecurve?
Answer:Theslopeofastraightlineiscalculatedbetweentwopointsontheline.Betweenthetwopoints
ontheline,theslopeequalsthechangeinthevalueofthevariablemeasuredontheverticalaxis(they
axis)dividedbythechangeinthevalueofthevariablemeasuredonthehorizontalaxis(thexaxis).The
slopeofacurvedlinecalculatedatapointonthecurveisequaltotheslopeofatangentstraightline.At
thatpointonthecurvedline,drawastraightlinethattouchesthecurvedlineatonlythatpoint.Then,
calculatetheslopeofthestraightline.Theslopeofthecurvedlineatthatpointequalstheslopeofthe
straightline.
Topic:Slope
Skill:Recognition
Status:Modified10thedition
AACSB:AnalyticalSkills

6)Itisimpossibletorepresentathreevariablerelationshipinatwodimensionalgraph.Isthis
statementtrueorfalse?Explainyouranswer.
Answer:Thestatementisfalsebecauseitispossibletorepresentathreevariablerelationshipinatwo
dimensionalgraph.Todoso,startbyfocusingontwoofthevariables.Assumethatthethirdvariable
doesnotchange(theceterisparibusassumption)andthengraphtherelationshipbetweenthetwo
variables.Thegraphshowshowthesetwovariablesarerelatedwhenthethirdvariabledoesnotchange.
Whenthethirdvariabledoeschange,thentheentirerelationshipbetweenthetwographedvariables
changes.Inotherwords,thelineshowingtherelationshipbetweenthetwographedvariablesshiftsso
thatitbecomesanentirelynewline.Theshiftinthelineshowshowthethirdvariableinfluencesthe
othertwo.
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:Communication

160
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15Appendix:NumericandGraphingQuestions

1)ThefigureaboveshowshowthesalesofthevideogameTombRaiderLaraRetireschangewhen
theadvertisingspentonthegamechanges.Istherelationshipbetweenadvertisingandthenumberof
gamessoldpositive,negative,orneither?Explainyouranswer.
Answer:Thefigureshowsthatthereisapositiverelationshipbetweenadvertisingandthenumberof
videogamessold.Therelationshipispositivebecausethetwovariablesmovetogether:Ifadvertising
increases,so,too,doesthenumberofgamessold.
Topic:PositiveRelationship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

161
Copyright2014PearsonEducation,Inc.

2)Thefigureaboveshowshowtherelationshipbetweenthenumberofhoursperweekahighschool
studentspendsonthewebandthestudentsSATscore.Istherelationshipbetweenhoursontheweband
theSATscorepositive,negative,neither?Explainyouranswer.
Answer:Thefigureshowsthatthereisanegativerelationshipbetweenhoursonthewebandthe
studentsSATscore.Therelationshipisnegativebecausethetwovariablesmoveinoppositedirections:If
hoursonthewebincrease,theSATscoredecreases.
Topic:NegativeRelationship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

162
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3)Agraphhasapointthatiseitheramaximumoraminimum.Totheleftofthepoint,theslopeof
relationshipispositive.Totherightofthepoint,theslopeisnegative.Isthepointamaximumpointora
minimumpoint?Besuretodrawafigurethatsupportsyouranswer.
Answer:

Thepointisamaximumpoint.Examinethefigureabove.Theslopeofacurvedlineatanypointequals
theslopeofastraightlinethattouchesthecurvedlineatonlythatonepoint.Thustotheleftofthe
maximumpoint,takepointA.TheslopeofthestraightlinethattouchesthecurvedlineatonlypointAis
positive,sotheslopeoftherelationshipispositive.Similarly,takepointBtotherightofthemaximum
point.Asthestraightlineshows,theslopeoftherelationshipatpointBisnegative.Indeed,whenever
thereisamaximumpoint,theslopeoftherelationshiptotheleftofthemaximumispositiveandthe
slopetotherightisnegative.
Topic:Maximum
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

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4)Inthefigureabove,whatcanyoudeduceabouttheslopeofthecurve?
Answer:Theslopeispositiveandincreasinginsizeaswemoverightwardalongthecurve.
Topic:Slope
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

5)Iftwopointsonalinearex=2,y=5andx=7,y=10,whatistheslopeofthisline?
Answer:Theslopeequalsthechangeintheyvariabledividedbythechangeinthexvariable.So,the
slopeequals(105)/(72)=(5)/(5)=1.00.
Topic:Slope
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

164
Copyright2014PearsonEducation,Inc.

Katiesincome
(dollarsperyear)
Katiespurchases
(booksperyear)
50,000 14
70,000 16
90,000 18
110,000 20

6)ThetableaboveshowshowthenumberofbooksKatiebuyseachyeardependsonherincome.
a) WhatkindofrelationshipexistsbetweenKatiesincomeandthenumberofbooksshepurchases?
b) PlottherelationshipbetweenKatiesincomeandthenumberofbooksshepurchasesintheabove
figure.Measureincomealongtheverticalaxisandthenumberofbooksalongthehorizontalaxis.Besure
tolabeltheaxes.
c) Whatistheslopeoftherelationshipbetween$50,000and$70,000ofincome?
d) Whatistheslopeoftherelationshipbetween$90,000and$110,000ofincome?
e) Commentonthesimilarityordissimilarityofyouranswerstoparts(c)and(d).

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Answer:
a) Thereisapositiverelationship.WhenKatiesincomeincreases,sotoodoesherpurchaseofbooks.

b) Therelationshipisplottedinthefigureabove.
c) Theslopeequalsthechangeinthevalueofthevariablemeasuredontheverticalaxis,income,
dividedbythechangeinthevalueofthevariablemeasuredalongthehorizontalaxis,thenumberof
books.Between$50,000and$70,000ofincome,thenumberofbookspurchasedincreasesfrom14to16.
Henceincomeincreasesby$20,000andthenumberofbooksincreasesby2,sotheslopeequals$20,000/2
=10,000.
d) Aswiththepreviousanswer,theslopeequalsthechangeinincomedividedbythechangeinbooks.
Between$90,000and$110,000ofincome,thenumberofbookspurchasedincreasesfrom18to20.Hence
incomeincreasesby$20,000andthenumberofbooksincreasesby2,sotheslopeequals$20,000/2=
10,000.
e) Theslopesinparts(c)and(d)areequal.But,theymustbeequalbecausetherelationshipbetween
Katiesincomeandthenumberofbooksshepurchasesislinear.Foralinearrelationship,theslopeisthe
sameregardlessofwhereitismeasured.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

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X Y
2 20
4 16
6 12
8 8

7)Graphthedatainthetableaboveinthefigure.Labeltheaxes.
a) IstherelationshipbetweenXandYpositiveornegative?
b) WhatistheslopewhenX=4?
c) WhatistheslopewhenX=8?

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Answer:

Thefigurelabelstheaxesandgraphstherelationship.
a) TherelationshipbetweenXandYisnegative.
b) Theslopeequals2.
c) Theslopeequals2.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

168
Copyright2014PearsonEducation,Inc.

8)Intheabovediagram,drawastraightlinewithaslopeofzero.
Answer:

Ahorizontallinehasaslopeofzero.Thefigureaboveshowsahorizontallinewithaslopeofzero.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

169
Copyright2014PearsonEducation,Inc.

9)Whatdoestheslopeofthelineshownintheabovefigureequal?
Answer:Theslopeequalsthechangeinvariableontheyaxisdividedbythechangeinthevariableon
thexaxis,or(150300)/(600800)=0.75.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

170
Copyright2014PearsonEducation,Inc.

10)Whatdoestheslopeofthelineshownintheabovefigureequal?
Answer:Theslopeequalsthechangeinvariableontheyaxisdividedbythechangeinthevariableon
thexaxis,or(1827)/(1020)=0.90.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

171
Copyright2014PearsonEducation,Inc.

11)Whatdoestheslopeofthelineshownintheabovefigureequal?
Answer:Theslopeequalsthechangeinvariableontheyaxisdividedbythechangeinthevariableon
thexaxis,or(3060)/(2515)=3.0.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

172
Copyright2014PearsonEducation,Inc.

12)Whatdoestheslopeofthelineshownintheabovefigureequal?
Answer:Theslopeequalsthechangeinvariableontheyaxisdividedbythechangeinthevariableon
thexaxis,or(510)/(60100)=0.125.
Topic:SlopeofaStraightLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

173
Copyright2014PearsonEducation,Inc.

13)WhatdoestheslopeofthecurvedlineatpointAshownintheabovefigureequal?
Answer:Theslopeofacurvedlineequalstheslopeofastraightlinethattouchesthecurvedlineatonly
thatpoint.And,theslopeofastraightlineequalsthechangeinvariableontheyaxisdividedbythe
changeinthevariableonthexaxis.MeasuretheslopeofthestraightlinefrompointAtowheretheline
crossesthexaxis,at15.Thusthestraightlinehasaslopeof(300)/(1015)=6.Thereforethecurveline
atpointAalsohasaslopeequalto6.
Topic:SlopeofaCurvedLine
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

174
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Hoursstudies
(perweek)
SATscores
2 900
4 1000
6 1050
8 1075
10 1090

14)JamieispreparingtotakehisSATtests.ThetableaboveshowshowJamiesscoredependsonthe
numberofhoursaweekJamiestudies.
a) Plottherelationshipinthefigure,puttingthehoursstudiedonthehorizontalaxis.
b) Istherelationshipyouplottedpositiveornegative?
c) Whathappenstotheslopeoftherelationshipashoursstudiedincrease?
d) SupposeJamiecanenrollinanSATprepcourseand,bysodoing,foreverypossiblenumberofhours
hestudies,hisscorewillbe100pointshigher.Plotthenewrelationshipbetweenthenumberofhours
studiedandJamiesSATscoreinthefigure.
e) Howmanyvariablesareinvolvedinthefigureyoujustcompleted?

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Answer:

a) ThefigureaboveplotstherelationshipbetweenthenumberofhoursJamiestudiesandhisSATscore.
b) Therelationshipispositive:AsJamieincreasesthehourshestudies,hisSATscoreincreases.
c) Therelationshipisnonlinear,sotheslopeoftherelationshipchangesasthenumberofhoursstudied
changes.Inthefigure,theslopeoftherelationshipdecreasesinsizeasthenumberofhoursstudied
increases.
d) ThefigureabovealsoplotstherelationshipbetweenthehoursJamiestudiesandhisSATscoreif
JamietakesanSATpreparationcourse.
e) Therearethreevariables:ThenumberofhoursJamiestudies,whetherornothetakesanSAT
preparationcourse,andhisSATscore.
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

16Appendix:TrueorFalse

1)Theverticalaxisofagraphshowsonlypositivevalues.
Answer:FALSE
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

2)Ascatterdiagramplotsthevalueofoneeconomicvariableagainsttime.
Answer:FALSE
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

176
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3)Acrosssectiongraphcanshowhoweconomicvariablesfordifferentgroupsofpeoplevaryovertime.
Answer:FALSE
Topic:GraphingData
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

4)Ifthexaxisvariableincreaseswhiletheyaxisvariabledecreases,thevariablesxandyarenegatively
related.
Answer:TRUE
Topic:GraphsUsedinEconomicModels
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

5)Agraphcannotbeusedtoshowthattwovariablesareunrelated.
Answer:FALSE
Topic:GraphsUsedinEconomicModels
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

6)Whengraphed,variablesthatareunrelatedareshownbyeitherahorizontaloraverticalline.
Answer:TRUE
Topic:GraphsUsedinEconomicModels
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

7)Theslopeofalineisthechangeintheyaxisvariabledividedbythechangeinthexaxisvariable.
Answer:TRUE
Topic:TheSlopeofaRelationship
Skill:Recognition
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

8)Theslopeofastraightlineincreasesasthenumbersonthexaxisbecomelarger.
Answer:FALSE
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

9)Tocalculatetheslopeofacurvedline,youcancalculatetheslopeatapointonthecurveoracrossan
arcofthecurve.
Answer:TRUE
Topic:TheSlopeofaRelationship
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

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10)Ifthechangeintheyaxisvariableis4andthechangeinthexaxisvariableis2,theslopeofthisline
is1/2.
Answer:FALSE
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

11)Ifthechangeintheyaxisvariableis6andthechangeinthexaxisvariableis5,theslopeofthisline
is6/5.
Answer:TRUE
Topic:TheSlopeofaRelationship
Skill:Analytical
Status:Previousedition,Chapter1
AACSB:AnalyticalSkills

12)Tographarelationshipthatinvolvesmorethantwovariables,weusetheceterisparibusassumption.
Answer:TRUE
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking

13)Ceterisparibusreferstotheideathatifmorethantwovariablesaregraphed,onlyonevariablemust
beheldconstant.
Answer:FALSE
Topic:GraphingRelationshipsAmongMoreThanTwoVariables
Skill:Conceptual
Status:Previousedition,Chapter1
AACSB:ReflectiveThinking