Test Bank for Microeconomics Principles & Policy 14th Edition by William J. Baumol, Alan S. Blinder, John L. Solow

Name: Class: Date:
Solution Manual For All Chapters


Answers Are At The End Of Each Chapter
chapter 1

Indicate whether the statement is true or false.

1. The steepness of a curve is partially determined by the units of measurement.
a. True
b. False

2. The United States has chosen to balance the competing claims of efficiency versus equality by emphasizing greater
efficiency over greater equality.
a. True
b. False

3. Lower inflation rates are usually correlated with lower unemployment rates.
a. True
b. False

4. All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis.
a. True
b. False

5. ―Correlation‖ is a measure of how one variable causes another to change.
a. True
b. False

6. A graph’s origin is the point of intersection of all lines or curves in the graph.
a. True
b. False

7. The United States has been willing to trade-off greater efficiency for greater wage equality.
a. True
b. False

8. The high unemployment of 2008–2010 caused a substantial decrease in inflation, which created fears of deflation.
a. True
b. False

9. Productivity growth is the main cause of rising living standards.
a. True
b. False

10. A contour map illustrates a cause-and-effect relationship among three variables.
a. True
b. False

Copyright Cengage Learning. Powered by Cognero. Page 1

,Name: Class: Date:
Solution Manual For All Chapters

11. Economists are often required to make unrealistic assumptions concerning the problems they are investigating.
a. True
b. False

12. The Phillips curve illustrates the trade-off between inflation and economic growth.
a. True
b. False

13. Economic efficiency and income equality are often conflicting goals in an economy.
a. True
b. False

14. A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.
a. True
b. False

15. When controls over market prices are enacted, the consequences are always clear.
a. True
b. False

16. There is no trade-off between efficiency and equality.
a. True
b. False

17. Even though international trade is undertaken voluntarily, a country that engages in trade may not benefit from it.
a. True
b. False

18. One of the consequences of allowing wages to fall in the United States has been growing wage inequality.
a. True
b. False

19. Eliminating important details in economic analysis is necessary to understand the complexity of the economy.
a. True
b. False

20. Externalities can only involve the imposition of harm on a party not directly involved in an economic transaction.
a. True
b. False

21. Externalities are costs to society, which have an impact on parties not directly involved into a particular economic
transaction.
a. True
b. False

22. In economic theorizing, common sense will always lead to the correct answer.

Copyright Cengage Learning. Powered by Cognero. Page 2

,Name: Class: Date:
Solution Manual For All Chapters

a. True
b. False

23. When the economy experiences a bust, the government knows exactly which policies will spur an economic recovery.
a. True
b. False

24. Abstraction ignores many details in order to focus on the most important elements of a problem.
a. True
b. False

25. In the calculation of the cost of going to college, an economist would always include the cost of room and board.
a. True
b. False

26. The marginal cost of an airline ticket is the total cost of operating a flight divided by the number of passengers who
buy tickets.
a. True
b. False

27. The optimal degree of abstraction depends on the objective of the analysis.
a. True
b. False

28. In scientific language, a theory is an untested assertion of alleged fact.
a. True
b. False

29. Graphs are valuable because they facilitate interpretation of data.
a. True
b. False

30. In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the
years spent at college.
a. True
b. False

31. Comparative advantage explains how two nations can benefit from trade.
a. True
b. False

32. Statistical correlation always implies causation.
a. True
b. False

33. Government controls over market prices are often enacted to benefit a specific group.

Copyright Cengage Learning. Powered by Cognero. Page 3

, Name: Class: Date:
Solution Manual For All Chapters

a. True
b. False

34. Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate
of inflation.
a. True
b. False

35. Economic problems are made manageable by stripping away some of the unnecessary details.
a. True
b. False

36. Abstraction is used in economics to omit unnecessary details and focus on the essence of the problem being studied.
a. True
b. False

37. A government has the ability to use fiscal and monetary policy to mitigate the effects of economic fluctuations.
a. True
b. False

38. Externalities are created when parties not involved in an economic transaction are affected by it.
a. True
b. False

39. The market price of a transaction always includes all of the costs and benefits associated with the transaction.
a. True
b. False

40. If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States,
Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras.
a. True
b. False

41. The word ―theory‖ means the same to the scientist as it does to the man on the street.
a. True
b. False

42. Slope will vary along a curve (as opposed to a straight line).
a. True
b. False

43. A graph conveys information about a cause-and-effect relationship.
a. True
b. False

44. In both the 1970s and the 1990s, extreme economic events caused unemployment to move in the same direction as
inflation.
Copyright Cengage Learning. Powered by Cognero. Page 4