Page 1 of 221
NETA Assessment: Test Bank to accompany
Principles of Macroeconomics, Sixth
Canadian Edition By N. Gregory Mankiw /
Ronald D. Kneebone / Kenneth J. McKenzie
||Complete A+ Guide
1.Which scenario best illustrates the economic principle that
"people face trade-offs"?
a) A student deciding to sleep an extra hour instead of
studying for an exam.
b) A government increasing spending on healthcare without
changing taxes.
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c) A factory utilizing more efficient machinery to produce more
output.
d) A consumer buying a product because its price decreased.
Answer: a
Rationale: Option 'a' correctly identifies a trade-off (sleep vs.
grades). Option 'b' ignores the budget constraint (spending
requires funding). Option 'c' is about productivity, and 'd' is
about the law of demand. NETA Cognitive Level: Higher
Order
Question 2
Suppose a university increases tuition fees. The administration
argues this is necessary to hire more professors and improve
facilities. A student argues that the increase will price out
lower-income students. The core disagreement is fundamentally
about:
a) How to calculate the rate of inflation.
b) The distribution of scarce resources.
c) The definition of a "market economy."
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d) The validity of the quantity theory of money.
Answer: b
Rationale: The core of economics is the allocation of scarce
resources. The administration wants resources for facilities; the
student wants accessible education. This is a distributional
trade-off. NETA Cognitive Level: Higher Order
Question 3
According to the principle of "rational people thinking at the
margin," a consumer should buy a second sandwich only if:
a) The total utility of the second sandwich is higher than the
first.
b) The marginal benefit of the second sandwich is greater than
its price.
c) They have enough budget left to afford a drink as well.
d) The sandwich shop offers a "buy one, get one free" deal.
Answer: b
Rationale: Rational decision-making compares marginal
benefit (MB) to marginal cost (MC/price). Only if MB > MC
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should the action be taken. NETA Cognitive Level: Higher
Order
Chapter 2: Thinking Like an Economist
Question 4
Economists often use assumptions in their models. Why is this
practice considered "scientific"?
a) Because assumptions are always proven true through
historical data.
b) Because assumptions simplify reality to focus on essential
relationships, similar to a physicist ignoring air resistance to
calculate velocity.
c) Because assumptions eliminate the need for data collection
entirely.
d) Because only unrealistic assumptions can generate
interesting conclusions.
Answer: b
NETA Assessment: Test Bank to accompany
Principles of Macroeconomics, Sixth
Canadian Edition By N. Gregory Mankiw /
Ronald D. Kneebone / Kenneth J. McKenzie
||Complete A+ Guide
1.Which scenario best illustrates the economic principle that
"people face trade-offs"?
a) A student deciding to sleep an extra hour instead of
studying for an exam.
b) A government increasing spending on healthcare without
changing taxes.
,Page 2 of 221
c) A factory utilizing more efficient machinery to produce more
output.
d) A consumer buying a product because its price decreased.
Answer: a
Rationale: Option 'a' correctly identifies a trade-off (sleep vs.
grades). Option 'b' ignores the budget constraint (spending
requires funding). Option 'c' is about productivity, and 'd' is
about the law of demand. NETA Cognitive Level: Higher
Order
Question 2
Suppose a university increases tuition fees. The administration
argues this is necessary to hire more professors and improve
facilities. A student argues that the increase will price out
lower-income students. The core disagreement is fundamentally
about:
a) How to calculate the rate of inflation.
b) The distribution of scarce resources.
c) The definition of a "market economy."
,Page 3 of 221
d) The validity of the quantity theory of money.
Answer: b
Rationale: The core of economics is the allocation of scarce
resources. The administration wants resources for facilities; the
student wants accessible education. This is a distributional
trade-off. NETA Cognitive Level: Higher Order
Question 3
According to the principle of "rational people thinking at the
margin," a consumer should buy a second sandwich only if:
a) The total utility of the second sandwich is higher than the
first.
b) The marginal benefit of the second sandwich is greater than
its price.
c) They have enough budget left to afford a drink as well.
d) The sandwich shop offers a "buy one, get one free" deal.
Answer: b
Rationale: Rational decision-making compares marginal
benefit (MB) to marginal cost (MC/price). Only if MB > MC
, Page 4 of 221
should the action be taken. NETA Cognitive Level: Higher
Order
Chapter 2: Thinking Like an Economist
Question 4
Economists often use assumptions in their models. Why is this
practice considered "scientific"?
a) Because assumptions are always proven true through
historical data.
b) Because assumptions simplify reality to focus on essential
relationships, similar to a physicist ignoring air resistance to
calculate velocity.
c) Because assumptions eliminate the need for data collection
entirely.
d) Because only unrealistic assumptions can generate
interesting conclusions.
Answer: b
