Solutions and Test Bank For
Essentials of Economics, 10th
Edition by N. Gregory Mankiw
,
,Indicate whether the statement is true or false.
1. Trade with any nation can be mutually beneficial.
a. True
b. False
2. To say people respond to incentives means that people may alter their decisions when the costs and benefits of
an action change.
a. True
b. False
3. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
4. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that
raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which
results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
a. True
b. False
5. A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.
a. True
b. False
6. Inflation increases the value of money.
a. True
b. False
7. An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.
a. True
b. False
8. Market power and externalities are two possible causes of market failure.
a. True
b. False
9. Productivity is defined as the quantity of goods and services produced from each unit of labor input.
a. True
b. False
10. One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-
efficient aircraft.
a. True
b. False
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11. The opportunity cost of working out for one hour is the value of the next-best activity that you could have done
in that hour.
a. True
b. False
12. Economics is the study of how evenly goods and services are distributed within society.
a. True
b. False
13. Economists study how people make decisions.
a. True
b. False
14. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's
productivity.
a. True
b. False
15. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
a. True
b. False
16. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of
that activity.
a. True
b. False
17. The classic tradeoff between “guns and butter” states that when a society spends more on national defense, it
has less to spend on consumer goods to raise the standard of living.
a. True
b. False
18. The invisible hand ensures that economic prosperity is distributed equally.
a. True
b. False
19. If wages for accountants rose, then accountants’ leisure time would have a lower opportunity cost.
a. True
b. False
20. Trade can make everyone better off except in the case where one person is better at doing everything.
a. True
b. False
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Essentials of Economics, 10th
Edition by N. Gregory Mankiw
,
,Indicate whether the statement is true or false.
1. Trade with any nation can be mutually beneficial.
a. True
b. False
2. To say people respond to incentives means that people may alter their decisions when the costs and benefits of
an action change.
a. True
b. False
3. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
4. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that
raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which
results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
a. True
b. False
5. A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.
a. True
b. False
6. Inflation increases the value of money.
a. True
b. False
7. An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.
a. True
b. False
8. Market power and externalities are two possible causes of market failure.
a. True
b. False
9. Productivity is defined as the quantity of goods and services produced from each unit of labor input.
a. True
b. False
10. One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-
efficient aircraft.
a. True
b. False
Page1
, lOMoAR cPSD| 16310474
11. The opportunity cost of working out for one hour is the value of the next-best activity that you could have done
in that hour.
a. True
b. False
12. Economics is the study of how evenly goods and services are distributed within society.
a. True
b. False
13. Economists study how people make decisions.
a. True
b. False
14. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's
productivity.
a. True
b. False
15. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
a. True
b. False
16. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of
that activity.
a. True
b. False
17. The classic tradeoff between “guns and butter” states that when a society spends more on national defense, it
has less to spend on consumer goods to raise the standard of living.
a. True
b. False
18. The invisible hand ensures that economic prosperity is distributed equally.
a. True
b. False
19. If wages for accountants rose, then accountants’ leisure time would have a lower opportunity cost.
a. True
b. False
20. Trade can make everyone better off except in the case where one person is better at doing everything.
a. True
b. False
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