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Macroeconomics Principles Applications and Tools 7th Edition Osullivan Test Bank
Macroeconomics Principles Applications and Tools 7th Edition Osullivan Test Bank
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The principle that individuals and firms pick the activity level where the incremental benefit of that 1)
activity equals the incremental cost of that activity is known as the
A) spillover principle. B) marginal principle.
C) principle of opportunity cost. D) principle of diminishing returns.
Answer: B
Explanation: A)
B)
C)
D)
2) Saving time by driving faster is an example of a ________ of driving faster. Increasing the severity 2)
of injuries from a potential accident due to driving faster is a(n) ________ of driving faster.
A) nominal cost; real cost B) marginal cost; nominal cost
C) normative benefit; opportunity cost D) marginal benefit; marginal cost
Answer: D
Explanation: A)
B)
C)
D)
Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans
to answer the following question(s).
3) According to this Application, if you earn a salary of $80,000 in the first year and all prices decrease 3)
by half in the next 5 years, what will your nominal annual salary be in 5 years?
A) $8,000 B) $10,000 C) $20,000 D) $40,000
Answer: D
Explanation: A)
B)
C)
D)
4) According to the possible trade-off example between warships and drinking water in the text, the 4)
policy question that should be considered in Malaysia is
A) do the benefits of the warships exceed their opportunity costs?
B) do the nominal costs of the warships exceed their real costs?
C) do the opportunity costs of the warships exceed their nominal costs?
D) do the real costs of the warships exceed their nominal costs?
Answer: A
Explanation: A)
B)
C)
D)
Table 2.3
5) Refer to Table 2.3. The principle of diminishing returns first occurs when how many workers are 5)
hired?
A) 2 B) 3 C) 4 D) 5
Answer: C
Explanation: A)
B)
C)
D)
Figure 2.1
2
Units of Capital Number of Workers Output/Day
5 0 0
5 1 40
5 2 90
5 3 150
5 4 200
5 5 235
Table 2.3
7) Refer to Table 2.3. What can be observed about the given resources? 7)
A) Capital is variable. B) Capital is fixed.
C) Capital and labor are both fixed. D) Labor is fixed.
Answer: B
Explanation: A)
B)
C)
D)
Table 2.2
8) Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her 8)
marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying
open 2 hours per day. If she is following the marginal principle, what must her marginal benefit
be?
A) $6 B) $12 C) $15 D) $18
Answer: B
Explanation: A)
B)
C)
D)
3
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