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Test BankPrinciples of Microeconomics, 4th Edition

N. Gregory Mankiw

Prepared by

Daniel K. Biederman, Kenneth H. Brown, Lisa K. Jepsen, Bryce Kanago, and Ken McCormick.

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ISBN 0-324-31895-2

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Contents

Preface v

Chapter 1 Ten Principles of Economics 1

Chapter 2 Thinking Like an Economist 35

Chapter 3 Interdependence and the Gains from Trade 80

Chapter 4 The Market Forces of Supply and Demand 117

Chapter 5 Elasticity and Its Applications 169

Chapter 6 Supply, Demand, and Government Policies 217

Chapter 7 Consumers, Producers, and the Efficiency of Markets 261

Chapter 8 Application: The Costs of Taxation 305

Chapter 9 Application: International Trade 345

Chapter 10 Externalities 389

Chapter 11 Public Goods and Common Resources 435

Chapter 12 The Design of the Tax System 474

Chapter 13 The Costs of Production 522

Chapter 14 Firms in Competitive Markets 574

Chapter 15 Monopoly 621

Chapter 16 Oligopoly 674

Chapter 17 Monopolistic Competition 726

Chapter 18 The Markets for the Factors of Production 769

Chapter 19 Earnings and Discrimination 814

Chapter 20 Income Inequality and Poverty 858

Chapter 21 The Theory of Consumer Choice 898

Chapter 22 Frontiers of Microeconomics 946

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Preface

The Mankiw Editorial and Development team understands that for the principles instructor, a high quality Test Bank is of paramount importance. Great care has been taken in this test bank, a supplement to Mankiw’s Principles of Microeconomics, Fourth Edition, to ensure that it not only includes questions of the highest quality and consistency, but also is easy to use.

The Mankiw 4th edition Microeconomics Test Bank now includes more than 9,000 multiple-choice, true/false, and short answer questions. Fifty new questions per chapter have been added for the 4th edition. But more importantly, each and every question in the Test Bank—old and new—has been carefully reviewed and evaluated for accuracy and relevance.

This test bank provides great flexibility to the instructor.  You may choose questions by topic, difficulty, section, cognitive domain, or choose while simply viewing the list of questions. (A key to question labels is included below.) For the instructor who carefully selects questions, we provide the ability to choose from many different questions on the same topic and with the same level of difficulty.  This variety is ideal for professors who give cumulative finals because there are comparable but not identical questions on all the main topics.

For the instructor who needs to generate many different exams in a short period of time, it is easy to use the software to pick a random set of questions. Also, with the Mankiw test bank, a randomly generated test will reflect the emphasis of the text content, allowing you to ask questions over the main points without the fear of creating a test composed of trivial questions over minor topics.

The Mankiw Test Bank team, comprised of economists who each write questions in their respective areas of expertise, has worked conscientiously to create a test bank that reduces the instructor’s burden of test writing.

New and Retained Features

The Test bank contains approximately 50 new questions per chapter, plus a revision of many of the existing questions.

The new questions are more rigorous and challenging and the variety of difficulty levels has been increased. More questions are numerical.

All questions have been checked multiple times for accuracy.

Questions have been carefully updated to reflect changes in the text.

The proportion of questions across topics represents Mankiw’s content emphasis.

Test bank authors write questions in their area of expertise.

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Questions are written to avoid making tests easy for “test-smart” students. That is, the questions have realistic and sensible foils.

The ExamView® software is now more user-friendly, allowing instructors to easily edit questions and add their own questions.

Codes

Each test question is coded to reflect the type of question, the level of difficulty, and the chapter section that the question tests. The answer follows each question.

Question TypeM = multiple-choice questionT = true/falseS = short answer

Section# = the chapter section the question is testing. Section headings are in red type and set in capital letters.

Difficulty1 = little2 = moderate3 = greater

Test Bank Options

This test bank is available in ExamView® Computerized Testing Software and Microsoft Word® files. The ExamView software and Word files are included on the Instructor’s Resource CD-ROM as well as on the Product Support Web site (http://mankiw.swlearning.com).

For use with a version of Mankiw’s textbook other than the microconomics split, compare the “micro” column of the Comparative Table of Contents below to the version of the text you are using to determine how chapters are shared among the five version of the text.

Acknowledgements

Special thanks to Ken McCormick and David Hakes of the University of Northern Iowa for their review of the test bank for accuracy and completeness.

For their helpful comments provided in a survey, thanks also to Josiah Baker, J. Ulysses Balderas, King Banaian, Bruce Brown, Margaret Chapman, Byron Chapman, Basanta Chaudhuri, Barbara Craig, Susanne Currier, Susan Dadres, Stratford Douglas, David Eaton, Can Erbil, Patricia Euzent, Fred Foldvary, Lynn Gillette, Phil Holleran, James Hvidding, Leo Kahane, Brian Kench, Fiona C. Maclachlan, Thomas Makemson, Tom Means, Jeffrey Michael, Peter Olson, Drew Parkes, Jodi Pelkowski, Michael Pisani, Marlene Reed, Thomas Rhoads, Raymond Robertson, Udayan Roy, Juha

vi

Preface vii

Seppala, William Seyfried, Joggindar Uppal, John Volpe, David Wihry, Virginia Wilcox-Gok, and Sheng-Ping Yang.

Finally, thanks to Sheryl Nelson and OffCenter Concept House for their remarkable editing and layout work.

We hope you’ll enjoy your Mankiw 4e Assessment Experience.

Comparative Table of Contents

CoreMicro

Macro

Essentials

Brief Macro

Part 1: Introduction Part 1

Part 1

Part 1 Part 1

1 Ten Principles of Economics 1 1 1 12 Thinking Like an Economist 2 2 2 23 Interdependence and the Gains from Trade 3 3 3 3Part 2: How Markets Work Part

2Part 2

Part 2 Part 2

4 The Market Forces of Supply and Demand 4 4 4 45 Elasticity and Its Application 5 5 56 Supply, Demand, and Government Policies 6 6 6Part 3: Markets and Welfare Part

3Part 3

Part 3

7 Consumers, Producers, and the Efficiency of Markets 7 7 78 Application: The Costs of Taxation 8 8 89 Application: International Trade 9 9 9Part 4: The Economics of the Public Sector Part

4Part 4

10 Externalities 10 1011 Public Goods and Common Resources 11 1112 The Design of the Tax System 12Part 5: Firm Behavior and the Organization of

IndustryPart 5

Part 5

13 The Costs of Production 13 1214 Firms in Competitive Markets 14 1315 Monopoly 15 1416 Oligopoly 1617 Monopolistic Competition 17Part 6: The Economics of Labor Markets Part

618 The Markets for the Factors of Production 1819 Earnings and Discrimination 1920 Income Inequality and Poverty 20Part 7: Topics for Further Study Part

721 The Theory of Consumer Choice 2122 Frontiers of Microeconomics 22Part 8: The Data of Macroeconomics Part

4Part 6 Part

323 Measuring a Nation’s Income 10 15 524 Measuring the Cost of Living 11 16 6Part 9: The Real Economy in the Long Run Part

5Part 7 Part

425 Production and Growth 12 17 726 Saving, Investment, and the Financial System 13 18 827 The Basic Tools of Finance 14 19 928 Unemployment 15 20 10Part 10: Money and Prices in the Long Run Part

6Part 8 Part

529 The Monetary System 16 21 1130 Money Growth and Inflation 17 22 12Part 11: The Macroeconomics of Open Economies Part

7Part 6

Preface ix31 Open-Economy Macroeconomics: Basic Concepts 18 1332 A Macroeconomic Theory of the Open Economy 19 14Part 12: Short-Run Economic Fluctuations Part

8Part 9 Part

733 Aggregate Demand and Aggregate Supply 20 23 1534 The Influence of Monetary and Fiscal Policy on Aggregate

Demand21 24 16

35 The Short-Run Trade-off between Inflation and Unemployment

22 17

Part 13: Final Thoughts Part 9

Part 8

36 Five Debates over Macroeconomic Policy 23 18