File: ch01, Chapter 1: Analyzing Economic Problems
Multiple Choice
1. The analytical tools underlying nearly all microeconomic studies are:
a) Unconstrained optimization and comparative statics.
b) Comparative statics and game theory.
c) Opportunity cost and equilibrium analysis.
d) Constrained optimization, equilibrium analysis, and comparative
statics.
Ans: D
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
2. Economics is often described as
a) The science of choice
b) The science of constrained choice
c) The science of supply and demand
d) The science of market forces
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
3. Microeconomics examines
a) the economic behavior of an entire nation.
b) the economic behavior of individual economic decision units.
c) topics such as national income and inflation.
d) monetary policy.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
1
4. An endogenous variable is
a) a variable that an economic agent chooses.
b) consumption, investment or government spending.
c) a variable determined within the economic system being studied.
d) a variable pertaining to the home country economy.
Ans: C
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
5. In general, economics is the study of
a) the allocation of scarce wants to unlimited resources.
b) the allocation scarce resources to unlimited wants.
c) the allocation of resources between the government and the private
sector.
d) the allocation of workers between firms.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
6. Identifying the appropriate way to allocate an economy’s resources is an
example of
a) a constrained optimization problem.
b) a comparative statics problem.
c) an equilibrium analysis.
d) marginal analysis.
Ans: A
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
7. Every society must answer
a) Which variables are exogenous and which are endogenous?
b) Who will receive the goods and services?
2
c) What goods and services will be produced, how much will be
produced, who will produce them and who will receive them?
d) How centralized should government bureaucracy be?
Ans: C
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
8. Which of the following statements regarding exogenous and endogenous
variables is correct?
a) The set of exogenous variables in any economic model should take
into account the rich detail of the world and so should be limitless.
b) Endogenous variables will always be determined within the model.
c) Exogenous variables change as a result of changes in endogenous
variables.
d) The only variables that are relevant to the market equilibrium are the
endogenous variables, as they are determined within the model.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
9. The definition of an exogenous variable is
a) a variable whose value is determined within the model under study.
b) a variable whose value is determined outside the model under study.
c) a variable whose value is determined through constrained
optimization.
d) a variable whose value is determined through comparative statics.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
10. Constrained optimization, equilibrium analysis and comparative statistics are
the three essential tools of
a) Macroeconomic analysis
b) Microeconomic analysis
3
c) Equilibrium analysis
d) Industry analysis
Ans: B
Difficulty: Easy
Heading: Three Key Analytical Tools
Multiple Choice
1. The analytical tools underlying nearly all microeconomic studies are:
a) Unconstrained optimization and comparative statics.
b) Comparative statics and game theory.
c) Opportunity cost and equilibrium analysis.
d) Constrained optimization, equilibrium analysis, and comparative
statics.
Ans: D
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
2. Economics is often described as
a) The science of choice
b) The science of constrained choice
c) The science of supply and demand
d) The science of market forces
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
3. Microeconomics examines
a) the economic behavior of an entire nation.
b) the economic behavior of individual economic decision units.
c) topics such as national income and inflation.
d) monetary policy.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
1
4. An endogenous variable is
a) a variable that an economic agent chooses.
b) consumption, investment or government spending.
c) a variable determined within the economic system being studied.
d) a variable pertaining to the home country economy.
Ans: C
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
5. In general, economics is the study of
a) the allocation of scarce wants to unlimited resources.
b) the allocation scarce resources to unlimited wants.
c) the allocation of resources between the government and the private
sector.
d) the allocation of workers between firms.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
6. Identifying the appropriate way to allocate an economy’s resources is an
example of
a) a constrained optimization problem.
b) a comparative statics problem.
c) an equilibrium analysis.
d) marginal analysis.
Ans: A
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
7. Every society must answer
a) Which variables are exogenous and which are endogenous?
b) Who will receive the goods and services?
2
c) What goods and services will be produced, how much will be
produced, who will produce them and who will receive them?
d) How centralized should government bureaucracy be?
Ans: C
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
8. Which of the following statements regarding exogenous and endogenous
variables is correct?
a) The set of exogenous variables in any economic model should take
into account the rich detail of the world and so should be limitless.
b) Endogenous variables will always be determined within the model.
c) Exogenous variables change as a result of changes in endogenous
variables.
d) The only variables that are relevant to the market equilibrium are the
endogenous variables, as they are determined within the model.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
9. The definition of an exogenous variable is
a) a variable whose value is determined within the model under study.
b) a variable whose value is determined outside the model under study.
c) a variable whose value is determined through constrained
optimization.
d) a variable whose value is determined through comparative statics.
Ans: B
Difficulty: Easy
Heading: Why Study Microeconomics?
LO 1 Define the terms microeconomics and macroeconomics, including the concept
of the science of constrained choice.
10. Constrained optimization, equilibrium analysis and comparative statistics are
the three essential tools of
a) Macroeconomic analysis
b) Microeconomic analysis
3
c) Equilibrium analysis
d) Industry analysis
Ans: B
Difficulty: Easy
Heading: Three Key Analytical Tools