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Test Bank
Principles 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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Preface  3

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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


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.

 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.


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 Type
M = multiple-choice question
T = true/false
S = short answer

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

1 = little
2 = moderate
3 = 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 (
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.


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

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
Core Micro Macro Essentials Macro
Part 1: Introduction Part 1 Part 1 Part 1 Part 1
1 Ten Principles of Economics 1 1 1 1
2 Thinking Like an Economist 2 2 2 2
3 Interdependence and the Gains from Trade 3 3 3 3
Part 2: How Markets Work Part 2 Part 2 Part 2 Part 2
4 The Market Forces of Supply and Demand 4 4 4 4
5 Elasticity and Its Application 5 5 5
6 Supply, Demand, and Government Policies 6 6 6
Part 3: Markets and Welfare Part 3 Part 3 Part 3
7 Consumers, Producers, and the Efficiency of Markets 7 7 7
8 Application: The Costs of Taxation 8 8 8
9 Application: International Trade 9 9 9
Part 4: The Economics of the Public Sector Part 4 Part 4
10 Externalities 10 10
11 Public Goods and Common Resources 11 11
12 The Design of the Tax System 12
Part 5: Firm Behavior and the Organization of Industry Part 5 Part 5
13 The Costs of Production 13 12
14 Firms in Competitive Markets 14 13
15 Monopoly 15 14
16 Oligopoly 16
17 Monopolistic Competition 17
Part 6: The Economics of Labor Markets Part 6
18 The Markets for the Factors of Production 18
19 Earnings and Discrimination 19
20 Income Inequality and Poverty 20
Part 7: Topics for Further Study Part 7
21 The Theory of Consumer Choice 21
22 Frontiers of Microeconomics 22
Part 8: The Data of Macroeconomics Part 4 Part 6 Part 3
23 Measuring a Nation’s Income 10 15 5
24 Measuring the Cost of Living 11 16 6
Part 9: The Real Economy in the Long Run Part 5 Part 7 Part 4
25 Production and Growth 12 17 7
26 Saving, Investment, and the Financial System 13 18 8
27 The Basic Tools of Finance 14 19 9
28 Unemployment 15 20 10
Part 10: Money and Prices in the Long Run Part 6 Part 8 Part 5
29 The Monetary System 16 21 11
30 Money Growth and Inflation 17 22 12
Part 11: The Macroeconomics of Open Economies Part 7 Part 6
31 Open-Economy Macroeconomics: Basic Concepts 18 13
32 A Macroeconomic Theory of the Open Economy 19 14
Part 12: Short-Run Economic Fluctuations Part 8 Part 9 Part 7
33 Aggregate Demand and Aggregate Supply 20 23 15
34 The Influence of Monetary and Fiscal Policy on Aggregate Demand 21 24 16
Preface  ix
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