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Test Bank for Economics, 9th edition by Glenn Hubbard A+
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Created By: A SolutionTest Bank for Economics, 9th edition by Glenn
Hubbard A+
Chapter 1 Economics: Foundations and Models
1.1 Three Key Economic Ideas
1) Apple assembles most iPhones in China and India because the lower wages earned by
Chinese and Indian workers and their experience in electronics manufacturing reduce the costs of
assembling iPhones. This is an example of Apple reacting to which of the three key economic
ideas?
A) People are rational.
B) People respond to economic incentives.
C) Optimal decisions are made at the margin.
D) Firms attempt to maximize revenues. Answer: B
Diff: 2
Topic: Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
Special Feature: Chapter Opener: Should Apple Manufacture the iPhone in the United States?
2) In economics, choices must be made because we live in a world of
A) unemployment.
B) scarcity.
C) greed.
D) unlimited resources. Answer: B
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
A+ Page 1
,Created By: A Solution
AACSB: Analytical thinking
3) Which of the following statements about scarcity is true?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity only arises when there is a wide disparity in income distribution. Answer: A
Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
4) The basic economic problem of has always existed and will continue to exist.
A) scarcity
B) efficiency
C) inflation
D) recession Answer: A Diff: 1
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
5) By definition, economics is the study of
A) how to make money in the stock market.
B) how to make money in a market economy.
C) the choices people make to attain their goals, given their scarce resources.
D) supply and demand. Answer: C
Diff: 1
A+ Page 2
,Created By: A Solution
Topic: Scarcity
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
6) An economic is a simplified version of some aspect of economic life used to analyze an
economic issue.
A) market
B) trade-off
C) variable
D) model Answer: D Diff: 1
Topic: Economic Models
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
7) Where do economic agents such as individuals, firms, and nations interact with each
other?
A) in public locations monitored by the government
B) in any arena that brings together buyers and sellers
C) in any physical location where people can physically get together for selling goods, such
as shopping malls
D) in any location where transactions can be monitored by consumer groups and taxed by
the government
Answer: B Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
A+ Page 3
, Created By: A Solution
AACSB: Analytical thinking
8) In economics, the term refers to a group of buyers and sellers of a product and the
arrangement by which they come together to trade.
A) collective
B) cooperative
C) market
D) trade-off Answer: C Diff: 1
Topic: Markets
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
9) Economists assume that individuals
A) behave in unpredictable ways.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) are rational and respond to incentives. Answer: D
Diff: 1
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think
like an economist
AACSB: Analytical thinking
10) Economists assume that rational behavior is useful in explaining choices people make
A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) because individuals act rationally all the time in all circumstances.
D) even though people rarely, if ever, behave in a rational manner. Answer: B
A+ Page 4
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