TEST BANK
ESSENTIALS OF ECONOMICS
8TH EDITION
CHAPTER NO. 01: 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
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
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
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
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain
how to think like an economist
ESSENTIALS OF ECONOMICS
8TH EDITION
CHAPTER NO. 01: 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
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
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
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
Diff: 2
Topic: People Are Rational
*: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain
how to think like an economist
