Copyright 2013 Pearson Education, Inc.

1 Copyright © 2013 Pearson Education, Inc.Macroeconomics, 4e (Hubbard/O'Brien)

Chapter 1 Economics: Foundations and Models

1.1 Three Key Economic Ideas 1) Recent changes occurring within the U.S. health care system, including lower insurance reimbursement rates, have resulted in

• a growing number of doctor's choosing to open private practices.
• more medical practices being owned by hospitals than by individual doctors.
• a majority of hospitals closing routine medical practices in order to focus only on emergency

care facilities.

• a majority of doctors working directly for insurance companies.

Answer: B

Diff: 2 Page Ref: 3/3

Topic: Scarcity

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: Chapter Opener: Why Are Some Doctors Leaving Practices?2) In economics, choices must be made because we live in a world of

• unemployment.
• scarcity.
• greed.
• unlimited resources.

Answer: B

Diff: 1 Page Ref: 4/4

Topic: Scarcity

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

3) Which of the following statements is true about scarcity?

• Scarcity refers to the situation in which unlimited wants exceed limited resources.
• Scarcity is not a problem for the wealthy.
• Scarcity is only a problem when a country has too large a population.
• Scarcity arises when there is a wide disparity in income distribution.

Answer: A

Diff: 1 Page Ref: 4/4

Topic: Scarcity

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

Macroeconomics 4e Glenn Hubbard OBrien (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2013 Pearson Education, Inc.4) The basic economic problem of ________ has always existed and will continue to exist.

• scarcity
• efficiency
• inflation
• recession

Answer: A

Diff: 1 Page Ref: 4/4

Topic: Scarcity

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

5) By definition, economics is the study of

• how to make money in the stock market.
• how to make money in a market economy.
• the choices people make to attain their goals, given their scarce resources.
• supply and demand.

Answer: C

Diff: 1 Page Ref: 4/4

Topic: Scarcity

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking, Communication

Special Feature: None

6) An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

• market
• trade-off
• variable
• model

Answer: D

Diff: 1 Page Ref: 4/4

Topic: Economic Models

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None 2 / 4

3 Copyright © 2013 Pearson Education, Inc.7) Where do economic agents such as individuals, firms and nations, interact with each other?

• in public locations monitored by the government
• in any arena that brings together buyers and sellers
• in any physical location people where people can physically get together for selling goods,

such as shopping malls

• in any location where transactions can be monitored by consumer groups and taxed by the

government

Answer: B

Diff: 1 Page Ref: 4/4

Topic: Markets

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

8) The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

• collective
• cooperative
• market
• trade-off

Answer: C

Diff: 1 Page Ref: 4/4

Topic: Markets

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

9) Economists assume that individuals

• behave in unpredictable ways.
• will never take actions to help others.
• prefer to live in a society that values fairness above all else.
• are rational and respond to incentives.

Answer: D

Diff: 1 Page Ref: 5/5

Topic: People Are Rational

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None 3 / 4

4 Copyright © 2013 Pearson Education, Inc.10) Economists assume that rational behavior is useful in explaining choices people make

• because irrational people do not make economic choices.
• even though people may not behave rationally all the time.
• because individuals act rationally all the time in all circumstances.
• even though people rarely, if ever, behave in a rational manner.

Answer: B

Diff: 2 Page Ref: 5/5

Topic: People Are Rational

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

11) Economists assume that rational people do all of the following except

• use all available information as they act to achieve their goals.
• undertake activities that benefit others and hurt themselves.
• weigh the benefits and costs of all possible alternative actions.
• respond to economic incentives.

Answer: B

Diff: 2 Page Ref: 5/5

Topic: People Are Rational

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

12) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

• equitably
• rationally
• emotionally
• selfishly

Answer: B

Diff: 2 Page Ref: 5/5

Topic: People Are Rational

*: Recurring

Learning Outcome: Micro 1: Identify the basic principles of economics and explain how to think like an economist

AACSB: Reflective Thinking

Special Feature: None

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