Test Bank for Microeconomics

Microeconomics Seventh Edition R.Glenn Hubbard Anthony Patrick O’Brien

Test Bank for Microeconomics

Randy Methenitis 1 / 4

Microeconomics 2019, 7e (Hubbard/O'Brien)

Chapter 1 Economics: Foundations and Models

1.1 Three Key Economic Ideas 1) Ford assembles some cars in Mexico because the lower wages the company pays to Mexican workers and the lower prices it pays for auto parts in Mexico reduces Ford's costs. This is an

example of Ford reacting to which of the three key economic ideas?

• People are rational.
• People respond to economic incentives.
• Optimal decisions are made at the margin.
• Firms attempt to maximize

revenues.

Answer: B

Diff: 2

Page Ref: 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: Why Does Ford Assemble Cars in Both the United States and Mexico?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

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?

• 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 only arises when there is a wide disparity in income distribution.

Answer: A

Diff: 1

Page Ref: 4

Topic: Scarcity

*: Recurring

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

AACSB: Analytical thinking

1

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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

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

• 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

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.

• market
• trade-off
• variable
• model

Answer: D

Diff: 1 Page Ref: 4

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

2

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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 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

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.

• collective
• cooperative
• market
• trade-off

Answer: C

Diff: 1 Page Ref: 4

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

• 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

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

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