Question 1

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets,and therefore choose to invest in foreign markets.By using all available information as they act to achieve their goals,these investors are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.

Accepted Answer

The investors' decision to invest in foreign markets instead of domestic markets is based on their assessment of risks and potential returns, which is an example of rational decision-making. This aligns with the economic idea that people are rational and respond to incentives. Option B is also a valid answer, but option A more accurately describes the reasoning behind the investors' decision. Options C and D are not relevant to this situation.

Question 2

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.

Accepted Answer

Economists typically assume that individuals are rational and respond to incentives. This means that they make decisions based on self-interest and will take action if they perceive that the benefits outweigh the costs. This assumption is built into many economic models and theories.

Question 3

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.

Accepted Answer

Economics is the study of how individuals, businesses, and governments make choices about how to allocate their scarce resources to satisfy their unlimited wants and needs. It is not solely focused on making money in a market economy or investing in the stock market, nor is it solely focused on supply and demand.

Question 4

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that
A) people with health insurance will be less likely to be overweight than people without health insurance.
B) people with health insurance will be more likely to be overweight than people without health insurance.
C) people with health insurance will be equally likely to be overweight as people without health insurance.
D) there is no correlation between having health insurance and being overweight.

Accepted Answer

The answer of Holding all other personal characteristics-such as age,gender,and...

Question 5

Recent changes occurring within the U.S.health care system,including lower insurance reimbursement rates,have resulted in
A) a growing number of doctor's choosing to open private practices.
B) more medical practices being owned by hospitals than by individual doctors.
C) a majority of hospitals closing routine medical practices in order to focus only on emergency care facilities.
D) a majority of doctors working directly for insurance companies.

Accepted Answer

Lower insurance reimbursement rates have made it more difficult for individual medical practices to remain financially profitable. As a result, we are seeing a trend of more medical practices being owned by hospitals rather than individual doctors. This allows the medical practices to have access to the resources and support of the larger hospital system, while also providing the hospital with a steady stream of patients.

Question 6

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.

Accepted Answer

The answer of Suppose that some teachers have decided that...

Question 7

In economics,choices must be made because we live in a world of
A) unemployment.
B) scarcity.
C) greed.
D) unlimited resources.

Accepted Answer

Scarcity refers to the limited availability of resources relative to unlimited wants and needs. As a result, choices must be made about how these resources are allocated and utilized. Without scarcity, there would be no need for economic decision-making.

Question 8

Suppose the U.S.government encouraged consumers to trade in their old automobiles for more efficient,new models by paying up to $5,000 for the old automobiles.These consumers would be exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.

Accepted Answer

Encouraging consumers to trade in their old automobiles for more efficient new ones by paying up to $5,000 for the old models is an economic incentive for consumers to make a rational decision that can improve their economic welfare. Therefore, this exemplifies the economic idea that people respond to economic incentives.

Question 9

The basic economic problem of ________ has always existed and will continue to exist.
A) scarcity
B) efficiency
C) inflation
D) recession

Accepted Answer

Scarcity refers to the limited resources available to satisfy unlimited wants and needs. This problem has always existed throughout human history and will continue to exist.

Question 10

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.
A) equitably
B) rationally
C) emotionally
D) selfishly

Accepted Answer

Economics assumes that economic agents make rational decisions, meaning they weigh the costs and benefits and choose the option that maximizes their own self-interest. This does not necessarily mean that they always make the right or ethical choice, but rather they make the best decision given their own incentives and constraints.

Question 11

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.

Accepted Answer

While economists assume that rational behavior is useful in explaining choices people make, they also acknowledge that people may not always behave rationally. Therefore, choice B is the best option as it acknowledges both the usefulness of rational behavior in economic analysis and the reality that people may not always behave rationally.

Question 12

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

Accepted Answer

An economic model is a simplified version of some aspect of economic life used to analyze an economic issue. It allows economists to make predictions and understand complex economic phenomena. Market, trade-off, and variable are all related to economics, but they do not specifically refer to a simplified version used for analysis.

Question 13

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.
A) collective
B) cooperative
C) market
D) trade-off

Accepted Answer

A market is the arrangement by which buyers and sellers come together to trade a product. It can be physical or virtual and can refer to a specific location or industry. The other options, collective and cooperative, do not encompass the concept of trading or exchange and trade-off refers to the concept of giving up one thing to obtain another.

Question 14

Consider the following statements: 
a.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c.Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.

Accepted Answer

The answer of Consider the following statements: 
a.Car owners purchase...

Question 15

Which of the following statements is true about scarcity?
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 arises when there is a wide disparity in income distribution.

Accepted Answer

Scarcity refers to the situation where unlimited wants exceed limited resources. This is a universal problem and applies to all individuals, regardless of their wealth or income. It is not limited to specific countries or populations.

Question 16

Suppose the U.S.government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.

Accepted Answer

This scenario involves the government providing financial incentives for new doctors to take over existing practices from retiring doctors. This aligns with the economic idea that people respond to economic incentives, as the monetary reward is likely to encourage more new doctors to enter the market and take over existing practices.

Question 17

Since 1994,obesity rates in the United States
A) have been on a slow and steady decline.
B) have increased in all 50 states.
C) have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country.
D) have remained fairly constant throughout the country.

Accepted Answer

The answer of Since 1994,obesity rates in the United States
A)...

Question 18

In economics,the term ________ means "additional" or "extra."
A) allocative
B) marginal
C) equity
D) optimal

Accepted Answer

The term that means "additional" or "extra" in economics is marginal. Option A (allocative) refers to the efficient distribution of resources, Option C (equity) refers to fairness and justice in the distribution of resources, and Option D (optimal) refers to the best possible outcome.

Question 19

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 people 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

Accepted Answer

Economic agents such as individuals, firms, and nations, interact with each other in any arena that brings together buyers and sellers, such as markets, exchanges, and online trading platforms. This can happen physically or virtually, and it is not limited to public locations or locations monitored by the government.

Question 20

Economists assume that rational people do all of the following except
A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.

Accepted Answer

Economists assume that individuals act rationally in pursuit of their goals, which includes weighing the costs and benefits of alternative actions and responding to economic incentives. However, they do not assume that individuals will knowingly undertake activities that harm themselves and benefit others, as this behavior would not be rational.

Quiz 1: Economics: Foundations and Models

Economists assume that individuals

By definition,economics is the study of

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that

Recent changes occurring within the U.S.health care system,including lower insurance reimbursement rates,have resulted in

In economics,choices must be made because we live in a world of

Suppose the U.S.government encouraged consumers to trade in their old automobiles for more efficient,new models by paying up to $5,000 for the old automobiles.These consumers would be exemplifying the economic idea that

The basic economic problem of ________ has always existed and will continue to exist.

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.

Economists assume that rational behavior is useful in explaining choices people make

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

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.

Which of the following statements is true about scarcity?

Suppose the U.S.government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that

Since 1994,obesity rates in the United States

In economics,the term ________ means "additional" or "extra."

Where do economic agents such as individuals,firms and nations,interact with each other?

Economists assume that rational people do all of the following except