Chapter 1 Economics: Foundations and Models 1.1 Three Key Economic Ideas 1) In an effort to serve consumers who have become more health conscious, a number of firms have begun developing small electronic devices which allow people to monitor various health conditions. These firms are 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 Page Ref: 6/e, 3 Topic: Scarcity Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytic thinking Special Feature: Chapter Opener: Will Smart Devices Revolutionize Health Care? 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 Page Ref: 6/e, 4 Topic: Scarcity *: Recurring Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytic 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 Page Ref: 6/e, 4 Topic: Scarcity *: Recurring Learning Outcome: Micro-1: Identify the basic p