,Chapter 1—The Role and Method of Economics
TRUE/FALSE
1. Since resources are abundant, we do not have to make choices about their use.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Scarcity and Unlimited Human Wants
2. Economics is the study of choices we make among our many wants and desires.
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics—A Word with Many Different Meanings
3. It is possible to completely eliminate scarcity.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Will Scarcity Ever Be Eradicated?
4. Scarcity forces us to choose, and choices are costly because we must give up other opportunities that
we value
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics—A Word with Many Different Meanings
5. Wealthy consumers do not have to make decisions on what to buy or how much to save.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Does Everyone Face Scarcity?
6. If we choose more work, we sacrifice leisure.
ANS: T PTS: 1 DIF: M
TOP: 1.1 Economics: A Brief Introduction | Economics Is All Around Us
7. Living in a world of scarcity involves trade-offs.
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics Is All Around Us
8. Scarcity is a problem faced by all but the wealthiest of citizens.
ANS: F PTS: 1 DIF: M
TOP: 1.1 The Role and Method of Economics | Does Everyone Face Scarcity?
9. Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce
resources.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
10. Human capital consists of computers, tools, and equipment owned by private individuals.
, ANS: F PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
11. An entrepreneur organizes the other factors of production and bears the business risk.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
12. Everyone faces scarcity.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Does Everyone Face Scarcity?
13. Economists assume that most individuals act as if they are motivated by self-interest and respond in
predictable ways to changing circumstances.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | Self-Interest
14. Economists believe that only a small part of human behavior can be explained and predicted by
assuming that most people act as if they are motivated by their own self-interest in an effort to increase
their expected personal satisfaction.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | Self-Interest
15. Self-interest could never include benevolence.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | Self-Interest
16. To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their
goals.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
17. Economists presume that when making a decision, individuals consider both the current action and the
expected future consequences of that action.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
18. At the time people make most of their choices, they typically know with certainty which choice is best.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
19. Economists believe that most people's actions are rational and purposeful, not random and chaotic.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
, 20. Market failure is a term used to describe what happens when a market economy is not able to allocate
resources efficiently.
ANS: T PTS: 1 DIF: E
TOP: 1.3 Markets | What is a Market Failure?
21. Government price controls make communication of information between buyers and sellers more
effective.
ANS: F PTS: 1 DIF: E
TOP: 1.3 Markets | Market Prices Provide Important Information
22. One topic that microeconomics explores is how prices are determined in individual markets, while
macroeconomics is concerned with issues such as the economy's overall rate of inflation, economic
growth and unemployment.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
23. Microeconomics is the branch of economics in which you study topics such as inflation and
unemployment in the economy.
ANS: F PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
24. Microeconomics explores the allocation of scarce resources from the perspective of small economic
units such as consumers and firms.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
25. Economic models are of very limited use since they cannot be tested empirically.
ANS: F PTS: 1 DIF: M
TOP: 1.4 Economic Theory | Developing a Testable Proposition
26. A hypothesis is a normative statement.
ANS: F PTS: 1 DIF: E
TOP: 1.4 Economic Theory | Developing a Testable Proposition
27. A testable proposition that predicts how people will react to changed circumstances is called a
hypothesis.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | Developing a Testable Proposition
28. A good economic theory should capture as many details about real-world behavior as possible.
ANS: F PTS: 1 DIF: M
TOP: 1.4 Economic Theory | Abstraction is Important
TRUE/FALSE
1. Since resources are abundant, we do not have to make choices about their use.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Scarcity and Unlimited Human Wants
2. Economics is the study of choices we make among our many wants and desires.
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics—A Word with Many Different Meanings
3. It is possible to completely eliminate scarcity.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Will Scarcity Ever Be Eradicated?
4. Scarcity forces us to choose, and choices are costly because we must give up other opportunities that
we value
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics—A Word with Many Different Meanings
5. Wealthy consumers do not have to make decisions on what to buy or how much to save.
ANS: F PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Does Everyone Face Scarcity?
6. If we choose more work, we sacrifice leisure.
ANS: T PTS: 1 DIF: M
TOP: 1.1 Economics: A Brief Introduction | Economics Is All Around Us
7. Living in a world of scarcity involves trade-offs.
ANS: T PTS: 1 DIF: E
TOP: 1.1 Economics: A Brief Introduction | Economics Is All Around Us
8. Scarcity is a problem faced by all but the wealthiest of citizens.
ANS: F PTS: 1 DIF: M
TOP: 1.1 The Role and Method of Economics | Does Everyone Face Scarcity?
9. Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce
resources.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
10. Human capital consists of computers, tools, and equipment owned by private individuals.
, ANS: F PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
11. An entrepreneur organizes the other factors of production and bears the business risk.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Scarcity and Limited Resources
12. Everyone faces scarcity.
ANS: T PTS: 1 DIF: E
TOP: 1.1 The Role and Method of Economics | Does Everyone Face Scarcity?
13. Economists assume that most individuals act as if they are motivated by self-interest and respond in
predictable ways to changing circumstances.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | Self-Interest
14. Economists believe that only a small part of human behavior can be explained and predicted by
assuming that most people act as if they are motivated by their own self-interest in an effort to increase
their expected personal satisfaction.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | Self-Interest
15. Self-interest could never include benevolence.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | Self-Interest
16. To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their
goals.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
17. Economists presume that when making a decision, individuals consider both the current action and the
expected future consequences of that action.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
18. At the time people make most of their choices, they typically know with certainty which choice is best.
ANS: F PTS: 1 DIF: M
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
19. Economists believe that most people's actions are rational and purposeful, not random and chaotic.
ANS: T PTS: 1 DIF: E
TOP: 1.2 Economic Behavior | What Is Rational Behavior?
, 20. Market failure is a term used to describe what happens when a market economy is not able to allocate
resources efficiently.
ANS: T PTS: 1 DIF: E
TOP: 1.3 Markets | What is a Market Failure?
21. Government price controls make communication of information between buyers and sellers more
effective.
ANS: F PTS: 1 DIF: E
TOP: 1.3 Markets | Market Prices Provide Important Information
22. One topic that microeconomics explores is how prices are determined in individual markets, while
macroeconomics is concerned with issues such as the economy's overall rate of inflation, economic
growth and unemployment.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
23. Microeconomics is the branch of economics in which you study topics such as inflation and
unemployment in the economy.
ANS: F PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
24. Microeconomics explores the allocation of scarce resources from the perspective of small economic
units such as consumers and firms.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | The Two Branches of Economics: Microeconomics and
Macroeconomics
25. Economic models are of very limited use since they cannot be tested empirically.
ANS: F PTS: 1 DIF: M
TOP: 1.4 Economic Theory | Developing a Testable Proposition
26. A hypothesis is a normative statement.
ANS: F PTS: 1 DIF: E
TOP: 1.4 Economic Theory | Developing a Testable Proposition
27. A testable proposition that predicts how people will react to changed circumstances is called a
hypothesis.
ANS: T PTS: 1 DIF: E
TOP: 1.4 Economic Theory | Developing a Testable Proposition
28. A good economic theory should capture as many details about real-world behavior as possible.
ANS: F PTS: 1 DIF: M
TOP: 1.4 Economic Theory | Abstraction is Important
