,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
2. It is possible to completely eliminate scarcity.
ANS: F PTS: 1
3. Scarcity applies to decision makers in macroeconomics but not in microeconomics.
ANS: F PTS: 1
4. 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
5. Microeconomics is the branch of economics in which you study inflation and unemployment in the
economy.
ANS: F PTS: 1
6. Microeconomics explores the allocation of scarce resources from the perspective of small economic
units such as consumers and firms.
ANS: T PTS: 1
7. To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their
goals.
ANS: T PTS: 1
8. Economists presume that when making a decision, individuals consider both the current action and the
future consequences of that action.
ANS: T PTS: 1
9. Economic models are of limited use since they cannot be tested empirically.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: F PTS: 1
10. A hypothesis is a normative statement.
ANS: F PTS: 1
11. A testable proposition that predicts how people will react to changed circumstances is called a
hypothesis.
ANS: T PTS: 1
12. A good economic theory should capture as many details about real-world behavior as possible.
ANS: F PTS: 1
13. The main concern of economics is to study how well the stock markets are performing.
ANS: F PTS: 1
14. "Ceteris paribus" is a Latin expression that means "holding everything else constant."
ANS: T PTS: 1
15. The fallacy of composition states that even if something is true for an individual, it is not necessarily
true for many individuals as a group.
ANS: T PTS: 1
16. When two variables repeatedly change at the same time, there must be a causal relationship between
them.
ANS: F PTS: 1
17. Normative analysis focuses on statements that can be tested against real-world data.
ANS: F PTS: 1
18. "A tax cut will lead to higher inflation" is an example of a positive economic statement.
ANS: T PTS: 1
19. To be a positive economic statement, an assertion must be factual.
ANS: F PTS: 1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, 20. Most disagreements among economists stem from normative issues.
ANS: T PTS: 1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
TRUE/FALSE
1. Since resources are abundant, we do not have to make choices about their use.
ANS: F PTS: 1
2. It is possible to completely eliminate scarcity.
ANS: F PTS: 1
3. Scarcity applies to decision makers in macroeconomics but not in microeconomics.
ANS: F PTS: 1
4. 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
5. Microeconomics is the branch of economics in which you study inflation and unemployment in the
economy.
ANS: F PTS: 1
6. Microeconomics explores the allocation of scarce resources from the perspective of small economic
units such as consumers and firms.
ANS: T PTS: 1
7. To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their
goals.
ANS: T PTS: 1
8. Economists presume that when making a decision, individuals consider both the current action and the
future consequences of that action.
ANS: T PTS: 1
9. Economic models are of limited use since they cannot be tested empirically.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, ANS: F PTS: 1
10. A hypothesis is a normative statement.
ANS: F PTS: 1
11. A testable proposition that predicts how people will react to changed circumstances is called a
hypothesis.
ANS: T PTS: 1
12. A good economic theory should capture as many details about real-world behavior as possible.
ANS: F PTS: 1
13. The main concern of economics is to study how well the stock markets are performing.
ANS: F PTS: 1
14. "Ceteris paribus" is a Latin expression that means "holding everything else constant."
ANS: T PTS: 1
15. The fallacy of composition states that even if something is true for an individual, it is not necessarily
true for many individuals as a group.
ANS: T PTS: 1
16. When two variables repeatedly change at the same time, there must be a causal relationship between
them.
ANS: F PTS: 1
17. Normative analysis focuses on statements that can be tested against real-world data.
ANS: F PTS: 1
18. "A tax cut will lead to higher inflation" is an example of a positive economic statement.
ANS: T PTS: 1
19. To be a positive economic statement, an assertion must be factual.
ANS: F PTS: 1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, 20. Most disagreements among economists stem from normative issues.
ANS: T PTS: 1
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
