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,Principles of Economics, 7e (Frank)Chapter 1 Thinking Like an Economist
1) Economics is best defined as the study of:
A) inflation, interest rates and the stock market.
B) supply and demand.
C) how people make choices in the face of scarcity and the implications of those choices for
society as a whole.
D) the financial concerns of businesses and individuals.
Answer: C
Explanation: Economics is the study of how people make choices under conditions of scarcity
and the implications of those choices for society as a whole.
Difficulty: 1 Easy
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2) Economics is best defined as the study of:
A) the financial concerns of businesses and individuals.
B) the role of government in limiting the choices people make.
C) choice in the face of limited resources.
D) whether we will have enough resources in the future.
Answer: C
Explanation: Economics is the study of how people make choices under conditions of scarcity
and the implications of those choices for society as a whole.
Difficulty: 1 Easy
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
1
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
,3) Economists recognize that because people have limited resources:
A) government intervention is necessary.
B) they have to make trade-offs.
C) they will never be happy.
D) our future is bleak.
Answer: B
Explanation: Economists recognize that the resources available to us are limited, so having more
of one good thing means having less of another.
Difficulty: 1 Easy
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
4) The Scarcity Principle states that:
A) people don't have enough money to buy what they want.
B) society will eventually run out of resources.
C) with limited resources, having more of one thing means having less of another.
D) some countries have fewer resources than others.
Answer: C
Explanation: The Scarcity Principle states that although we have boundless needs and wants, the
resources available to us are limited. So having more of one thing means having less of another.
Difficulty: 1 Easy
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
2
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
, 5) An implication of scarcity is that:
A) people will never be happy.
B) making trade-offs becomes unnecessary as wealth increases.
C) some people will always be poor.
D) people must make trade-offs.
Answer: D
Explanation: The Scarcity Principle states that although we have boundless needs and wants, the
resources available to us are limited. So having more of one thing means having less of another.
Difficulty: 1 Easy
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
6) If all the world's resources were to magically increase one hundredfold, then:
A) people would still have to make trade-offs.
B) economics would no longer be relevant.
C) scarcity would disappear.
D) trade-offs would become unnecessary.
Answer: A
Explanation: Economists assume that resources will always be scarce relative to people's wants.
Difficulty: 2 Medium
Topic: Economics: Studying Choice in a World of Scarcity
Learning Objective: 01-01 Explain and apply the Scarcity Principle, which says that having
more of any good thing necessarily requires having less of something else.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
3
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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