Question 1

Why do economists use models?
A)Models are used to add complexity to a simple world.
B)Models allow us to study a simplified version of a complex world.
C)Models allow us to control exogenous factors.
D)Models make the world harder to understand.
E)Models allow us to examine more factors than what actually exists in our world.

Accepted Answer

Economists use models to study a simplified version of a complex world, allowing them to isolate and analyze specific factors and relationships.

Question 2

The important act of holding all other variables constant while examining a particular variable is known as:
A)endogeneity.
B)a normative statement.
C)a positive statement.
D)macroeconomics.
E)ceteris paribus.

Accepted Answer

The term ceteris paribus means "all other things being equal" or "holding all other variables constant." It is an important concept in economic analysis as it allows us to isolate the effect of a particular variable on an outcome, without the influence of other factors. The other choices are not relevant to the concept of ceteris paribus.

Question 3

Ceteris paribus means:
A)in sets of two.
B)constant opportunity cost.
C)other things being equal.
D)buyer beware.
E)there is no reason to argue about people's tastes.

Accepted Answer

Ceteris paribus means "other things being equal." It is often used in economics to isolate the impact of one variable on another by assuming that all other variables remain constant.

Question 4

Economists use the scientific method and the tools of economics to study:
A)only the decisions of individuals.
B)only the decisions of business firms.
C)only economic growth and gross domestic product (GDP).
D)only the production possibilities curve.
E)anything around them; the world is the economist's laboratory.

Accepted Answer

Economists study anything around them, as the world is the economist's laboratory. They use the scientific method and the tools of economics to understand human behavior and interactions, including decisions made by individuals, businesses, governments, and societies, as well as factors affecting economic growth and GDP. The production possibilities curve is just one of many tools used to analyze economic concepts.

Question 5

Which of the following is a normative statement?
A)The sky is blue.
B)The sky is green with pink polka dots.
C)Points on the production possibilities frontier (PPF)are efficient.
D)Points outside the PPF are unattainable with current resources.
E)We should strive to push the PPF outward.

Accepted Answer

Normative statements express value judgments or opinions and suggest what ought to be. Option E suggests a desirable goal or course of action, making it a normative statement. The other options are descriptive statements that state facts or observations about the world, making them positive statements.

Question 6

Which of the following is a normative statement?
A)You should wear a helmet when cycling.
B)The sky is blue.
C)A bicycle has two wheels.
D)A unicycle has five wheels.
E)Electricity follows the path of least resistance.

Accepted Answer

A normative statement expresses a value judgment on what ought to be or what is desirable. "You should wear a helmet when cycling" is a normative statement because it prescribes a behavior that is desired for safety. The other statements are descriptive statements and do not express any value judgments.

Question 7

Which of the following is necessary to build a good economic model?
A)normative statements
B)assumptions
C)opinions
D)complex math
E)realism

Accepted Answer

Assumptions are necessary to build a good economic model as they simplify the complexity of the real world and make the model easier to understand and work with. Normative statements and opinions are subjective and may vary from person to person, while complex math may not always be necessary depending on the model being built. Realism is important, but it is often difficult to achieve in economic modeling as the real world is complex and constantly changing.

Question 8

An economist's use of experiments and real-world data to test a theory is an example of:
A)the scientific method in economics.
B)macroeconomics.
C)economic growth.
D)normative analysis.
E)comparative advantage.

Accepted Answer

The use of experiments and real-world data to test a theory is a crucial step in the scientific method, which is used by economists to develop and validate economic theories.

Question 9

On the television show "MythBusters," the hosts design experiments,collect data,and test theories based on popular myths.This is an example of:
A)the scientific method as used in economics.
B)economic growth.
C)gains from trade.
D)production possibilities.
E)absolute advantage.

Accepted Answer

The scientific method involves designing experiments, collecting data, and testing theories. Although the show MythBusters does not explicitly deal with economic concepts, it applies the scientific method in trying to prove or disprove popular myths.

Question 10

Variables that are controlled for in a model are called:
A)normative statements.
B)positive statements.
C)endogenous factors.
D)exogenous factors.
E)the scientific method.

Accepted Answer

The answer of Variables that are controlled for in a...

Question 11

Which of the following is a positive statement?
A)My dog should lose some weight.
B)Legally requiring dogs to have rabies shots will reduce the number of rabid dogs.
C)You should take your dog to the veterinarian once a year for a checkup.
D)Chihuahuas are cuter than bulldogs.
E)All dogs should be required to wear leashes at all times.

Accepted Answer

This statement is a positive statement because it presents an objective, factual claim that can be tested or verified through observation or research - specifically, that legally requiring dogs to have rabies shots will reduce the number of rabid dogs. This statement does not express any value judgments or opinions. The other statements include subjective opinions or value judgments (A, D, and E) or recommendations (C).

Question 12

The scientific method and the tools of economics are useful in examining:
A)only how individuals make decisions.
B)only how business firms make decisions.
C)only how government policies affect macroeconomic outcomes.
D)only the trade-offs evident in production possibilities frontier (PPF).
E)anything; economists will use their tools to study anything in the world around them.

Accepted Answer

The scientific method and the tools of economics can be applied to study any phenomenon in the world around us, including individual and business decisions, government policies, and trade-offs evident in production possibilities. Economics is a social science that uses empirical observation, data analysis, and theoretical modeling to explain how people make choices, how markets work, and how policies affect outcomes. Therefore, economists are not limited to studying only one aspect of the economy or society, but are open to examining any topic that is relevant to their field of inquiry.

Question 13

Variables that are not accounted for in a model are called:
A)endogenous factors.
B)exogenous factors.
C)normative statements.
D)positive statements.
E)the scientific method.

Accepted Answer

Exogenous factors are external variables that are not included in a model or analysis. Endogenous factors, on the other hand, are internal variables that are accounted for in the model. Normative and positive statements refer to types of statements, while the scientific method is a process for conducting research.

Question 14

You are considering the "dress well,test well" theory,which argues that you perform better on exams when you dress nicely than you do when you wear sweatpants.If you want to test this theory over the course of the semester,which of the following would be an endogenous factor in your experiment?
A)your innate ability in the subject
B)the difficulty of the exam
C)the relative mix of multiple-choice and short-answer questions
D)your clothing choice for the exam
E)the amount of time you spend studying for the exam

Accepted Answer

Your clothing choice for the exam is the endogenous factor in this experiment because it is the variable that you are manipulating (i.e. dressing nicely vs. wearing sweatpants) to test the theory. The other factors listed are not being manipulated by you and are therefore exogenous.

Question 15

Which of the following is a positive statement?
A)Winters in Arkansas are too cold.
B)Everyone should work in a bank to understand the true value of money.
C)Harvard University is the top education institution in the country.
D)On average,people save 15% when they switch to GEICO.
E)Everyone ought to have a life insurance policy.

Accepted Answer

Option D is a positive statement as it provides a verifiable fact about people saving money when they switch to GEICO. The other options express subjective opinions or normative statements that can't be factually proven.

Question 16

A positive statement:
A)is a claim that can be tested.
B)is a statement about what ought to be.
C)is a declaration of opinion.
D)is a claim that cannot be tested.
E)cannot be evaluated using the scientific method.

Accepted Answer

A positive statement is a statement that can be tested and potentially proven true or false through empirical evidence. It is a factual statement based on observable and measurable objects or events.

Question 17

Which of the following is a normative statement?
A)The current exchange rate is 0.7 British pounds per U.S.dollar.
B)In January,the average temperature in Fargo,North Dakota,is 56 degrees.
C)Winters in Arkansas are too cold.
D)On average,people save 15% when they switch to GEICO.
E)University of Virginia graduates earn more than Duke University graduates.

Accepted Answer

Normative statements express value judgments or opinions on what should or ought to be. Option C expresses an opinion on what the weather should be like in Arkansas, making it a normative statement. The other options are descriptive statements that describe what is or what has happened.

Question 18

Which of the following is a positive statement?
A)Individuals should make good long-term decisions.
B)Corporations should maximize shareholder value.
C)Government should reduce the level of unemployment.
D)The most important effects of policy happen in the short term.
E)The unemployment rate is 8%.

Accepted Answer

The statement "The unemployment rate is 8%" is a positive statement because it is a statement of fact that can be empirically verified. The other statements are normative statements, expressing opinions or values rather than describing observable phenomena.

Question 19

The process of examining a change in one variable in a model while assuming that all the other variables remain constant is called:
A)exogenous factors.
B)ceteris paribus.
C)normative analysis.
D)positive analysis.
E)faulty assumptions.

Accepted Answer

Ceteris paribus means "all other things being equal," and it is a fundamental concept in economics used to isolate the relationship between two variables by assuming that all other variables remain constant. This allows for a more accurate analysis of the effects of the change in the variable of interest. Exogenous factors refer to variables outside the model's control, while normative and positive analysis relate to value judgments and descriptive analysis, respectively. "Faulty assumptions" is not a valid term commonly used in economics.

Question 20

Which of the following is a positive statement?
A)An economist should test every theory at least twice.
B)Increases in the minimum wage cause unemployment.
C)We ought to deregulate the mortgage market.
D)The government must provide unlimited health care to citizens.
E)We should forgo some current consumption in order to invest in the future.

Accepted Answer

Positive statements are objective statements that can be tested, amended, or rejected by referring to the available evidence. B) "Increases in the minimum wage cause unemployment" is a positive statement because it describes a cause-and-effect relationship that can be tested through empirical observation.

Quiz 2: Model Building and Gains From Trade

Why do economists use models?

The important act of holding all other variables constant while examining a particular variable is known as:

Ceteris paribus means:

Economists use the scientific method and the tools of economics to study:

Which of the following is a normative statement?

Which of the following is a normative statement?

Which of the following is necessary to build a good economic model?

An economist's use of experiments and real-world data to test a theory is an example of:

On the television show "MythBusters," the hosts design experiments,collect data,and test theories based on popular myths.This is an example of:

Variables that are controlled for in a model are called:

Which of the following is a positive statement?

The scientific method and the tools of economics are useful in examining:

Variables that are not accounted for in a model are called:

You are considering the "dress well,test well" theory,which argues that you perform better on exams when you dress nicely than you do when you wear sweatpants.If you want to test this theory over the course of the semester,which of the following would be an endogenous factor in your experiment?

Which of the following is a positive statement?

A positive statement:

Which of the following is a normative statement?

Which of the following is a positive statement?

The process of examining a change in one variable in a model while assuming that all the other variables remain constant is called:

Which of the following is a positive statement?