Question 1

Which of the following is NOT an alleged "unrealistic" assumption that proponents of behavioral economics suggest are commonly utilized in traditional economic models based on the rationality assumption?

Accepted Answer

The other options (A, B, C) are assumptions that behavioral economists suggest are unrealistic in traditional economic models based on the rationality assumption. However, unbounded resources is not an assumption that is typically made in traditional economic models, as scarcity is considered a fundamental aspect of economics.

Question 2

A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of

Accepted Answer

Including the impact of wind when studying earthquakes introduces an additional variable that could confound the results related to earthquake damage, thus failing to isolate the variable of interest (earthquake impact) by not holding all other conditions constant.

Question 3

If psychological limitations and other complications cause people to be unable to examine and think through every possible choice available to them and rely instead on rules of thumb, then these individuals exhibit

Accepted Answer

The scenario describes individuals who are unable to examine and think through every possible choice due to psychological limitations and other complications. This is an example of bounded rationality, which is the idea that individuals are limited in their ability to process information and make decisions, and therefore rely on simplified decision-making strategies like rules of thumb.

Question 4

In constructing models, economists

Accepted Answer

Economists often make simplifying assumptions when constructing models in order to focus on the specific relationship between certain variables and avoid unnecessary complications. This allows for clearer analysis and interpretation of the model's results.

Question 5

Assumptions are necessary to

Accepted Answer

Assumptions are necessary to define a set of circumstances where a model is most likely to apply. Without assumptions, it would be difficult to develop economic models that can predict and explain real-world phenomena. However, assumptions are not meant to define the relationship between wants and resources under all circumstances, nor do they always define the specific cause and effect relationship being explained by social sciences.

Question 6

In building a model the assumption that allows economists to study only the factors being analyzed is the

Accepted Answer

The ceteris paribus assumption allows economists to isolate the effects of specific factors being studied by assuming that all other factors are held constant or equal. This allows for a more accurate analysis of the relationship between the variables being examined.

Question 7

"Ceteris paribus" assumption means

Accepted Answer

The "ceteris paribus" assumption means that nothing else changes except for the variables under consideration. This is often used in economic analysis to isolate the effect of a specific variable on an outcome, holding all other factors constant. It does not relate to the role of rational self-interest, the use of real-world data, or the limitation of analysis to descriptive statements or scientific predictions.

Question 8

Ceteris paribus means

Accepted Answer

Ceteris paribus means "other things being equal." It is used to isolate the effect of a particular variable by assuming that all other variables are held constant.

Question 9

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

Accepted Answer

Economic theory focuses on actual behavior and choices that people make rather than just what they say they would do. Therefore, the fact that people in this survey stated they cared more about safety than fuel efficiency, but then didn't purchase a car with many safety features, does not necessarily contradict economic theory. Other factors such as price, availability, and perceived value may have influenced their ultimate decision.

Question 10

The ceteris paribus assumption means

Accepted Answer

The ceteris paribus assumption means "other things being equal" in Latin. This assumption is used in economics to isolate the effect of one variable while holding all other factors constant.

Question 11

In building a model to analyze economic situations, one of the important assumptions is

Accepted Answer

The assumption of ceteris paribus, or "all else equal," is crucial in economic modeling because it allows economists to isolate the effect of one variable on an outcome, while holding all other variables constant. This simplifies the analysis and allows for clearer insights into cause-and-effect relationships. Scarcity is a fundamental concept in economics, but it is not an assumption specific to building economic models. Conversion abstraction and cognitive dissonance are not relevant assumptions in this context.

Question 12

A theory or a model

Accepted Answer

A theory or a model is a simplified, abstract view of reality. It is not based on value judgments, it may include some aspects of what ought to be, but it does not capture all aspects of the real world.

Question 13

Which expression below matches most closely the way economists go about testing their models?

Accepted Answer

Economists typically rely on empirical data to test their models and theories. They use statistical techniques to analyze the data and determine whether their model fits the data well and whether their hypotheses are supported by the evidence. Seeing the results is the only way to know if the model is a good representation of reality.

Question 14

Ceteris paribus means

Accepted Answer

Ceteris paribus is a Latin phrase that means "all other things being equal" or "other things held constant." Therefore, it refers to the assumption that all other variables except the ones being studied are held constant, so that the effects of changes in the studied variable can be isolated and accurately analyzed.

Question 15

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

Accepted Answer

The best way to determine whether the assumption that business people try to maximize profits is useful or not is to see whether it generates accurate predictions about the choices of business people. If it does, then the assumption is useful. If it does not, then the assumption may not be as useful. Asking business people directly may not provide accurate information as they may not be aware of their own behavior or may not be completely truthful in their responses. Comparing the profitability of U.S. and European businesses does not necessarily determine the usefulness of the assumption as there may be many other factors at play. Taking a survey of people's opinions also does not determine the usefulness of the assumption as opinions may be biased or not based on actual behavior.

Question 16

"Ceteris paribus" means

Accepted Answer

"Ceteris paribus" is a Latin term that means "other things being equal" or "other things constant". It is used in economics to isolate the effect of a particular variable, while holding all other variables constant.

Question 17

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

Accepted Answer

Rules of thumb, also known as heuristics, are shortcuts or simplified decision-making strategies that individuals use when faced with complex choices. These heuristics are a way of simplifying decision-making and conserving mental effort, but can sometimes lead to biases and errors in judgment. Therefore, proponents of behavioral economics argue that individuals tend to fall back on these heuristics when making decisions, rather than considering every possible choice.

Question 18

The assumption that nothing changes except the factor being studied is

Accepted Answer

The ceteris paribus assumption is the assumption that nothing changes except the factor being studied. This allows economists to isolate the effects of a specific variable on a particular outcome.

Question 19

Economic models relate to

Accepted Answer

Economic models are mathematical or conceptual tools used to understand and analyze economic behavior and decision-making, which is based on people's choices. Therefore, the best option is A.

Question 20

Economics is an empirical science, which means that economists

Accepted Answer

Economics relies on data and evidence to support or refute economic theories and models. Economists analyze real-world data and events to test the accuracy of their models and make predictions about future economic conditions.

Quiz 1: The Nature of Economics

Which of the following is NOT an alleged "unrealistic" assumption that proponents of behavioral economics suggest are commonly utilized in traditional economic models based on the rationality assumption?

A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of

If psychological limitations and other complications cause people to be unable to examine and think through every possible choice available to them and rely instead on rules of thumb, then these individuals exhibit

In constructing models, economists

Assumptions are necessary to

In building a model the assumption that allows economists to study only the factors being analyzed is the

"Ceteris paribus" assumption means

Ceteris paribus means

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

The ceteris paribus assumption means

In building a model to analyze economic situations, one of the important assumptions is

A theory or a model

Which expression below matches most closely the way economists go about testing their models?

Ceteris paribus means

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

"Ceteris paribus" means

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

The assumption that nothing changes except the factor being studied is

Economic models relate to

Economics is an empirical science, which means that economists