Question 1

The basic purpose of economic models is to:
A) make simplifying assumptions about the real world.
B) explain reality in all its complexity.
C) collect empirical data to support facts.
D) construct situations where controlled experiments can be carried out.
E) explain and predict events.

Accepted Answer

The answer of The basic purpose of economic models is...

Question 2

A good economic theory:
A) is based on value judgments.
B) contains as much detail as possible.
C) cannot be proven false.
D) can be used to make predictions.
E) can only be presented in mathematical terms.

Accepted Answer

A good economic theory should be able to make accurate predictions about real-world phenomena.

Question 3

Exhibit 1.3
 
-Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 1 is:
A) Formulate a hypothesis.
B) Specify assumptions.
C) Identify the question and define relevant variables.
D) Test the hypothesis.
E) Use the hypothesis until a better one shows up.

Accepted Answer

Exhibit 1.3 is the image of a product or item, therefore it does not provide any information relevant to the other steps in the scientific method. Step 1 is to identify the question and define relevant variables, which is the initial stage of formulating a hypothesis.

Question 4

An economic model that sometimes makes incorrect predictions can be used by economic decision makers:
A) under no circumstances.
B) only if it assumes a positive correlation between the variables being analyzed.
C) if it is mathematical.
D) if it is simple enough for a child to understand.
E) until a better model is developed.

Accepted Answer

While an economic model that sometimes makes incorrect predictions may not be perfect, it can still provide valuable insight for decision makers until a better model is developed. It is important for decision makers to be aware of the limitations of the model and to use it in conjunction with other sources of information.

Question 5

Economists employ the scientific method to help explain economic behavior. In part, this means that:
A) there is a single economic theory accepted by all economists.
B) economic hypotheses are tested to determine their validity.
C) all economic laws have been proven true by laboratory tests.
D) personal values never enter into economic policy recommendations.
E) assumptions are not necessary in economics.

Accepted Answer

Economists use the scientific method to test and validate economic hypotheses. This involves using data and empirical evidence to assess the validity of economic theories and models. While there may be debates among economists regarding what constitutes valid evidence, the use of empirical methods is a central feature of mainstream economics. Assumptions are also necessary in economics, as they are in any scientific discipline, but they must be based on evidence and subject to testing through empirical analysis. Personal values may influence economic policy recommendations, but economists aim to separate their personal beliefs from their professional analyses. Ultimately, the goal of economics is to provide a rigorous and evidence-based understanding of economic behavior, which can inform policy decisions and improve the overall welfare of individuals and societies.

Question 6

Exhibit 1.3
 
-Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 2 is:
A) Identify the question and define relevant variables.
B) Test the hypothesis.
C) Formulate a hypothesis.
D) Specify assumptions.
E) Use the hypothesis until a better one shows up.

Accepted Answer

The answer of Exhibit 1.3
 
-Refer to Exhibit 1.3 of...

Question 7

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?
A) As the model does not include the interaction between firms and resource markets, it does not predict correctly.
B) As the model does not include the interaction between households and product markets, it does not predict correctly.
C) The model has too many simplifying assumptions, and it cannot be used to make predictions about the real world.
D) The model is a simplification of the real world, and it can be used to make predictions about the real world.
E) As the model does not include the interaction between firms and product markets, it does not predict correctly.

Accepted Answer

The statement "The model is a simplification of the real world, and it can be used to make predictions about the real world" is correct. While it is true that the model does not capture all of the complexity of the real-world interactions between households and firms, it is a useful tool for understanding the basic flow of goods and services between these two groups. It can still be used to make predictions about how changes in variables such as production or consumption will affect the economy as a whole.

Question 8

An economic model:
A) omits critical elements.
B) must be presented in mathematical terms.
C) is used to make predictions about the real world.
D) can never be proven wrong if its assumptions are realistic.
E) produces poor predictions if it includes assumptions.

Accepted Answer

Economic models are used to make predictions about the real world, based on certain assumptions and variables. While they may not include all critical elements and can be presented in mathematical terms, their main purpose is to provide insight into real-world situations and outcomes. However, models can be limited by their assumptions and may not always accurately predict outcomes.

Question 9

Which of the following is an accurate list, in order, of the steps of the scientific method?
A) Define variables; state assumptions; form a hypothesis; test
B) State assumptions; define variables; form a hypothesis; test
C) Identify variables; state assumptions; test; form a hypothesis
D) Identify variables; form a hypothesis; form behavioral assumptions; test
E) Define assumptions; form behavioral assumptions; form hypothesis; test

Accepted Answer

The answer of Which of the following is an accurate...

Question 10

When constructing an economic model, economists:
A) rely mostly on their own value judgments and ignore the far more complex world of facts.
B) always try to duplicate reality by including all available information.
C) use assumptions that are true for the individual but never true for the whole economy.
D) must rely on assumptions for the sake of simplification.
E) are primarily concerned with making realistic assumptions.

Accepted Answer

Economic models are constructed to simplify complex economic situations and highlight important relationships between variables. In order to do so, economists must make assumptions that may not hold true for the entire economy. These assumptions are made for the sake of simplification and allow economists to analyze the relationships between different economic variables. Therefore, choice D is the best answer.

Question 11

Exhibit 1.3
 
-Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 4 is:
A) Formulate a hypothesis.
B) Test the hypothesis.
C) Identify the question and define relevant variables.
D) Use the hypothesis until a better one shows up.
E) Specify assumptions.

Accepted Answer

Step 4 is to test the hypothesis, which means to gather data and evidence to either support or reject the hypothesis formulated in Step 3.

Question 12

All economic models must involve simplifications because:
A) economists would be unable to command high salaries if their models were too simple.
B) human behavior is very erratic and unpredictable.
C) reality is too complex to understand in its entirety, so we must reduce the complexity to a level that we can understand.
D) economists try to cover all the possible variables.
E) we must ignore complexity.

Accepted Answer

Economists recognize that reality is too complex to fully understand, so they use simplifications to make it more manageable to analyze and study. This does not mean that complexity is ignored or that economists try to cover all possible variables, but rather that simplification is necessary in order to gain insight into economic phenomena.

Question 13

Exhibit 1.3
 
-Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 3 is:
A) Identify the question and define relevant variables.
B) Test the hypothesis.
C) Formulate a hypothesis.
D) Specify assumptions.
E) Use the hypothesis until a better one shows up.

Accepted Answer

Step 3 in the Scientific Method involves formulating a hypothesis based on the observations and questions identified in the earlier steps. This hypothesis serves as a tentative explanation or prediction that can be tested through further experimentation and observation.

Question 14

The "other-things-constant" assumption is also known as:
A) ceteris paribus.
B) prediction.
C) normative.
D) variable.
E) positive.

Accepted Answer

The "other-things-constant" assumption is also known as ceteris paribus, which means that all other variables except the one being studied are held constant.

Question 15

The "other-things-constant" assumption:
A) allows an economist to make useful predictions.
B) is a prediction.
C) applies only to consumers' decisions and not to those of firms.
D) forces an economist to ignore reality, where things are constantly changing.
E) implies rational self-interest on the part of all economic actors.

Accepted Answer

The "other-things-constant" assumption (also known as ceteris paribus) enables economists to isolate the effects of one variable on an economic outcome while holding all other factors constant. This assumption helps economists make useful predictions about how changes in one variable will affect others in a complex economic environment.

Question 16

Economic theories are:
A) useful because they are as precise as theories in the physical sciences.
B) useless because they are based on abstractions.
C) useful because they allow us to make predictions.
D) complex to understand because they do not make assumptions.
E) useful in predicting events only if their assumptions are realistic.

Accepted Answer

Economic theories are useful because they allow us to make predictions about how markets and economies will behave, based on assumptions about individual behavior and other factors. This can be valuable for decision-making in business, government, and personal finance.

Question 17

An economic model is useful if it:
A) includes every detail of reality.
B) involves no unproven assumptions.
C) is expressed in equations.
D) makes accurate predictions.
E) is simple enough to be understood by a child.

Accepted Answer

The purpose of an economic model is to make predictions and help understand complex economic systems. Therefore, the best choice is D which indicates that an economic model is useful if it makes accurate predictions.

Question 18

An economic theory seeks to:
A) distort reality in order to improve forecasting ability.
B) predict phenomena without explaining them.
C) explain phenomena without predicting them.
D) include every detail and interrelation among variables that are being analyzed.
E) capture the important elements of the problem under study.

Accepted Answer

An economic theory seeks to capture the important elements of the problem under study. It provides a simplified representation of the real world, highlighting the essential variables and relationships that give rise to the observed economic phenomenon. While it does not include every detail or interrelation among variables, it aims to provide a coherent and logical framework for understanding the behavior of economic agents and the functioning of markets. The theory can be used to make predictions, but its primary goal is to explain phenomena by identifying the underlying causes and mechanisms that drive economic activity.

Question 19

Exhibit 1.3
 
-Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. If Box A is 'Reject the hypothesis,' then Box B is:
A) Formulate a hypothesis.
B) Modify the approach.
C) Reject the hypothesis
D) Use the hypothesis until a better one shows up.
E) Test the hypothesis.

Accepted Answer

The answer of Exhibit 1.3
 
-Refer to Exhibit 1.3 of...

Question 20

Economic theories:
A) express normative values.
B) invent imaginative and interesting stories.
C) use the fallacy of composition to validate hypotheses.
D) predict cause and effect in the real world.
E) use only perfect and complete information to formulate and test hypotheses.

Accepted Answer

Economic theories aim to predict cause and effect in the real world by analyzing data and empirical evidence. While economic theories may have normative implications, their primary purpose is to explain and make predictions about economic phenomena through observed behaviors and interactions. They do not use fallacies or rely solely on perfect information.

Quiz 1: The Art and Science of Economic Analysis.

The basic purpose of economic models is to:

A good economic theory:

Exhibit 1.3 -Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 1 is:

An economic model that sometimes makes incorrect predictions can be used by economic decision makers:

Economists employ the scientific method to help explain economic behavior. In part, this means that:

Exhibit 1.3 -Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 2 is:

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?

An economic model:

Which of the following is an accurate list, in order, of the steps of the scientific method?

When constructing an economic model, economists:

Exhibit 1.3 -Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 4 is:

All economic models must involve simplifications because:

Exhibit 1.3 -Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. Step 3 is:

The "other-things-constant" assumption is also known as:

The "other-things-constant" assumption:

Economic theories are:

An economic model is useful if it:

An economic theory seeks to:

Exhibit 1.3 -Refer to Exhibit 1.3 of the Scientific Method: Step-by-Step. If Box A is 'Reject the hypothesis,' then Box B is:

Economic theories: