Question 1

The basic difference between macroeconomics and microeconomics is that

Accepted Answer

Microeconomics focuses on individual markets and the behavior of people and firms, while macroeconomics looks at aggregate markets and the entire economy.

Question 2

Which one of the following statements is correct?

Accepted Answer

Government programs, even if created with good intentions, can lead to undesirable outcomes due to unintended consequences and secondary effects.

Question 3

Economists use the term ceteris paribus to indicate that

Accepted Answer

Ceteris paribus is a Latin phrase meaning "all other things being equal," used by economists to isolate the effect of one variable by holding other relevant factors constant.

Question 4

When the Hometown football team is winning by a lot of points after halftime, they often play their second and third team players. One of the coaches notices that when the third team plays that Hometown wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. What is wrong with his way of thinking?

Accepted Answer

The coach is assuming that the third team's playing time causes the larger margin of victory, but correlation does not imply causation. Other factors could contribute to the larger margin.

Question 5

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Accepted Answer

The legislation intended to protect the woodpeckers inadvertently led to an undesirable outcome, where people harvested trees early to avoid restrictions, illustrating that good intentions can have unintended negative consequences.

Question 6

Which of the following best illustrates the fallacy of composition?

Accepted Answer

The fallacy of composition occurs when one assumes that what is true for an individual is also true for a group. In this case, the assumption that if everyone stood up, everyone would have a better view, illustrates this fallacy.

Question 7

The Latin phrase "ceteris paribus" means

Accepted Answer

"Ceteris paribus" is a Latin phrase meaning "all other things being equal" or "holding other things constant," used to isolate the effect of one variable in economic analysis.

Question 8

The fallacy of composition is the incorrect view that

Accepted Answer

The fallacy of composition occurs when it is assumed that what is true for an individual is also true for the group as a whole.

Question 9

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Accepted Answer

Correlation does not imply causation; the observed relationship between auto production and population growth does not mean one causes the other.

Question 10

The statement, "John buys more of good X as his income increases, ceteris paribus," means

Accepted Answer

"Ceteris paribus" means all other factors are held constant except for the one being studied, which in this case is John's income.

Question 11

When economists use the term ceteris paribus, they are indicating that

Accepted Answer

Ceteris paribus is a Latin phrase meaning "all other things being equal," used to isolate the relationship between two variables by assuming other influencing factors remain constant.

Question 12

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

Accepted Answer

The student assumed that because the third-string played more minutes and the team won by a larger margin, the third-string caused the larger margin of victory. This is a classic example of confusing correlation with causation.

Question 13

The fallacy of composition is the incorrect view that

Accepted Answer

The fallacy of composition occurs when one assumes that what is true for an individual is also true for the group as a whole.

Question 14

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Accepted Answer

The statement assumes a causal relationship between elections and cold weather based solely on their association, which is a logical fallacy.

Question 15

"If Tom had twice as much money, he could consume twice as much. If everyone had twice as much money, they could consume twice as much." This quote illustrates

Accepted Answer

The quote illustrates the fallacy of composition, which is the erroneous belief that what is true for an individual is also true for a group. While Tom could consume twice as much with twice the money, if everyone had twice as much money, prices might rise, and consumption might not double.

Question 16

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

Accepted Answer

The person has confused association with causation, assuming that because sunspot activity and recessions occur together, one causes the other, without evidence of a causal link.

Question 17

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Accepted Answer

Government programs can have unintended consequences that may lead to outcomes different from what was intended, despite good intentions.

Question 18

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

Accepted Answer

The answer of A popular video program, used to teach...

Question 19

The fallacy of composition is the fallacious view that

Accepted Answer

The fallacy of composition occurs when one assumes that what is true for an individual is also true for the group as a whole.

Question 20

The term ceteris paribus means that

Accepted Answer

Ceteris paribus is a Latin phrase meaning "all other things being equal," used in economics to isolate the effect of one variable by holding other relevant factors constant.

Quiz 1: The Economic Approach

The basic difference between macroeconomics and microeconomics is that

Which one of the following statements is correct?

Economists use the term ceteris paribus to indicate that

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Which of the following best illustrates the fallacy of composition?

The Latin phrase "ceteris paribus" means

The fallacy of composition is the incorrect view that

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

The statement, "John buys more of good X as his income increases, ceteris paribus," means

When economists use the term ceteris paribus, they are indicating that

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

The fallacy of composition is the incorrect view that

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

"If Tom had twice as much money, he could consume twice as much. If everyone had twice as much money, they could consume twice as much." This quote illustrates

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

The fallacy of composition is the fallacious view that

The term ceteris paribus means that