Question 1

Which of the following best illustrates the fallacy of composition?
A) If I talk loudly at a party, I have a better chance of being heard by my listeners. If everyone at the party talks loudly, everyone can be heard more clearly.
B) Resources are scarce; therefore, there is no such thing as a free lunch.
C) If the price of a product rises, the quantity supplied will decline.
D) The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation.

Accepted Answer

The fallacy of composition occurs when a person assumes that what is true for an individual part is also true for the whole group. In this case, the assumption that if talking loudly helps an individual to be heard, then everyone talking loudly will make everyone be heard more clearly is a fallacy of composition, as it may lead to everyone just talking over each other and making it even harder to understand what people are saying.

Question 2

If Canadian consumers bought more gasoline in 2007 (when prices averaged $1.30 per litre) than they did in 1980 (when prices averaged $0.40 per litre), does that mean that people buy more gasoline at higher prices?
A) Yes, because gasoline is a luxury good that consumers willingly purchase-even at higher prices.
B) Yes, because gas is a necessity that is in short supply. Consumers are always willing to buy more gasoline-even at higher prices.
C) No, because there is too little information provided about inflation, consumer income and other variables to make an appropriate comparison.
D) No, because prices cannot be compared over time.

Accepted Answer

The question does not provide enough information to make an appropriate comparison. Inflation and other variables could have affected the purchasing power of consumers, making it difficult to conclude that people buy more gasoline at higher prices. Therefore, we cannot simply compare the raw price of gasoline in 2007 and 1980 to make this judgment.

Question 3

Ten-year-old Tommy observes that people who play hockey are larger than average and tells his mom that he's going to play hockey because it will make him big and strong. What is the problem with Tommy's logic?
A) He is committing the fallacy of composition.
B) He is committing the fallacy of decomposition.
C) He is violating the ceteris paribus assumption.
D) He is mistaking correlation for causation.

Accepted Answer

Tommy is mistaking correlation for causation. Just because hockey players tend to be larger than average does not mean that playing hockey causes someone to become larger or stronger. It could be that people who are naturally larger and stronger are more likely to choose to play hockey.

Question 4

A scientist is trying to test a theory about the relationship between people's consumption of alcohol and their longevity. Which of the following variables would the scientist NOT hold constant?
A) the past histories of heart and lung disease
B) the amount of dietary fat that people in the experimental group consumed
C) the amount of alcohol that people in the experimental group consumed
D) the amount of cigarettes that people in the experimental group smoked

Accepted Answer

The scientist would not hold the amount of alcohol consumed constant because this is the variable being tested for its effect on longevity. Holding it constant would negate the purpose of the experiment.

Question 5

What would an economist predict would happen if airfares to Europe were to increase?
A) Airlines would make significantly greater profits.
B) Most people would not change their travel and vacation plans.
C) More individuals would choose to fly to Europe because now it is a more valuable experience.
D) Many individuals would substitute toward other travel destinations.

Accepted Answer

If airfares to Europe were to increase, many individuals would substitute toward other travel destinations. This is because as the price of airfare rises, people will be less likely to want to spend the extra money to travel to Europe and instead opt to travel to other, less expensive destinations.

Question 6

Which of the following best illustrates the fallacy of composition?
A) If Mr. Ahmad had more money, he would buy a new car; if he had a new car, he would have less money.
B) If Mr. Mua had more money, he could buy more goods; if the Mua family had more money, it could buy additional goods.
C) If Ms. Smith had more money, she would buy her children more gifts; if her children had more gifts, they would be happier.
D) If Ms. Shiflet had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

Accepted Answer

The fallacy of composition occurs when it is assumed that what is true of the parts is also true of the whole. The example in choice D implies that if individuals have more money, they can buy more scarce goods, and therefore, if the whole nation has more money, everyone can buy more scarce goods. However, this overlooks the fact that resources are limited, and an increase in demand for scarce goods will drive up prices, making them even more difficult to obtain for some individuals. Therefore, the assumption that everyone can buy more scarce goods with an increase in national wealth is a fallacy of composition.

Question 7

Which of the following best illustrates the fallacy of composition?
A) A great many people have been immunized against polio because it can be such a devastating disease. As a result, I probably do not personally need to be immunized against polio.
B) I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past. If everyone were to leave 30 minutes earlier for work, we'd all get to work faster.
C) Whenever I attend a hockey game at the local arena, the home team wins. Therefore, if I attend all of the team's local games, they will achieve a perfect winning record at home.
D) The parking at York University is in short supply on the main campus. It would be better for more people to ride the bus to school.

Accepted Answer

The fallacy of composition occurs when someone assumes that what is true of a part is necessarily true of the whole, and in this case, the assumption that leaving for work 30 minutes earlier will speed up commute time for all assumes that there will be no added traffic or congestion as a result.

Question 8

"When one hockey team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." What is this statement an illustration of?
A) the fallacy of composition
B) the ceteris paribus condition
C) a misunderstanding of the direction of causality
D) confusing correlation with causation

Accepted Answer

This statement is an illustration of the fallacy of composition, which assumes that what is true for one individual or group must be true for everyone. While it may be true that one hockey team benefits from acquiring better players, if all teams do the same thing, it does not necessarily mean they will all be better off. The competition between teams will still exist, and some may end up worse off despite their efforts to improve.

Question 9

Which of the following is the erroneous view that is associated with the fallacy of composition?
A) An increase in the supply of money will cause a general increase in the level of prices.
B) When two events are correlated, the one observed first must have caused the second.
C) If something is True for an individual, then it must also be True for a group.
D) A small change in an economic variable will have an unrecognizable but significant effect on the economy.

Accepted Answer

The fallacy of composition results from the erroneous view that what is true for an individual is necessarily true for a group or the whole. An example would be the mistaken belief that if one person stands up to see better at a sporting event, then everyone should stand up to see better. The other options listed do not fit this definition of the fallacy of composition.

Question 10

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?
A) The reoccurrence of such a relationship is sufficient evidence that sitting in the back of a classroom will lead to lower grades.
B) It is not possible for an economist to determine causation between variables.
C) The reoccurrence of a certain relationship between two variables does not necessarily imply causation.
D) The reoccurrence of such a relationship is sufficient evidence that students who receive low grades prefer to keep a low profile and always sit in the back of the classroom.

Accepted Answer

Correlation does not always imply causation. Just because there is a relationship between where someone sits in a classroom and their grades does not mean that sitting in the back of the classroom causes them to perform poorly on exams. There could be other factors at play, such as students who struggle academically being more likely to sit in the back of the classroom. Therefore, it is important to exercise caution when interpreting correlations and not jump to conclusions about causality.

Question 11

What is the fallacy of composition?
A) the idea that correlation need not imply causation
B) the erroneous view that an economic activity can sometimes exceed the sum of its components
C) the view that the aggregation of economic activity will necessarily lead to an outcome that is different from the outcome generated by each individual in the group
D) the erroneous view that what is True for the individual will also be True for the group

Accepted Answer

The fallacy of composition is the erroneous assumption that what is true for the individual must also be true for the group or the whole. This is not always the case, as the aggregation of individual actions can lead to outcomes that are different from the outcomes generated by each individual in the group.

Question 12

In a parliamentary debate about agricultural price supports, Members of Parliament and other experts made the following four statements. Which one of these is a normative statement?
A) "Without price supports, the price of wheat and corn will fall by over 20 percent."
B) "Price supports are important because Canada should preserve the small family farm."
C) "The decline in commodity prices caused by the removal of price supports will result in fewer, larger farms."
D) "The decline in commodity prices caused by the removal of price supports will reduce the number of tractors sold in Canada."

Accepted Answer

This statement presents a subjective value judgment about why price supports are important, rather than presenting a factual statement about their effects on the economy or markets.

Question 13

"To do well and be at the top 10 percent of the class, one should study more. If everyone studies more then they all can do well and finish at the top of the class." What is the problem with the logic in this statement?
A) There is causation but no correlation.
B) There is correlation but no causation.
C) It is a normative statement and should be a positive statement.
D) There is a fallacy of composition.

Accepted Answer

The problem with the logic in this statement is the fallacy of composition, which assumes that something true for an individual is automatically true for the entire group or population without considering other factors that may impact the outcome. Just because studying more may help an individual do well and finish at the top of the class, that does not mean it will guarantee the same results for everyone in the class.

Question 14

Which of the following statements best illustrates the fallacy of composition?
A) the error of omitting relevant variables from an economic model
B) the error of confusing normative economics with positive economics
C) the error of generalizing from the individual to the whole
D) the error of confusing correlation with causation

Accepted Answer

The fallacy of composition occurs when an individual assumes that something that is true for one part of a system must be true for the whole system. Choice C best illustrates this fallacy as it involves generalizing from the individual to the whole. For example, just because a single student benefits from studying longer hours, it does not mean that all students benefit from it.

Question 15

Many people have heard that the US stock market rises when a team from the National Football Conference (NFC) wins the Super Bowl, and falls when a team from the American Football Conference (AFC) is victorious. If you conclude that there is a causal relationship between the outcome of the Super Bowl and stock prices, you probably are making what mistake?
A) You are committing the fallacy of composition.
B) You are violating the ceteris paribus assumption.
C) You are confusing correlation with causation.
D) You are confusing the direction of causality; stock prices determine which team wins the Super Bowl.

Accepted Answer

The mistake being made is confusing correlation with causation. Just because there is a correlation between the outcome of the Super Bowl and stock prices, it does not necessarily mean that one causes the other. There could be other variables at play that affect both. It is important to note that correlation does not imply causation.

Question 16

A theory asserts that consumers will purchase less of a good at higher prices than they will at lower prices. However, when the average price of cars increased throughout the 1990s, more cars were purchased. Which of the following explanations of the apparent conflict between theory and data is most accurate?
A) The price and quantity data gathered by researchers was clearly measured incorrectly.
B) It is likely that variables other than the price and quantity of cars demanded were changing.
C) The ceteris paribus assumption is valid.
D) The theory must be invalid.

Accepted Answer

The theory of demand applies the ceteris paribus assumption, which means that all other variables remain constant. In reality, there are many variables that influence consumer purchases such as income, taste, and availability of credit, which could all be changing alongside the price of cars. The increase in car purchases during the 1990s could be due to other variables that were changing simultaneously. Thus, the apparent conflict between theory and data can be explained by the presence of other variables.

Question 17

If rain dancing is correlated with rain, does that necessarily mean rain dancing causes rain?
A) No. This is an example of the fallacy of composition.
B) No. Two variables may be correlated without one necessarily causing the other.
C) Yes. This is an example of a failure to properly employ the ceteris paribus assumption.
D) Yes. If it rains after individuals have engaged in rain dancing, then there is certainly causation at work.

Accepted Answer

Correlation does not necessarily imply causation. While rain dancing may be correlated with rain, it does not necessarily mean that the rain is caused by the rain dancing. It could be that both rain dancing and rain are caused by some other factor, or it could be coincidence. To establish causation, a rigorous experimental design would need to be employed, such as having a control group that does not engage in rain dancing and comparing their rainfall levels to those of the rain dancers.

Question 18

Which of the following statements describing correlation is the most accurate?
A) Two sets of phenomena may be related, but one does not necessarily cause the other.
B) When two phenomena are not observed together, one still causes the other.
C) When two phenomena are repeatedly observed together, one must cause the other.
D) Two sets of phenomena are not related and one may in fact cause the other.

Accepted Answer

Correlation means that two sets of phenomena are related, but it does not necessarily mean that one causes the other. There may be other factors involved that influence both phenomena. Therefore, option A is the most accurate statement. Option B is incorrect because it implies a causal relationship between the two phenomena, which is not always the case. Option C is also incorrect because correlation does not imply causation, and it is possible that both phenomena are caused by a third factor. Option D is incorrect because correlation means there is a relationship between the two phenomena, and if one causes the other, then they are related.

Question 19

A student football team manager examined variables influencing the team's record and concluded that the best scores resulted when the "third-string" team played the most minutes. Therefore he recommended that the third-string team become the first team. Why is this conclusion probably erroneous?
A) He failed to recognize that correlation is not causation.
B) He did not review the entire game strategy carefully enough.
C) He committed the fallacy of composition.
D) He confused positive and normative analysis.

Accepted Answer

The fact that the team's best scores resulted when the third-string team played the most minutes does not necessarily mean that the third-string team is the reason for the success. Other variables, such as the opponents' strength or the starting lineup, may have affected the outcomes as well. Therefore, the conclusion based solely on correlation is probably erroneous.

Question 20

Which of the following best illustrates the fallacy of composition?
A) If the price of bread rose, consumers would buy less; if consumers bought less, the price of bread would rise.
B) If Mr. Lewis produces more, he can consume more; if Mr. Lewis consumes more, he can produce more.
C) If prices of houses went down, more people could afford houses; and if more people bought houses, the prices of houses would increase.
D) If Mr. Lewis had more money, he would be wealthier; if a nation's money supply were larger, the people of the nation would be wealthier.

Accepted Answer

The fallacy of composition is the error of assuming that what is true of a member of a group is true for the group as a whole. Choice D illustrates this fallacy by suggesting that if an individual having more money makes them wealthier, then a larger money supply for a nation would make its people wealthier, ignoring the potential for inflation and other macroeconomic factors that affect wealth at the national level.

Quiz 1: The Role and Method of Economics

Which of the following best illustrates the fallacy of composition?

If Canadian consumers bought more gasoline in 2007 (when prices averaged $1.30 per litre) than they did in 1980 (when prices averaged $0.40 per litre) , does that mean that people buy more gasoline at higher prices?

Ten-year-old Tommy observes that people who play hockey are larger than average and tells his mom that he's going to play hockey because it will make him big and strong. What is the problem with Tommy's logic?

A scientist is trying to test a theory about the relationship between people's consumption of alcohol and their longevity. Which of the following variables would the scientist NOT hold constant?

What would an economist predict would happen if airfares to Europe were to increase?

Which of the following best illustrates the fallacy of composition?

Which of the following best illustrates the fallacy of composition?

"When one hockey team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." What is this statement an illustration of?

Which of the following is the erroneous view that is associated with the fallacy of composition?

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?

What is the fallacy of composition?

In a parliamentary debate about agricultural price supports, Members of Parliament and other experts made the following four statements. Which one of these is a normative statement?

"To do well and be at the top 10 percent of the class, one should study more. If everyone studies more then they all can do well and finish at the top of the class." What is the problem with the logic in this statement?

Which of the following statements best illustrates the fallacy of composition?

If rain dancing is correlated with rain, does that necessarily mean rain dancing causes rain?

Which of the following statements describing correlation is the most accurate?

A student football team manager examined variables influencing the team's record and concluded that the best scores resulted when the "third-string" team played the most minutes. Therefore he recommended that the third-string team become the first team. Why is this conclusion probably erroneous?

Which of the following best illustrates the fallacy of composition?