Question 1

Which of the following is a normative economic statement?

Accepted Answer

A normative economic statement makes a value judgment or recommendation about what should be done, rather than describing what is. Option A advocates for an action (increasing the legal minimum wage) and is therefore normative, while options B, C, and D describe the potential effects of such an action and therefore are positive (or descriptive) economic statements.

Question 2

Which of the following is a positive economic statement?

Accepted Answer

Option B is a positive economic statement as it predicts that an increase in unemployment benefits will lead to a higher unemployment rate. It is a statement of fact and does not involve judgments or value judgments. The other options express policy prescriptions or moral judgments, which are not positive economic statements.

Question 3

Which one of the following statements is correct?

Accepted Answer

Government programs can be implemented with good intentions but can lead to unintended consequences that can result in undesirable outcomes. Policymakers need to consider the potential secondary effects of their proposals before implementing them. Simply having good intentions does not guarantee a good outcome.

Question 4

Economists use the term ceteris paribus to indicate that

Accepted Answer

Ceteris paribus means “other things being equal or remaining constant”. Economists use this expression when analyzing the relationship between two variables while assuming that all other variables remain constant.

Question 5

The term ceteris paribus means that

Accepted Answer

Ceteris paribus is a Latin term that means "all other things being equal" or "with all other relevant factors held constant". Therefore, the correct answer is B, which states that all variables except those specified are constant.

Question 6

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

Your friend has mistakenly inferred causation from observed correlation. Just because U.S. auto production and population growth have moved together over several decades does not mean that one caused the other. There are likely other factors at play, and it is important not to jump to conclusions without considering all possible explanations.

Question 7

The fallacy of composition is the fallacious view that

Accepted Answer

The fallacy of composition is the mistaken belief that what is true for the individual must also be true for the group. This is not always the case, as the behavior or characteristics of a group cannot always be inferred from the behavior or characteristics of its individual members.

Question 8

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

Accepted Answer

Ceteris paribus means "all other things being equal" or "holding all other variables constant". This indicates that in analyzing the relationship between two economic variables, economists assume that all other factors that could affect the relationship are held constant. This allows for a clearer understanding and analysis of the relationship between the specified variables.

Question 9

Which of the following is a normative economic statement?

Accepted Answer

A normative economic statement expresses a value judgment or opinion about what ought to be. Option B is a normative statement as it expresses the opinion that companies should have a broader concern than solely profit. Options A, C, and D are positive economic statements, which describe what is or what would likely happen, rather than express an opinion about what should be.

Question 10

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

This is an example of unintended consequences resulting from good intentions. The legislation was created to protect the red-cockaded woodpecker, but the incentives created by the legislation led to premature harvesting of trees which had the opposite effect on the woodpecker population.

Question 11

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 made an erroneous conclusion by confusing the association between sunspot activity and recessions as causation. Just because two variables are correlated does not mean that one causes the other.

Question 12

"The standard of living is too low for many individuals in the United States.The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Accepted Answer

The statements are normative economic statements because they are based on the values of what should be done rather than what is currently happening in the economy.

Question 13

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

Accepted Answer

The statement confuses association with causation, as there is no evidence to suggest that elections actually cause cold weather. Therefore, it fails to recognize that association is not causation.

Question 14

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

Accepted Answer

The answer of The statement,"John buys more of good X...

Question 15

Which of the following is a normative statement?

Accepted Answer

A normative statement expresses a value judgment and is subjective, whereas a positive statement is objective and based on facts. Choice C expresses a value judgment that people would be better off if government expenditures were higher. The other three choices are positive statements that describe a relationship between variables or a prediction based on facts.

Question 16

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 made a causal inference based on an association between the performance of the third-string and the margin of victory. However, this association may not necessarily imply a causal relationship, as there may be other factors at play. Therefore, the student's recommendation may not necessarily lead to the desired outcome.

Question 17

"As soon as I announced my 'get tough on crime' policy,criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January--it was just too cold for anybody to be out robbing other people.Which fundamental economic mistake did the politician make?

Accepted Answer

The politician in this scenario is making the mistake of assuming that because the announcement of the policy and the decrease in crime rate occurred at the same time, they must be causally related. However, there may be other factors at play, such as the weather, which could account for the decrease in crime. This mistake is an example of the fallacy of believing that association is the same as causation.

Question 18

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

Accepted Answer

Economic analysis suggests that any new program, no matter the intention, may result in unintended consequences. This is why policymakers need to consider both the benefits and costs of environmental legislation. There's always an opportunity cost to any government spending, including spending on new environmental programs. Therefore, cost should always be a factor in designing environmental legislation.

Question 19

Which of the following is a positive economic statement?

Accepted Answer

Option C is a positive economic statement because it predicts a cause-and-effect relationship between an increase in investment and an increase in economic growth. Option A is normative because it involves a value judgment about what the federal minimum wage should be. Option B is also normative because it makes a subjective claim about the level of spending on anti-terrorism. Option D is not a statement about economics and is not positive or normative.

Question 20

Which of the following is a positive economic statement?

Accepted Answer

This statement makes a prediction about the impact of a specific policy on the economy, and can be tested and evaluated based on observable data.

Quiz 1: The Economic Approach

Which of the following is a normative economic statement?

Which of the following is a positive economic statement?

Which one of the following statements is correct?

Economists use the term ceteris paribus to indicate that

The term ceteris paribus means 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 fallacy of composition is the fallacious view that

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

Which of the following is a normative economic statement?

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?

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

"The standard of living is too low for many individuals in the United States.The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

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

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

Which of the following is a normative statement?

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

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

Which of the following is a positive economic statement?

Which of the following is a positive economic statement?