Question 1

The best test of an economic theory is:

Accepted Answer

The best test of an economic theory is its ability to explain and predict real-world economic phenomena. This is ultimately what determines the usefulness and relevance of economic theories in practical applications. While mathematical formulation, accuracy of assumptions, and level of real-world detail captured are important factors, they are not sufficient on their own to establish the validity and relevance of an economic theory.

Question 2

Which of the following statements is most accurate?

Accepted Answer

Scarcity is a fundamental economic concept and cannot be eliminated in any time frame. This is because resources are limited while human wants and needs are infinite. Even if we achieve a state of abundance for some resources, there will always be other resources that are scarce.

Question 3

An economic hypothesis:

Accepted Answer

Economic hypotheses can be tested using empirical analysis, which involves gathering and analyzing data to determine if the hypothesis is supported or not. This is a positive economic statement, as it is based on measurable facts and observations.

Question 4

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer,the professor should take which steps?

Accepted Answer

The economist should develop a hypothesis and test it through empirical analysis to examine if it fits with the facts. This involves gathering data and conducting statistical analyses to determine the causes of the recent decline in Alaskan crude oil prices.

Question 5

Economists use the term "ceteris paribus" to indicate that:

Accepted Answer

Ceteris paribus means "other things being equal" or "all else constant." When economists use this term, they are assuming that all other factors, besides the ones being analyzed, are held constant. This allows them to isolate the effects of a particular variable on the outcome being studied.

Question 6

When economists use the term "ceteris paribus," they mean that:

Accepted Answer

Ceteris paribus means "all other things being equal". Therefore, when economists use this term, they are assuming that all other variables except the ones specified are constant and not changing. This allows them to isolate the effect of the variables they are analyzing and to determine their causal relationship more accurately.

Question 7

A hypothesis is:

Accepted Answer

A hypothesis is a testable proposition that can be evaluated using real-world data. It is not a normative economic statement or a model with no connection to the real world.

Question 8

An economic theory is tested by:

Accepted Answer

The best way to test an economic theory is to compare its predictions with real-world data. This allows for an assessment of how well the theory holds up in practice and whether it accurately describes real economic phenomena. Assessing the realism of its assumptions is important, but may not always be feasible or conclusive. Polling economists may reveal consensus, but this does not necessarily prove a theory's validity. Comparing simplicity with related theories is also useful, but simplicity alone does not guarantee accuracy or relevance.

Question 9

An economist might hypothesize that people will buy less gasoline at a price of $4.00 per gallon than at $3.50 per gallon.In order for the hypothesis to become a theory,it would have to be tested.Which of the following observations would seem to support this hypothesis?

Accepted Answer

Choice D indicates that individuals respond to an increase in price by purchasing less gasoline, which supports the economist's hypothesis that people will buy less gasoline at a higher price. Therefore, this observation would seem to support the hypothesis becoming a theory. Options A, B, and C do not support the hypothesis.

Question 10

A good economic theory:

Accepted Answer

Economic theories often rely on simplifying assumptions in order to make complex economic behavior easier to understand and analyze. While these assumptions may not capture every detail of a real-world situation, they can still provide valuable insights and predictions about how economic actors will behave.

Question 11

Which of the following is correct?

Accepted Answer

A hypothesis is an initial explanation for a phenomenon that requires testing, while a theory is a well-substantiated and widely accepted explanation that has been extensively tested and confirmed. Therefore, a theory may result from a tested and confirmed hypothesis, but not the other way around. Option A is incorrect because these two terms have distinct meanings, and are not interchangeable. Option B is incorrect because a hypothesis is only an initial explanation, and cannot result from a tested and confirmed theory. Option D is incorrect because not all hypotheses or theories rely on mathematics for their formulation.

Question 12

A good economic theory:

Accepted Answer

Good economic theories explain economic behavior effectively and make accurate predictions, regardless of the realism of their assumptions or the level of detail and mathematical expression involved.

Question 13

Economics is different from a "hard" science like physics because:

Accepted Answer

Economics deals with the behavior of human beings and their choices, which are influenced by a multitude of factors, making it difficult to isolate and control all the variables that might influence their behavior. In contrast, physics deals with the behavior of inanimate objects, which can be studied in controlled laboratory conditions. Economists also often use mathematical models to make predictions and form theories, but they must be able to explain them in a way that is understandable to policy makers and others who may not have formal mathematical training.

Question 14

The term "ceteris paribus" means that:

Accepted Answer

Ceteris paribus means "all other things being equal" or "holding all else constant." Therefore, option B is the correct choice, as it specifies that all variables except those specified are constant.

Question 15

"Ceteris paribus" means:

Accepted Answer

"Ceteris paribus" is a Latin phrase that means "holding other things constant." It is often used in economics and other social sciences to refer to the assumption that all other variables are held constant except for the specific variable being studied. Therefore, the correct choice is D.

Question 16

Economists need to develop abstractions in order to:

Accepted Answer

Economists develop abstractions in order to understand and explain economic behavior by simplifying complex real-world interactions and analyzing them in a controlled environment. This allows economists to identify patterns and make predictions about economic phenomena.

Question 17

Adam Smith

Accepted Answer

Adam Smith is considered the founder of modern economics, wrote An Inquiry into the Nature and Causes of the Wealth of Nations, and believed that the wealth of nations came from an accumulation of capital, not gold and silver.

Question 18

Difficulty in prediction social sciences is the result of analyzing ____ but can be overcome by focusing on ____ groups.

Accepted Answer

Difficulty in prediction in social sciences arises due to the complexity of human behavior. However, by focusing on larger groups, patterns and trends in behavior can become more apparent and accurate predictions can be made. Therefore, the best choice is option D - analyzing human behavior; large groups.

Question 19

Economists use theories to:

Accepted Answer

Economists use theories to abstract from the complexities of the world, understand economic behavior, and explain and help predict human behavior. Therefore, the best choice is D, which states that economists do all of the above.

Question 20

An economic theory:

Accepted Answer

An economic theory is an abstraction from reality, as it simplifies and models the behavior of economic agents and the economy as a whole in a way that allows us to make predictions, test hypotheses, and identify patterns and relationships. While it may not capture every aspect of an economy's complexity, a theory can still be very useful in helping us understand and analyze economic phenomena. Assumptions are necessary to make theories tractable, but they should still be realistic enough to be meaningful.

Quiz 1: The Role and Method of Economics

The best test of an economic theory is:

Which of the following statements is most accurate?

An economic hypothesis:

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer,the professor should take which steps?

Economists use the term "ceteris paribus" to indicate that:

When economists use the term "ceteris paribus," they mean that:

A hypothesis is:

An economic theory is tested by:

An economist might hypothesize that people will buy less gasoline at a price of $4.00 per gallon than at $3.50 per gallon.In order for the hypothesis to become a theory,it would have to be tested.Which of the following observations would seem to support this hypothesis?

A good economic theory:

Which of the following is correct?

A good economic theory:

Economics is different from a "hard" science like physics because:

The term "ceteris paribus" means that:

"Ceteris paribus" means:

Economists need to develop abstractions in order to:

Adam Smith

Difficulty in prediction social sciences is the result of analyzing but can be overcome by focusing on groups.

Economists use theories to:

An economic theory: