Question 1

Explain how economic models are similar to and different from models used in other sciences. What are the consequences of these differences?

Accepted Answer

Acceptable answers will mention that eco

Question 2

Consider an economic model of CD production. Represent this model graphically, algebraically, and verbally.

Accepted Answer

Graphically: @#IMG-DLM& Algebraically:
Using the i

Question 3

Economics has always been a good example of an experimental science.

Accepted Answer

A) True 
 B)False

Question 4

Economic models

Accepted Answer

A)  are not complicated because the behavior they describe is not complicated. 
B)  require either algebra or graphs. 
C)  are complicated because human behavior is complicated. 
D)  are simplifications of the phenomena they attempt to explain. 
E)  need to be the same as the phenomena they describe. 
A)  are not complicated because the behavior they describe is not complicated. 
B)  require either algebra or graphs. 
C)  are complicated because human behavior is complicated. 
D)  are simplifications of the phenomena they attempt to explain. 
E)  need to be the same as the phenomena they describe.

Question 5

If the price of gasoline decreases but not as much as the decrease in the average price of other goods and services, then the relative price of gasoline

Accepted Answer

A)  cannot be determined. 
B)  decreases. 
C)  remains the same. 
D)  increases. 
E)  increases or decreases, depending on the price of automobiles. 
A)  cannot be determined. 
B)  decreases. 
C)  remains the same. 
D)  increases. 
E)  increases or decreases, depending on the price of automobiles.

Question 6

Exhibit 2-2  
-Exhibit 2-2 shows the relationship between X and Y between 1980 and 1991. Suppose this correlation between X and Y continues to hold for the next 10 years. If Y declines over the period 1993 through 1998, we would expect

Accepted Answer

A)  X to fall over the same period because X and Y are negatively correlated. 
B)  X to increase over the same period because X and Y are positively correlated. 
C)  X to increase over the same period because X and Y are negatively correlated. 
D)  the correlation to be unknown because we do not know the units of measurement for X and Y and thus cannot say anything about how X and Y are related. 
E)  X to fall over the same period because X and Y are positively correlated. 
A)  X to fall over the same period because X and Y are negatively correlated. 
B)  X to increase over the same period because X and Y are positively correlated. 
C)  X to increase over the same period because X and Y are negatively correlated. 
D)  the correlation to be unknown because we do not know the units of measurement for X and Y and thus cannot say anything about how X and Y are related. 
E)  X to fall over the same period because X and Y are positively correlated.

Question 7

It has been documented that beer consumption rises when the unemployment rate rises. To conclude that this correlation means that increased unemployment causes increased beer consumption is to mistake correlation for causality.

Accepted Answer

A) True 
 B)False

Question 8

Positive economics is the

Accepted Answer

A)  study of the desirable attributes of economic relationships. 
B)  scientific study of "what is" among economic relationships. 
C)  scientific study of how people behave positively. 
D)  study of how economic policy should improve the welfare of individuals. 
E)  study of how people and institutions should behave. 
A)  study of the desirable attributes of economic relationships. 
B)  scientific study of "what is" among economic relationships. 
C)  scientific study of how people behave positively. 
D)  study of how economic policy should improve the welfare of individuals. 
E)  study of how people and institutions should behave.

Question 9

A system in which the government essentially owns and controls all production is called

Accepted Answer

A)  capitalism. 
B)  socialism. 
C)  a market system. 
D)  a laissez faire system. 
E)  a mixed economy. 
A)  capitalism. 
B)  socialism. 
C)  a market system. 
D)  a laissez faire system. 
E)  a mixed economy.

Question 10

In modern market economies, the role of government is small.

Accepted Answer

A) True 
 B)False

Question 11

Positive economics

Accepted Answer

A)  will usually indicate which economic policy is best. 
B)  is concerned with what ought to be. 
C)  is the same as normative economics. 
D)  is strictly quantitative and so has little to say to those with philosophical goals to achieve in policymaking. 
E)  produces verifiable statements. 
A)  will usually indicate which economic policy is best. 
B)  is concerned with what ought to be. 
C)  is the same as normative economics. 
D)  is strictly quantitative and so has little to say to those with philosophical goals to achieve in policymaking. 
E)  produces verifiable statements.

Question 12

Describe an experiment that you would run to see how market prices are determined. Also be sure to explain where the ceteris paribus assumption is needed.

Accepted Answer

I would run an experiment by dividing a

Question 13

A model is valid if

Accepted Answer

A)  it is based on human behavior. 
B)  it is new. 
C)  it has been around for many years. 
D)  observations can be explained by it. 
E)  it incorporates asymmetric information. 
A)  it is based on human behavior. 
B)  it is new. 
C)  it has been around for many years. 
D)  observations can be explained by it. 
E)  it incorporates asymmetric information.

Question 14

Studying economics will provide you with tools that are

Accepted Answer

A)  mainly useful for understanding business issues. 
B)  useless in real-world situations. 
C)  mainly useful for financial analysis. 
D)  not useful for studying issues such as crime, discrimination, and who has the right to sue. 
E)  useful for studying issues such as monetary policy, discrimination, and who has the right to sue. 
A)  mainly useful for understanding business issues. 
B)  useless in real-world situations. 
C)  mainly useful for financial analysis. 
D)  not useful for studying issues such as crime, discrimination, and who has the right to sue. 
E)  useful for studying issues such as monetary policy, discrimination, and who has the right to sue.

Question 15

An economic model is a tool used to help us understand the real world.

Accepted Answer

A) True 
 B)False

Question 16

When economists explain the relationship between the price of hotdogs and the number that consumers will buy, the ceteris paribus assumption implies that

Accepted Answer

A)  the price of hotdogs is constant. 
B)  the quantity of hotdogs purchased is constant. 
C)  both the price and quantity of hotdogs purchased are constant. 
D)  factors other than the price and quantity of hotdogs purchased are constant. 
E)  everything in the world does not change. 
A)  the price of hotdogs is constant. 
B)  the quantity of hotdogs purchased is constant. 
C)  both the price and quantity of hotdogs purchased are constant. 
D)  factors other than the price and quantity of hotdogs purchased are constant. 
E)  everything in the world does not change.

Question 17

If we observe that an increase in the amount of vehicle miles traveled rises after the price of gasoline rises, then we can conclude that

Accepted Answer

A)  the amount of vehicle miles traveled and the price of gasoline are positively correlated. 
B)  the amount of vehicle miles traveled and the price of gasoline are negatively correlated. 
C)  the amount of vehicle miles traveled causes the price of gasoline to go up. 
D)  the price of gasoline causes the amount of vehicle miles traveled to go up. 
E)  a negative causation occurs between the amount of vehicle miles traveled and the price of gasoline 
A)  the amount of vehicle miles traveled and the price of gasoline are positively correlated. 
B)  the amount of vehicle miles traveled and the price of gasoline are negatively correlated. 
C)  the amount of vehicle miles traveled causes the price of gasoline to go up. 
D)  the price of gasoline causes the amount of vehicle miles traveled to go up. 
E)  a negative causation occurs between the amount of vehicle miles traveled and the price of gasoline

Question 18

Two variables are negatively correlated if

Accepted Answer

A)  the value of one variable decreases as the value of the other variable decreases. 
B)  the value of one variable increases as the value of the other variable decreases. 
C)  a fall in one variable only causes another variable to fall. 
D)  changes in one have no effect on the other. 
E)  the value of one variable remains constant as the value of another variable changes. 
A)  the value of one variable decreases as the value of the other variable decreases. 
B)  the value of one variable increases as the value of the other variable decreases. 
C)  a fall in one variable only causes another variable to fall. 
D)  changes in one have no effect on the other. 
E)  the value of one variable remains constant as the value of another variable changes.

Question 19

The ceteris paribus, or everything else held constant, assumption is used in economics primarily to identify unstable equilibrium situations.

Accepted Answer

A) True 
 B)False

Question 20

Controlled experiments are

Accepted Answer

A)  seldom used in economics because economists do not like to repeat experiments. 
B)  often used because controlling other factors is relatively easy in economics. 
C)  not used as widely in economics as in other disciplines. 
D)  often used in economics. 
E)  performed by the government to collect economic data. 
A)  seldom used in economics because economists do not like to repeat experiments. 
B)  often used because controlling other factors is relatively easy in economics. 
C)  not used as widely in economics as in other disciplines. 
D)  often used in economics. 
E)  performed by the government to collect economic data.

Explain how economic models are similar to and different from models used in other sciences. What are the consequences of these differences?

Consider an economic model of CD production. Represent this model graphically, algebraically, and verbally.

Economics has always been a good example of an experimental science.

Economic models

If the price of gasoline decreases but not as much as the decrease in the average price of other goods and services, then the relative price of gasoline

Exhibit 2-2 -Exhibit 2-2 shows the relationship between X and Y between 1980 and 1991. Suppose this correlation between X and Y continues to hold for the next 10 years. If Y declines over the period 1993 through 1998, we would expect

It has been documented that beer consumption rises when the unemployment rate rises. To conclude that this correlation means that increased unemployment causes increased beer consumption is to mistake correlation for causality.

Positive economics is the

A system in which the government essentially owns and controls all production is called

In modern market economies, the role of government is small.

Positive economics

Describe an experiment that you would run to see how market prices are determined. Also be sure to explain where the ceteris paribus assumption is needed.

A model is valid if

Studying economics will provide you with tools that are

An economic model is a tool used to help us understand the real world.

When economists explain the relationship between the price of hotdogs and the number that consumers will buy, the ceteris paribus assumption implies that

If we observe that an increase in the amount of vehicle miles traveled rises after the price of gasoline rises, then we can conclude that

Two variables are negatively correlated if

The ceteris paribus, or everything else held constant, assumption is used in economics primarily to identify unstable equilibrium situations.

Controlled experiments are

The Central Idea

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 2: Observing and Explaining the Economy

Explain how economic models are similar to and different from models used in other sciences. What are the consequences of these differences?

Consider an economic model of CD production. Represent this model graphically, algebraically, and verbally.

Economics has always been a good example of an experimental science.

Economic models

If the price of gasoline decreases but not as much as the decrease in the average price of other goods and services, then the relative price of gasoline

Exhibit 2-2 -Exhibit 2-2 shows the relationship between X and Y between 1980 and 1991. Suppose this correlation between X and Y continues to hold for the next 10 years. If Y declines over the period 1993 through 1998, we would expect

It has been documented that beer consumption rises when the unemployment rate rises. To conclude that this correlation means that increased unemployment causes increased beer consumption is to mistake correlation for causality.

Positive economics is the

A system in which the government essentially owns and controls all production is called

In modern market economies, the role of government is small.

Positive economics

Describe an experiment that you would run to see how market prices are determined. Also be sure to explain where the ceteris paribus assumption is needed.

A model is valid if

Studying economics will provide you with tools that are

An economic model is a tool used to help us understand the real world.

When economists explain the relationship between the price of hotdogs and the number that consumers will buy, the ceteris paribus assumption implies that

If we observe that an increase in the amount of vehicle miles traveled rises after the price of gasoline rises, then we can conclude that

Two variables are negatively correlated if

The ceteris paribus, or everything else held constant, assumption is used in economics primarily to identify unstable equilibrium situations.

Controlled experiments are

The Central Idea

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters