Question 1

How does an economic model attempt to explain puzzling behavior? What features would be desirable in an economic model?

Accepted Answer

An economic model attempts to show that an observed human behavior is a result of rational decision making occurring in response to certain incentives and constraints.One desirable feature of an economic model is that it have testable implications.When an economic explanation of a phenomenon can be extended to generate new predictions,real-world observations can be used to support or refute the model.A second desirable feature is robustness.If the assumptions of the model do not enter in a crucial way,then the results and predictions will likely hold under other similar circumstances.

Question 2

If asked to comment about a new tax on cotton collected from growers who do not grow their plants in the shade of other plants,an economist with no particular expertise in cotton growing might still note that

Accepted Answer

A)  the price received by these cotton producers will fall by the full amount of the tax. 
B)  the price paid by consumers of this cotton will rise by the full amount of the tax. 
C)  the legal incidence of the tax does not determine who bears the burden of the tax. 
D)  the tax was imposed on the wrong party,it should have been placed on buyers. 
A)  the price received by these cotton producers will fall by the full amount of the tax. 
B)  the price paid by consumers of this cotton will rise by the full amount of the tax. 
C)  the legal incidence of the tax does not determine who bears the burden of the tax. 
D)  the tax was imposed on the wrong party,it should have been placed on buyers. C

Question 3

Which of the three stages of economic analysis would include consideration of how each individual's actions affect the options available to others?

Accepted Answer

A)  The first. 
B)  The second. 
C)  The third. 
D)  None,this is not part of economic analysis. 
A)  The first. 
B)  The second. 
C)  The third. 
D)  None,this is not part of economic analysis. C

Question 4

In laboratory experiments,how do animals respond to economic stimuli?

Accepted Answer

A)  The animals' behaviors are consistent with economic theory. 
B)  The animals' responses are random and unpredictable. 
C)  The results indicate that the animals' tastes must be constantly changing. 
D)  The animals do not respond at all to subtle variations in "prices" and "incomes." 
A)  The animals' behaviors are consistent with economic theory. 
B)  The animals' responses are random and unpredictable. 
C)  The results indicate that the animals' tastes must be constantly changing. 
D)  The animals do not respond at all to subtle variations in "prices" and "incomes."

Question 5

When formulating an economic model,one must explicitly identify both an agent's objectives and his constraints.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are economic explanations for why shopping carts have gotten bigger over the years.

Accepted Answer

A)  more women in the marketplace have made spending time in the grocery store more costly. 
B)  grocery stores now have a wider variety of items available. 
C)  store owners are "tricking" customers in into buying more groceries by making them feel ashamed that their carts are not full. 
D)  shoppers have become wealthier over the years and are willing to pay for the luxury of wide aisles and the big carts that go along with wider aisles. 
A)  more women in the marketplace have made spending time in the grocery store more costly. 
B)  grocery stores now have a wider variety of items available. 
C)  store owners are "tricking" customers in into buying more groceries by making them feel ashamed that their carts are not full. 
D)  shoppers have become wealthier over the years and are willing to pay for the luxury of wide aisles and the big carts that go along with wider aisles.

Question 7

In the consumer-choice model,the economist examines how the consumer's purchases change when there is a change in prices or income.Which stage of economic analysis is this procedure a part of?

Accepted Answer

A)  Formulation. 
B)  Optimization. 
C)  Equilibrium. 
D)  Economic dynamics. 
A)  Formulation. 
B)  Optimization. 
C)  Equilibrium. 
D)  Economic dynamics.

Question 8

If an activity is worth pursuing at all,then it should be pursued up to the point where

Accepted Answer

A)  the total benefit received is as large as possible. 
B)  the marginal benefit and the marginal cost both equal zero. 
C)  the average net benefit is at a maximum. 
D)  the net benefit received from the last unit of the activity is zero. 
A)  the total benefit received is as large as possible. 
B)  the marginal benefit and the marginal cost both equal zero. 
C)  the average net benefit is at a maximum. 
D)  the net benefit received from the last unit of the activity is zero.

Question 9

Economic models start with the assumption of

Accepted Answer

A)  exogenous prices. 
B)  the laws of supply and demand. 
C)  equilibrium. 
D)  rational behavior. 
A)  exogenous prices. 
B)  the laws of supply and demand. 
C)  equilibrium. 
D)  rational behavior.

Question 10

The primary criterion used to analyze the desirability of outcomes in Economics is

Accepted Answer

A)  sustainability 
B)  equity. 
C)  predictability. 
D)  efficiency. 
A)  sustainability 
B)  equity. 
C)  predictability. 
D)  efficiency.

Question 11

In a Walrasian equilibrium,which of the following constrains an individual when he optimizes?

Accepted Answer

A)  The market prices. 
B)  His tastes. 
C)  The actions of other individuals. 
D)  Nothing-the individual has no constraints in a Walrasian equilibrium. 
A)  The market prices. 
B)  His tastes. 
C)  The actions of other individuals. 
D)  Nothing-the individual has no constraints in a Walrasian equilibrium.

Question 12

Efficiency is the only criterion by which economists judge policies.

Accepted Answer

A) True 
 B)False

Question 13

The first step in economic analysis is to choose an appropriate equilibrium condition.

Accepted Answer

A) True 
 B)False

Question 14

In the Black-Scholes option pricing model,investors are assumed to be not only rational but also able to do Ito calculus.This model,with its unrealistic assumptions,

Accepted Answer

A)  is valuable only as an abstract curiosity. 
B)  cannot be robust. 
C)  still leads to accurate predictions. 
D)  is rejected by most economists. 
A)  is valuable only as an abstract curiosity. 
B)  cannot be robust. 
C)  still leads to accurate predictions. 
D)  is rejected by most economists.

Question 15

In a Nash equilibrium,which of the following constrains an individual when he optimizes?

Accepted Answer

A)  The market prices. 
B)  His tastes. 
C)  The actions of other individuals. 
D)  Nothing-the individual has no constraints in a Nash equilibrium. 
A)  The market prices. 
B)  His tastes. 
C)  The actions of other individuals. 
D)  Nothing-the individual has no constraints in a Nash equilibrium.

Question 16

Economists find that models based on the assumption of rational behavior are robust,because a world in which everyone is rational would function quite similarly to a world in which there are no

Accepted Answer

A)  unexploited profit opportunities. 
B)  constraints due to scarcity. 
C)  inefficient markets. 
D)  barriers to free trade. 
A)  unexploited profit opportunities. 
B)  constraints due to scarcity. 
C)  inefficient markets. 
D)  barriers to free trade.

Question 17

An economic problem can be defined as any problem involving money.

Accepted Answer

A) True 
 B)False

Question 18

An economic model is robust if it provides results that are testable and verifiable.

Accepted Answer

A) True 
 B)False

Question 19

Abstract economic models whose assumptions and conclusions are essentially untestable are still useful because they

Accepted Answer

A)  indicate what data should be collected in the future. 
B)  develop economists' intuition for more complex situations. 
C)  can be illustrated using simple graphical techniques. 
D)  capture the detail of realistic situations without any simplifying hypotheses. 
A)  indicate what data should be collected in the future. 
B)  develop economists' intuition for more complex situations. 
C)  can be illustrated using simple graphical techniques. 
D)  capture the detail of realistic situations without any simplifying hypotheses.

Question 20

A Nash equilibrium is one in which each individual optimizes taking market prices as given.

Accepted Answer

A) True 
 B)False

How does an economic model attempt to explain puzzling behavior? What features would be desirable in an economic model?

If asked to comment about a new tax on cotton collected from growers who do not grow their plants in the shade of other plants,an economist with no particular expertise in cotton growing might still note that

Which of the three stages of economic analysis would include consideration of how each individual's actions affect the options available to others?

In laboratory experiments,how do animals respond to economic stimuli?

When formulating an economic model,one must explicitly identify both an agent's objectives and his constraints.

All of the following are economic explanations for why shopping carts have gotten bigger over the years.

In the consumer-choice model,the economist examines how the consumer's purchases change when there is a change in prices or income.Which stage of economic analysis is this procedure a part of?

If an activity is worth pursuing at all,then it should be pursued up to the point where

Economic models start with the assumption of

The primary criterion used to analyze the desirability of outcomes in Economics is

In a Walrasian equilibrium,which of the following constrains an individual when he optimizes?

Efficiency is the only criterion by which economists judge policies.

The first step in economic analysis is to choose an appropriate equilibrium condition.

In the Black-Scholes option pricing model,investors are assumed to be not only rational but also able to do Ito calculus.This model,with its unrealistic assumptions,

In a Nash equilibrium,which of the following constrains an individual when he optimizes?

Economists find that models based on the assumption of rational behavior are robust,because a world in which everyone is rational would function quite similarly to a world in which there are no

An economic problem can be defined as any problem involving money.

An economic model is robust if it provides results that are testable and verifiable.

Abstract economic models whose assumptions and conclusions are essentially untestable are still useful because they

A Nash equilibrium is one in which each individual optimizes taking market prices as given.

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

The Behavior of Firms

Production and Costs

Competition

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

Filters

Exam 19: What Is Economics

How does an economic model attempt to explain puzzling behavior? What features would be desirable in an economic model?

If asked to comment about a new tax on cotton collected from growers who do not grow their plants in the shade of other plants,an economist with no particular expertise in cotton growing might still note that

Which of the three stages of economic analysis would include consideration of how each individual's actions affect the options available to others?

In laboratory experiments,how do animals respond to economic stimuli?

When formulating an economic model,one must explicitly identify both an agent's objectives and his constraints.

All of the following are economic explanations for why shopping carts have gotten bigger over the years.

In the consumer-choice model,the economist examines how the consumer's purchases change when there is a change in prices or income.Which stage of economic analysis is this procedure a part of?

If an activity is worth pursuing at all,then it should be pursued up to the point where

Economic models start with the assumption of

The primary criterion used to analyze the desirability of outcomes in Economics is

In a Walrasian equilibrium,which of the following constrains an individual when he optimizes?

Efficiency is the only criterion by which economists judge policies.

The first step in economic analysis is to choose an appropriate equilibrium condition.

In the Black-Scholes option pricing model,investors are assumed to be not only rational but also able to do Ito calculus.This model,with its unrealistic assumptions,

In a Nash equilibrium,which of the following constrains an individual when he optimizes?

Economists find that models based on the assumption of rational behavior are robust,because a world in which everyone is rational would function quite similarly to a world in which there are no

An economic problem can be defined as any problem involving money.

An economic model is robust if it provides results that are testable and verifiable.

Abstract economic models whose assumptions and conclusions are essentially untestable are still useful because they

A Nash equilibrium is one in which each individual optimizes taking market prices as given.

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

The Behavior of Firms

Production and Costs

Competition

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

Filters