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21
4) Positive economics is an approach to economics that
A) seeks to understand behavior and the operation of systems while making judgments about their
usefulness to society.
B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred
courses of action.
C) seeks to understand behavior and the operation of systems without making judgments.
D) examines the role of government in the economy.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
5) Normative economics is an approach to economics that
A) seeks to understand behavior and the operation of systems without making judgments.
B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred
courses of action.
C) applies statistical techniques and data to economic problems.
D) examines the role of government in the economy.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
6) Which of the following is a normative question?
A) Why do gasoline prices increase between Memorial Day and Labor Day?
B) What will happen to gasoline consumption if the federal tax on gasoline is eliminated?
C) To reduce the regressive nature of the gasoline excise tax, should the portion of the gasoline excise tax
paid by high-income individuals be increased?
D) How will oil exploration be affected if the government subsidizes oil producers?
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
22
7) Which of the following is a positive question?
A) Will the level of teenage unemployment increase if the minimum wage is increased?
B) Should the minimum wage be set at one-half the average manufacturing wage to guarantee
individuals a decent standard of living?
C) Wouldn't it be more equitable if the minimum wage increased automatically with the cost of living?
D) Wouldn't it be better to try to increase people's wages through job-training programs rather than by
requiring employers to pay minimum wages?
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
8) Health insurance should be provided to every citizen in a wealthy nation such as the United States.
This statement is best described as
A) a positive statement.
B) a normative statement.
C) a marginal statement.
D) an implication of an efficient market.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
9) There is great concern over the idea that citizens should have to provide specific identification to be
able to vote in elections. A study of the costs and benefits of implementing a voter identification program
is an example of
A) laissez-faire economics.
B) positive economics.
C) labor economics.
D) normative economics.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
23
10) A measure that can change from observation to observation is known as a(n)
A) empirical measure.
B) model.
C) causality.
D) variable.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
11) A formal statement of a theory is known as a(n)
A) model.
B) positive statement.
C) empirical measure.
D) causal statement.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
Refer to Scenario 1.1 below to answer the question(s) that follow.
SCENARIO 1.1: An economist wants to understand the relationship between minimum wages and the
level of teenage unemployment. The economist collects data on the values of the minimum wage and the
levels of teenage unemployment over time. The economist concludes that a 1% increase in minimum
wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the
minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment
among teenagers.
12) Refer to Scenario 1.1. The statement that a 1% increase in the minimum wage causes a 0.2% increase in
teenage unemployment is an example of
A) equity.
B) normative economics.
C) positive economics.
D) Ockham's razor.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
24
13) Refer to Scenario 1.1. The statement, "the minimum wage is harmful to teenagers and should be
reduced or eliminated to increase employment among teenagers," is an example of
A) marginal economics.
B) normative economics.
C) positive economics.
D) Ockham's razor.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
14) Refer to Scenario 1.1. The collection and use of the data on minimum wage and teenage
unemployment over time is an example of
A) law and economics.
B) economic history.
C) econometrics.
D) empirical economics.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
15) Refer to Scenario 1.1. The statement that an increase in the minimum wage causes an increase in
teenage unemployment is an example of
A) a fallacy.
B) an economic theory.
C) normative economics.
D) deductive reasoning.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
16) Refer to Scenario 1.1. A graph of the value of the minimum wage on one axis and the level of teenage
unemployment on the other axis is an example of
A) an economic theory.
B) an economic model.
C) inductive reasoning.
D) a variable theory.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
25
17) To isolate the impact of one single factor, economists invoke the assumption of
A) inductive reasoning.
B) Ockham's razor.
C) ceteris paribus.
D) post hoc, ergo propter hoc.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
18) The principle that irrelevant detail should not be included in a model is known as
A) a fallacy.
B) ceteris paribus.
C) Ockham's razor.
D) normative economics.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
19) Economists use the phrase ceteris paribus to express the assumption
A) "all else equal."
B) "everything affects everything else."
C) "scarcity is a fact of life."
D) "there is no such thing as a free lunch."
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
20) The Latin phrase economists use that means all else equal is
A) ceteris paribus.
B) cogito ergo sum.
C) carpe diem.
D) caveat emptor.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
26
21) Marco observed that every time the temperature rises above 90 degrees, he forgets to take out the
trash. Based on this observation he concluded that temperatures above 90 degrees result in temporary
memory loss. In actuality, Marco
A) committed the fallacy of logic.
B) committed the ceteris paribus error.
C) was confusing causality.
D) showed good reasoning relating to the relationship between temperatures and memory.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
22) Whenever the Democrats gain control of the Congress, spending on social programs increases;
whenever Republicans gain control of the Congress, spending on defense increases. Hence, we know
what the next party in control will do. This statement is an example of the
A) fallacy of inductive reasoning.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of stability.
D) ceteris paribus fallacy.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
23) Whenever I go to the grocery store, I always stop at Starbucks on the way home. Therefore, going to
the grocery store causes me to go to Starbucks. This statement is an example of the
A) fallacy of logic.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of inductive reasoning.
D) ceteris paribus fallacy.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
27
24) The economy was expanding during all of the years that I was a student, but as soon as I graduated,
the economy contracted. Therefore, the labor market was waiting until I started looking for a job to
contract. This statement is an example of the
A) ceteris paribus fallacy.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of logic.
D) fallacy of inductive reasoning.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
25) Every citizen in the United States should be required to become licensed to carry a firearm for the
sake of protection. This statement is best described as
A) a positive statement.
B) a normative statement.
C) a marginal statement.
D) an implication of an efficient market.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
26) Rent control laws are imposed when city officials believe landlords have been exploiting tenants.
Which of the following criteria are they using to guide their actions?
A) efficiency
B) equity
C) growth
D) stability
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
28
27) A government policy that tries to minimize inflation and unemployment can best be described as
trying to achieve economic
A) efficiency.
B) equity.
C) profitability.
D) stability.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
28) Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes to
rise with income. Which of the following criteria best explains the goal of this tax system?
A) efficiency
B) equity
C) growth
D) stability
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
29) Normative economics ________ and positive economics ________.
A) involves judgments; does not involve judgments
B) involves judgments; also involves judgments
C) does not involve judgments; involves judgments
D) does not involve judgments; also does not involve judgments
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
30) It always rains about an hour after you finish washing your car. Concluding that washing your car
caused it to rain is an example of the
A) fallacy of logic.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of inductive reasoning.
D) ceteris paribus conditions.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
29
31) Debbie observes that leaves fall from trees before the fist day of winter, and concludes that the falling
leaves cause winter to begin. This is an example of
A) ceteris paribus.
B) the post hoc, ergo propter hoc fallacy.
C) the fallacy of logic.
D) Ockham's razor.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
32) You have observed that every time you do 30 minutes of cardio exercise before taking an exam you
get an A. You therefore conclude that to get an A on an exam, all you have to do is 30 minutes of cardio
exercise before you take an exam. You have committed the
A) fallacy of logic.
B) fallacy of inductive reasoning.
C) post hoc, ergo propter hoc fallacy.
D) fallacy of division.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
33) If you observe that Event A happens before Event B happens, and you erroneously conclude that
Event A caused Event B, you would be guilty of an error called the
A) fallacy of logic.
B) fallacy of inductive reasoning.
C) fallacy of ceteris paribus.
D) post hoc, ergo propter hoc fallacy.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
34) The mistake of inferring causality from two events happening one after the other is called
A) the post hoc, ergo propter hoc fallacy.
B) the fallacy of composition.
C) Ockham's razor.
D) the fallacy of co-dependence.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
30
35) The post hoc, ergo propter hoc fallacy is the belief that
A) if Event A happens before Event B happens, then Event A causes Event B to occur.
B) what is true for the whole is necessarily true of the parts.
C) what is true for a part is necessarily true for the whole.
D) it is impossible to draw generalizations about cause and effect.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
36) The collection and use of data to test economic theories is
A) empirical economics.
B) descriptive economics.
C) normative economics.
D) positive economics.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
37) A change in economic output is potentially efficient
A) if the value of the resulting gains exceeds the value of the resulting losses.
B) if the value of the resulting gains exactly equals the value of the resulting losses.
C) only if no one is made worse off.
D) if the value of the resulting gains is less than the value of the resulting losses.
Topic: The Method of Economics
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
38) An efficient economy is an economy
A) in which output is steady or growing and there is low inflation.
B) that produces what consumers demand and does so at the least possible cost.
C) that distributes output equally among all consumers.
D) in which there is a fair distribution of wealth.
Topic: The Method of Economics
Skill: Definition
Learning Outcome: Micro-1
