321)
A common approach that economists use to understand, explain and predict economic phenomena
is to
321)
A)
examine people’s thought processes.
B)
ask what people think.
C)
conduct experiments in a science lab.
D)
form a theory or model.
322)
Consider the statement, “The number of beers consumed the night before a test affects the grade.”
In this statement
322)
A)
both beer and grade are dependent variables.
B)
beer is the independent variable and test grade is the dependent variable.
C)
both beer and grade are independent variables.
D)
beer is the dependent variable and test grade is the independent variable.
323)
The ceteris paribus assumption is important in economics because
323)
A)
it would be impossible to relate the effects of changes in one variable on another without
holding some variables constant.
B)
all empirical data are equal.
C)
economic data move very slowly over time and so they can always be considered constant.
D)
models are always complex and require as many variables as possible.
324)
One major assumption of economics is that people
324)
A)
are sometimes rational and sometimes irrational.
B)
behave randomly without any predictable pattern.
C)
act as if they systematically pursue self–interest.
D)
always pursue the interests of others.
325)
Which of the following statements is NOT true?
325)
A)
Economics is the study of how people allocate their limited resources to satisfy their
unlimited wants.
B)
Economics does not use theories.
C)
Economics is a social science.
D)
Economics is an empirical science.
326)
Given a linear curve, the value on the y–axis changes from 100 to 120 when the value on the x–axis
changes from 20 to 10, then the slope of that curve is
326)
A)
+2.
B)
–2.
C)
+20.
D)
–20.
B
Explanation:
327)
Economics is the study of how people make
327)
A)
choices.
B)
money.
C)
subjective judgments.
D)
themselves worse off.
A
Explanation:
328)
Normative economic analysis tends to
328)
A)
lead to empirical testing of data.
B)
include the way someone thinks things should be or ought to be.
C)
involve descriptive statements.
D)
generate testable hypotheses.
B
Explanation:
329)
The assumption that individuals do NOT intentionally make decisions that would leave them
worse off is referred to as
329)
A)
the premium assumption.
B)
the law of comparative advantage.
C)
the law of demand.
D)
the rationality assumption.
D
Explanation:
B
Explanation:
330)
The potential rewards that are available to an individual if a particular activity is undertaken are
known as
330)
A)
premiums.
B)
incentives.
C)
intrinsic values.
D)
gifts.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
331)
What is meant by the term “incentives,” and why are they important?
332)
Explain what economists mean when they apply the rationality assumption.
333)
“To be useful, a model must be completely realistic.” Evaluate.
334)
“Rational, self–interested people would never end up worse off by any decision they make. Obviously, people
often make mistakes or have regrets. Therefore, people do not act rationally or out of self–interest.” Do you
agree with these statements? Why or why not?
335)
Is inflation a macroeconomic or a microeconomic question? Why?
336)
What does it mean to say economics is an empirical science, and how is this related to the question of deciding
on the usefulness of a model?
337)
Distinguish between a command–and–control economic system and a price system.
338)
What assumption about human motivation is made in economics? Explain.
339)
Explain the study of economics.
340)
What is economics and what does it try to explain?
341)
What is the economic way of thinking, and why is it important?
342)
Suppose a survey is taken concerning car safety. According to the survey, people strongly desire safer cars and
indicate they are willing to pay substantially more for safer cars. Using this information, one auto firm adds
numerous safety features to its car, raising the price by several thousand dollars. Sales drop sharply, and the
firm loses profits. What went wrong?
343)
“A positive economic statement is always true and a normative economic statement is always false.” Do you
agree or disagree with this statement? Explain.
344)
“Economists assume people are selfish.” Do you agree with this statement or not? Explain.
345)
Distinguish between macroeconomics and microeconomics.
346)
During the Middle Ages, heretics were often burned at the stake. Were the heretics violating the assumption of
rational self–interest? Explain.
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