Thinking Like an Economist
Multiple Choice – Section 00: Introduction
1. Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all
terms that are part of the economist’s language.
d. The value of the economist’s language lies in its ability to provide you with a new and useful way
of thinking about the world in which you live.
2. Economists use some familiar terms in specialized ways
a. to make the subject sound more complex than it is.
b. because every respectable field of study has its own language.
c. to provide a new and useful way of thinking about the world.
d. because it was too difficult to come up with new terms.
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3. The language of economics is
a. needlessly arcane.
b. valuable because it provides a new and useful way of learning about the world.
c. easy to learn within a day.
d. unnecessary to learn for a thorough understanding of economics.
Multiple Choice – Section 01: The Economist as Scientist
1. Economists, like mathematicians, physicists, and biologists,
a. make use of the scientific method.
b. try to address their subject with a scientist’s objectivity.
c. devise theories, collect data, and then analyze these data in an attempt to verify or refute their
theories.
d. All of the above are correct.
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2. The essence of science is
a. the laboratory experiment.
b. the scientific method.
c. the study of nature, but not the study of society.
d. All of the above are correct.
3. The scientific method is
a. the use of modern technology to understand the way the world works.
b. the use of controlled laboratory experiments to understand the way the world works.
c. the dispassionate development and testing of theories about how the world works.
d. the search for evidence to support preconceived theories about how the world works.
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4. The scientific method is applicable to studying
a. natural sciences, but not social sciences.
b. social sciences, but not natural sciences.
c. both natural sciences and social sciences.
d. None of the above is correct.
5. Who said, “The whole of science is nothing more than the refinement of everyday thinking“?
a. Isaac Newton
b. Albert Einstein
c. Adam Smith
d. Benjamin Franklin
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6. Albert Einstein once made the following observation about science:
a. “The whole of science is nothing more than the refinement of everyday thinking.”
b. “The whole of science is nothing more than an interesting intellectual exercise.”
c. “In order to understand science, one must rely solely on abstraction.”
d. “In order to understand science, one must transcend everyday thinking.”
7. Sir Isaac Newton’s development of the theory of gravity after observing an apple fall from a tree is
an example of
a. a controlled experiment that lead to the formulation of a scientific theory.
b. being in the right place at the right time.
c. an idea whose time had come.
d. the interplay between observation and theory in science.
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8. Which of the following steps does an economist take when studying the economy?
a. devise theories
b. collect data
c. analyze data
d. All of the above are correct.
9. Which of the following is an example of using the scientific method with a natural experiment?
a. measuring how long it takes a marble to fall from a ten story building
b. comparing plant growth with and without a soil additive
c. tracking the price of oil when a war in the Middle East interrupts the flow of crude oil
d. observing the reaction when two chemicals are mixed together
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10. The goal of an economist who formulates new theories is to
a. provide an interesting framework of analysis, whether or not the framework turns out to be of
much use in understanding how the world works.
b. provoke stimulating debate in scientific journals.
c. contribute to an understanding of how the world works.
d. demonstrate that economists, like other scientists, can formulate testable theories.
11. Suppose an economist develops a theory that higher food prices arise from higher gas prices.
According to the scientific method, which of the following is the economist’s next step?
a. Collect and analyze data.
b. Go to a laboratory and generate data to test the theory.
c. Publish the theory without testing it.
d. Consult with other economists to see they agree with the theory.
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12. Which of the following statements applies to economics, as well as to other sciences such as
physics?
a. Experiments are considered valid only when they are conducted in a laboratory.
b. Good theories do not need to be tested.
c. Real-world observations often lead to theories.
d. Economics, as well as other sciences, is concerned primarily with abstract concepts.
13. With respect to how economists study the economy, which of the following statements is most
accurate?
a. Economists study the past, but they do not try to predict the future.
b. Economists use “rules of thumb” to predict the future.
c. Economists devise theories, collect data, and analyze the data to test the theories.
d. Economists use controlled experiments in much the same way that biologists and physicists do.
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14. Economists face an obstacle that many other scientists do not face. What is that obstacle?
a. It is often difficult to formulate theories in economics.
b. It is often impractical to perform experiments in economics.
c. Economics cannot be addressed objectively; it must be addressed subjectively.
d. The scientific method cannot be applied to the study of economics.
15. In conducting their research, economists face an obstacle that not all scientists face; specifically,
in economics, it is often impractical to
a. make use of theory and observation.
b. rely upon the scientific method.
c. conduct laboratory experiments.
d. find articles or books that were written before 1900.
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16. The use of theory and observation is more difficult in economics than in sciences such as physics
due to the difficulty in
a. performing an experiment in an economic system.
b. applying mathematical methods to economic analysis.
c. analyzing available data.
d. formulating theories about economic events.
17. Which of the following statements is (are) correct?
a. Relative to some other scientists, economists find it more difficult to conduct experiments.
b. Theory and observation are important in economics as well as in other sciences.
c. To obtain data, economists often rely upon the natural experiments offered by history.
d. All of the above are correct.
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18. Because it is difficult for economists to use experiments to generate data, they generally must
a. do without data.
b. substitute assumptions for data when data are unavailable.
c. rely upon hypothetical data that were previously concocted by other economists.
d. use whatever data the world gives them.
19. Which of the following statements is correct?
a. Economists almost always find it easy to conduct experiments in order to test their theories.
b. Economics is not a true science because economists are not usually allowed to conduct
experiments to test their theories.
c. Economics is a social science rather than a true science because it cannot employ the scientific
method.
d. Economists are usually not able to conduct experiments, so they must rely on natural
experiments offered by history.
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20. Instead of conducting laboratory experiments to generate data to test their theories, economists
often
a. ask winners of the Nobel Prize in Economics to evaluate their theories.
b. argue that data is impossible to collect in economics.
c. gather data from historical episodes of economic change.
d. assume that data would support their theories.
21. The most common data for testing economic theories come from
a. carefully controlled and conducted laboratory experiments.
b. computer models of economies.
c. historical episodes of economic change.
d. centrally planned economies.
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22. In conducting their research, economists often substitute historical events and historical episodes
for
a. theories and observations.
b. laboratory experiments.
c. models.
d. assumptions.
23. For economists, substitutes for laboratory experiments often come in the form of
a. natural experiments offered by history.
b. untested theories.
c. “rules of thumb” and other such conveniences.
d. reliance upon the wisdom of elders in the economics profession.
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24. Economists regard events from the past as
a. irrelevant, since history is unlikely to repeat itself.
b. of limited interest, since those events seldom provide any useful economic data.
c. interesting but not particularly valuable, since those events cannot be used to evaluate present-
day economic theories.
d. interesting and valuable, since those events are capable of helping us to understand the past, the
present, and the future.
25. For economists, historical episodes
a. are not worthy of study because they offer few insights into current economic events and
problems.
b. are not worthy of study because laboratory experiments provide more reliable data.
c. are worthy of study because economists rely entirely on observation, rather than on theory.
d. are worthy of study because they serve as valuable substitutes for laboratory experiments.
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26. Historical episodes are
a. valuable to economists because they allow economists to see how the science of economics
has evolved.
b. valuable to economists because they allow economists to evaluate economic theories.
c. not of concern to economists because economics is about predicting the future, not dwelling on
the past.
d. not of concern to economists because the exact circumstances of historical episodes are
unlikely to be observed again.
27. One thing economists do to help them understand how the real world works is
a. make assumptions.
b. ignore the past.
c. try to capture every aspect of the real world in the models they construct.
d. All of the above are correct.
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28. Which of the following is not an example of a natural experiment an economist might use to
evaluate a theory?
a. Transit ridership increased in Atlanta following an increase in gas prices.
b. Federal tax revenue increased following a decrease in the tax rate.
c. Students in a principles of microeconomics course are asked to play a game with classmates to
determine what decisions they make under certain circumstances.
d. Following the imposition of austerity measures, the growth rate of the economy in Greece
slowed.
29. Economists make assumptions to
a. mimic the methodologies employed by other scientists.
b. minimize the number of experiments that yield no useful data.
c. minimize the likelihood that some aspect of the problem at hand is being overlooked.
d. focus their thinking on the essence of the problem at hand.
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30. Economists make use of assumptions, some of which are unrealistic, for the purpose of
a. teaching economics to people who have never before studied economics.
b. advancing their political agendas.
c. developing models when the scientific method cannot be used.
d. focusing their thinking.
31. For an economist, the idea of making assumptions is regarded generally as a
a. bad idea, since doing so leads to the omission of important ideas and variables from economic
models.
b. bad idea, since doing so invariably leads to data-collection problems.
c. good idea, since doing so helps to simplify the complex world and make it easier to understand.
d. good idea, since economic analysis without assumptions leads to complicated results that the
general public finds hard to understand.
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32. Economists make assumptions to
a. provide issues for political discussion.
b. make a complex world easier to understand.
c. make it easier to teach economic concepts and analysis.
d. create policy alternatives that are incomplete or subject to criticism.
33. A circular-flow model and production possibilities frontier are similar in that
a. neither allows economic analysis to occur.
b. neither can be represented visually on a graph.
c. both make use of assumptions.
d. both make use of complex equations to arrive at solutions.
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34. An economic theory about international trade that is based on the assumption that there are only
two countries trading two goods
a. is useless, since the real world has many countries trading many goods.
b. can be useful only in situations involving two countries and two goods.
c. can be useful in the classroom, but is useless in the real world.
d. can be useful in helping economists understand the complex world of international trade
involving many countries and many goods.
35. The art in scientific thinking — whether in chemistry, economics, or biology — is
a. the design and implementation of laboratory experiments.
b. knowing when to stop collecting data and when to start analyzing the data.
c. deciding which assumptions to make.
d. being able to mathematically model natural phenomena.
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36. The art in scientific thinking is
a. finding the right problem to study.
b. deciding which assumptions to make.
c. the ability to make an abstract subject easy to understand.
d. not something in which economists have to be skilled.
37. The decision of which assumptions to make is
a. an easy decision for an economist, but a difficult decision for a physicist or a chemist.
b. not a particularly important decision for an economist.
c. usually regarded as an art in scientific thinking.
d. usually regarded as the easiest part of the scientific method.