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True / False
1. A theory is a perfect description of reality.
a.
True
b.
False
2. Theories should be judged based upon how consistently and precisely they predict and how well they explain things.
a.
True
b.
False
3. Scientists are interested in finding out when their theories are wrong, as well as when their theories are right.
a.
True
b.
False
4. If a theory gives a scientist results that she does not want, then she should not believe in that theory.
a.
True
b.
False
5. For economic imperialists, economics is more of a method of analysis than a specific field of study.
a.
True
b.
False
6. There is a direct relationship between the opportunity cost of bad behavior in a public venue and the use of bad
behavior in that venue.
a.
True
b.
False
7. There is no difference between building a theory and evaluating a theory.
a.
True
b.
False
8. If a theory can predict those things that you should observe if it is right and can also predict those things that you should
observe if it is wrong, it is said to have the virtue of falsifiability.
a.
True
b.
False
9. Scientists prefer to advance irrefutable theories, rather than refutable theories.
a.
True
b.
False
10. One theory discussed in the textbook is that there is a direct relationship between the opportunity cost of having
children and the number of children a woman will have.
a.
True
b.
False
11. The higher the cost of talking on a cell phone in public (in terms of being perceived by others as rude) the less likely
one is to do so.
a.
True
b.
False
Multiple Choice
12. Theories should be judged based upon how
a.
well they explain things.
b.
consistently and accurately they predict.
c.
famous the economist is making the prediction.
d.
the amount of attention given to them by the media.
e.
a and b
13. In general, in a given rich country the ______________ the opportunity cost for a woman of having and raising a
child, the _____________ children she will have.
a.
higher; fewer
b.
higher; more
c.
lower; fewer
d.
lower; more
e.
a and d
14. Which of the following statements is false?
a.
A theory should be judged based upon whether or not it tells us the things we want to hear.
b.
Scientists are interested in finding out when their theories are wrong or right.
c.
Scientists are interested in building theories that can be refuted.
d.
If evidence is consistent with a theory’s predictions, we state that the evidence fails to reject the theory.
15. To an economist, it is preferable to
a.
assume that all criminals are rational.
b.
assume that all criminals are irrational.
c.
build a theory based on a rational criminal and then check the evidence.
d.
a or b
16. Which of the following theories is not falsifiable or refutable?
a.
Everything that has happened to Jane throughout her life happened to her specifically because she was born on
June 23, 1993.
b.
People with blue eyes tend to be more sensitive to light than people with brown eyes.
c.
Women who are electrical engineers tend to have fewer children than women who are retail cashiers.
d.
People who watch more than six hours of television per day tend to weigh more than people who watch fewer
hours of television daily.
e.
all of the above
17. A person tends to be ______________ likely to lose her temper with a boss than with a friend because the opportunity
cost of losing her temper with her boss tends to be _____________ than the opportunity cost of losing her temper with her
friend.
a.
less; higher
b.
more; higher
c.
less; lower
d.
more; lower
18. The _________________ the opportunity cost of bad behavior, the _________________ likely one is to exhibit bad
behavior.
a.
higher; less
b.
lower; more
c.
higher; more
d.
lower; less
e.
a and b
19. Those who say that economics is becoming an increasingly imperialist social science are suggesting that economics is
a.
becoming increasingly concerned with corporations rather than small businesses.
b.
becoming increasingly focused on government actions rather than on business activity.
c.
spreading out into other fields of study, such as history, anthropology, and sociology.
d.
becoming increasingly focused on business activity rather than on government actions.
20. Which of the following statements is true?
a.
The motivation to try to explain something is at the heart of building a theory.
b.
If a theory makes people uncomfortable then it should be discarded or ignored.
c.
In order for a theory to be valid it must be a perfect description of reality.
d.
Building a theory and evaluating a theory are the same thing.
21. In general, a dry cleaner in a small town is ______________ likely to be unethical in his business practices than a dry
cleaner in a large city. This is because the larger a percentage of the population one person is, the _____________likely
that person will have to further engage with people he encounters.
a.
more; less
b.
less; less
c.
more; more
d.
less; more
Situation 33-1
Suppose that the equation that represents the expected benefits of burglary for a given prospective criminal is as follows:
EB = Ps x Loot
The criminal’s cost equation is as follows:
EC = [Pp x (I + F)] + AC
Where:
EB is the expected benefits of burglary
Ps is the probability of successfully burglarizing a house
Loot is the dollar take from the burglary
EC is the expected costs of burglary
Pp is the probability of imprisonment
I is the income the criminal gives up if caught and imprisoned
F is the dollar value the criminal puts on freedom
AC is the anguish cost of committing a burglary
22. Refer to Situation 33-1. If the prospective criminal sets the following values:
Ps = 65 percent
Loot = $20,000
Pp = 20 percent
I = $30,000
F = $15,000
AC = $5,000
The prospective criminal’s expected benefit from committing the burglary is ______________ and his expected cost of
committing the burglary is _______________. Economic theory tells us that under these circumstances, the prospective
criminal ______________ commit the burglary.
a.
$13,000; $14,000; will
b.
$13,000; $14,000; will not
c.
$6,667; $50,000; will not
d.
$57,500; $50,000; will
23. Refer to Situation 33-1. If the prospective criminal sets the following values:
Ps = 50 percent
Loot = $30,000
Pp = 10 percent
I = $10,000
F = $25,000
AC = $5,000
The prospective criminal’s expected benefit from committing the burglary is ______________ and his expected cost of
committing the burglary is _______________. Economic theory tells us that under these circumstances, the prospective
criminal ______________ commit the burglary.
a.
$15,000; $8,500; will
b.
$15,000; $8,500; will not
c.
$15,000; $40,000; will not
d.
$17,500; $12,000; will
24. The larger a percentage of the population a person is, the ______________ likely that person will have to further
engage with people she meets. This implies that she will generally be ____________ likely to behave unethically and
poorly with the people in her town as the population of her town increases.
a.
more; less
b.
less; less
c.
more; more
d.
less; more
25. We state that the evidence __________________ if evidence is consistent with a theory’s predictions.
a.
fails to reject the theory
b.
proves the theory is correct
c.
proves the theory is invalid
d.
none of the above
26. The efficient number of gifts that a gift-giver wants to give is the number at which the marginal benefits of giving a
gift are__________________the marginal costs of giving a gift.
a.
greater than
b.
less than
c.
equal to
d.
less than or equal to
27. Which of the following can a homebuyer pay for indirectly when purchasing a home?
a.
good weather
b.
a good school district
c.
a nice view
d.
all of the above
28. George is a gift giver and Roger is a gift recipient. George has Roger in his utility function, but Roger does not have
George in his utility function. Roger may try to get George to __________________ George’s efficient number of gifts to
(give).
a.
give more gifts to him than
b.
reduce the number of gifts he receives below
c.
increase the number of gifts he receives beyond
d.
a and b
e.
a and c
29. If a person gives a gift to another person, an economist would say that it is because
a.
the marginal benefit of giving the gift is at least as great as the marginal cost of giving the gift.
b.
the marginal cost of giving the gift is at least as great as the marginal benefit of giving the gift.
c.
he expects to receive a gift in return.
d.
none of the above
30. Anna gives Billy a gift of $200. We can be sure that Billy will
a.
spend the $200 on what Anna hopes that he will spend it on.
b.
save the $200, and not spend it on anything.
c.
spend the $200 on whatever is next on Billy’s list of things to buy.
d.
spend the $200 on something that Anna does not want him to spend it on.
31. House A has an ocean view and House B does not. In all other respects, the two houses are the same. The market
price of house A is $2,800,000; the market price of house B is $2,600,000. The ocean view is therefore valued at
a.
$200,000.
b.
$1,950,000.
c.
-$700,000.
d.
$2,700,000.
32. Economists often evaluate a theory in terms of how consistently and accurately it predicts what happens. Implicit in
this position is the belief that
a.
if the theory’s predictions are consistently accurate, then there is a fairly good chance that the theory is a good
explanation of how things work.
b.
if the theory’s predictions are consistently accurate, then there is a fairly good chance that the theory will be
accepted by others.
c.
if the theory’s predictions are consistently accurate, then there is a fairly good chance that the theory’s
assumptions (even if they initially seem unrealistic) capture something that is essential to explaining what it is
that the theory is trying to explain.
d.
all of the above
33. Smith says that criminals are rational and that they consider both the benefits and costs of criminal activity. Jones
disagrees. He says criminals are irrational and can’t possibly be considering both the benefits and costs of criminal
activity. If they did, he argues, they wouldn’t be criminals. An economist who wants to figure out if criminals are
rational, would most likely build a
a.
falsifiable theory built on a rational criminal and then test the theory.
b.
non-falsifiable theory built on a rational criminal and then test the theory.
c.
falsifiable theory built on a rational criminal, but not test the theory.
d.
non-falsifiable theory built on a rational criminal, but not test the theory.
34. In the burglary crime model presented in the textbook, as the anguish cost of committing a burglary rises, the
prediction is that
a.
more people will commit burglary.
b.
the same number of people will commit burglary.
c.
fewer people will commit burglary.
d.
There is not enough information to answer this question.
35. If people value clean air over dirty air, and if the air in city A is cleaner than the air in city B (by a wide margin), then
we would expect that ____________________, all else equal between the two cities.
a.
comparable houses in the two cities will sell for the same price.
b.
comparable house in A will be more expensive than comparable house in B.
c.
comparable house in B will be more expensive than comparable house in A.
d.
There is not enough information to answer the question.
36. Kristie currently spends her $1,000 a week income as follows: $500 on X, $300 on Y, and $200 on Z. Her mother
then gives her a $100 bill and tells her to use it to buy more Z. Kristie actually takes the $100 her mother gave to her,
adds $40 to the $200 she usually spends on Z, and buys $240 worth of Z. Did Kristie’s mother’s $100 go to buy only Z?
a.
Yes, because Kristie used her mother’s actual $100 bill to buy Z.
b.
No, because if it had, Kristie would have bought $300 worth of Z. Some of Kristie’s mother’s money went for
what Kristie had next on her list of desired purchases.
c.
Yes, since Kristie bought $240 worth of Z, and the amount of money her mother gave her is less than $240.
d.
There is not enough information to answer the question.
37. The ______________ the gap between the tuition a college student pays and the equilibrium tuition for that college,
the _____________ likely the student’s instructors will be on time and attentive during their office hours.
a.
larger; less
b.
smaller; more
c.
larger; more
d.
smaller; less
e.
a and b
38. For every gift that A gives to B from the first to the tenth gift, A receives a net benefit of $10. The additional cost to
A of giving an additional gift is constant at $5. It follows that A’s marginal benefit curve for giving gifts to B is
___________________ (assuming that we place “marginal benefits” on the vertical axis and “number of gifts” on the
horizontal axis).
a.
downward-sloping over units 1 -10.
b.
upward-sloping over units 1-10.
c.
horizontal over units 1-10.
d.
vertical over units 1-10.
e.
There is not enough information provided to answer the question.
39. Adrian reads about two theories, A and B. Theory A seems wrong to Adrian and theory B seems correct to Adrian. It
follows that
a.
theory B is correct, and theory A is not.
b.
both theories may be correct.
c.
both theories may be incorrect.
d.
theory A is trying to explain something completely different than theory B.
e.
b and c
40. “The theory’s predictions are consistent with what I believe, so now I have good reason to believe what the theory
says.” This statement is likely to have been made by a person who believes that
a.
theories should be tested by gathering and analyzing data.
b.
theories are descriptive of reality.
c.
theories should be falsifiable or refutable.
d.
b and c
e.
none of the above
41. Theory A predicts that the higher the opportunity cost of having a child, the fewer children a woman will have. Which
of the following is evidence against the theory if opportunity cost is measured in terms of foregone salary?
a.
women with high-paying jobs have more children than women with low-paying jobs.
b.
women with low-paying jobs have more children than women with high-paying jobs.
c.
men married to women with high-paying jobs want more children than men married to women with low-
paying jobs.
d.
the mothers of women with high-paying jobs will want their daughters to have children more than the mothers
of women with low-paying jobs will want their daughters to have children.
e.
none of the above
42. A man moves from a large city to a small town. In the small town he seems like a very different person than the
person he was in the big city. For instance, he is more polite in the small town than he was in the big city. This could be
because
a.
the costs of his being impolite are higher in the big city than in the small town.
b.
the costs of his being impolite are higher in the small town than in the big city.
c.
he is a happier person in the small town and it could be that happier people are more polite.
d.
b and c
e.
a and c
43. People sometimes act differently in different settings. An economist is likely to explain this by saying
a.
the benefits and costs of certain behaviors can be different in different settings.
b.
people are hard to figure out.
c.
people behave as others behave.
d.
it is hard to figure out what makes people tick.
e.
none of the above
44. It often appears as if there are “too few” workers at the Department of Motor Vehicles (DMV) to service all of its
customers at a given point in time. Based on one of theories discussed in the textbook, this is probably because
a.
the equilibrium “price” to be served by the DMV is lower than the “price” charged customers.
b.
the equilibrium “price” to be served by the DMV is higher than the “price” charged customers.
c.
the equilibrium “price” to be served by the DMV minus the “price” charged to customers is zero.
d.
b and c
e.
none of the above
45. The gap between the higher equilibrium tuition and lower student tuition is $4,000 at university A and $10,000 at
university B. It follows that
a.
if the supply of openings at each university is the same, then the demand to attend university B must be higher
than the demand to attend university A.
b.
the supply of openings is necessarily larger at university A than B.
c.
instructors at university B are likely to be more punctual for their office hours than instructors at university A.
d.
instructors at university A are more likely to be punctual for their office hours than instructors at university B.
e.
none of the above
46. Which of the following is inconsistent with the burglary crime model presented in the textbook?
a.
The burglary rate rises during recessions.
b.
The burglary rate declines during recessions.
c.
The burglary rate remains does not change because of a recession.
d.
The anguish cost of committing a burglary is directly related to the expected cost of committing a burglary.
e.
a and d
47. A theory predicts that all swans are white. A thousand people go out into the field and identify the color of the swans
they see. Their results reveal that, of the 10,000 swans they saw, all were white. It follows that
a.
the swan theory is a falsifiable theory.
b.
the swan theory is correct.
c.
the evidence fails to reject the swan theory.
d.
a and b
e.
a and c
48. A theory predicts that the more a student studies, the higher his or her grades will be. This theory is
a.
not falsifiable.
b.
falsifiable.
c.
too difficult a theory to test.
d.
inconsistent with the fact that some students study less than other students, yet receive higher grades.
e.
b and d
49. Suppose you go to a high school and identify groups of students sitting at different lunch tables. To you it appears that
everyone on the football team sits at one table, everyone who gets really high grades sits at another table, everyone who is
in the drama club sits at another table, and so on. This outcome could be
a.
the result of everyone preferring to sit at a table with dissimilar students, but not want to be at a table if he or
she is in a 30 percent minority or less.
b.
because people naturally discriminate against (and make feel unwelcome) those people who are not like them.
c.
because the school authorities have instituted a one-week experimental plan to keep students segregated (at
lunch) according to certain key interests.
d.
b and c
e.
all of the above
50. Which of the following is not a prediction of the theory on baseball caps and cheating?
a.
More people will wear baseball caps on test days than on lecture days.
b.
More people will wear baseball caps for multiple choice tests than for essay tests.
c.
More people will wear baseball caps when students sit close to each other in class and are taking a test than
when students sit far apart from each other and are taking a test.
d.
b and c
e.
none of the above
51. Which of the following is not a prediction of the theory on baseball caps and cheating?
a.
More people will wear baseball caps on test days than on lecture days.
b.
More people will wear baseball caps for multiple choice tests than for essay tests.
c.
More people will wear baseball caps when students sit close to each other in class and are taking a test than
when students sit far apart from each other and are taking a test.
d.
Baseball caps are more likely to be worn on backwards (than frontwards) on test days than on lecture days.
e.
none of the above
52. A person who lives in a good-climate city says, “It’s expensive to live here, but at least the climate is free.” In terms
of a theory advanced in the textbook, this person has either forgotten or is unaware that
a.
New York City is not a good-climate city and it is expensive to live there. In other words, not all good-climate
cities are expensive and not all bad-climate cities are cheap.
b.
part of the reason it’s expensive to live in the city is because of the good climate.
c.
good-climate cities have more outdoor entertainment entities and activities and therefore people have to pay
higher taxes to support those entities and activities.
d.
there is a sunshine tax in most of the country – the more hours of sunshine a day, the higher the tax.
e.
none of the above
53. A gift-giver’s efficient number of gifts (to give to a gift-recipient) has fallen from 10 to 8. This could be because
a.
the gift-giver’s marginal benefit curve for giving gifts shifted down and left.
b.
the gift-giver’s marginal cost curve of giving gifts shifted up and left.
c.
the gift-recipient “fell out” of the gift-giver’s utility function.
d.
a and b
e.
none of the above
54. Smith sends her children to a private school on the other side of town. Tuition per student per year is $15,000. Jones
sends her children to a public school on her side of town. Tuition per student per year is $0. Most people seem to think
that the private school and public school are equivalent when it comes to educating students. According to a theory
discussed in the textbook,
a.
Smith lives in a more expensive home than Jones.
b.
Jones lives in a more expensive home than Smith.
c.
Smith and Jones live in homes that are priced the same.
d.
Smith lives in a larger home than Jones.
e.
none of the above
55. Universities A and B are substitutes in the minds of many college students. Initially the student tuition at each
university is the same and far below the equilibrium tuition. Then, the tuition at A is raised and B is not. As a result of a
rising tuition at A, some students who would have applied and enrolled in A, apply to B instead. Based on the logic
presented in one of the theories discussed in the textbook, we would expect that
a.
instructors at B will begin to be less nearly punctual for office hours than they were previously.
b.
instructors at A will begin to be more nearly punctual for office hours than they were previously.
c.
instructors at B will be more nearly punctual for office hours than they were previously.
d.
a and b
e.
b and c
56. The bigger the shortage of a good or service, the ____________ the seller of the good or service will be to an
individual customer _________. (We are assuming here that the shortage cannot, for legal reasons, be alleviated through
a rise in price.)
a.
more polite; without having sales adversely affected
b.
ruder; without having sales adversely affect
c.
more polite; even though sales will be adversely affected
d.
ruder; even though sales will be adversely affected
57. The instructors at College A are regularly late for their office hours. Based on a theory presented in the textbook, we
would predict that the gap between the ______________student tuition and ___________equilibrium tuition is
___________ at College A.
a.
lower; higher; small
b.
higher; lower; small
c.
lower; higher; large
d.
higher; lower; large
58. Smith drives his car numerous places. Sometimes he drives his car around his residential neighborhood and
sometimes he drives it on the highway. Occasionally, Smith gets peeved with the way other people drive and makes a
rude gesture to them. Based on one of the theories discussed in the textbook, he is
a.
more likely to make a rude gesture to another driver on the highway than in his residential neighborhood.
b.
less likely to make a rude gesture to another driver on the highway than in his residential neighborhood.
c.
equally likely to make a rude gesture to another driver on the highway as in the residential neighborhood.
d.
There is not enough information provided to answer this question.
59. Theory B predicts that everything that happens, happens for a reason – although we may not know what the reason
is. This theory
a.
can be refuted.
b.
probably cannot be refuted.
c.
is a good explanation for what happens.
d.
is the kind of theory that scientists like to build because it can explain so much.
60. Explain what it means to say that a theory is falsifiable or refutable? Give a specific example to help support your
answer.
61. Identify and describe each step of the five-step process outlined in the textbook for building and testing theories.
