c.
If the price of a product rises, the quantity supplied will decline.
d.
The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation.
ANSWER:
a
103. Which of the following best illustrates the fallacy of composition?
a.
Many people have been vaccinated against polio because it can be such a devastating disease. As a result, I probably do not personally need to be vaccinated against polio.
b.
Whenever I attend a hockey game at the local arena the home team wins. Therefore, if I attend all of the team's local games they will achieve a perfect winning record at home.
c.
Parking at McGill University is in short supply on the main campus. It would be better for more people to ride their bikes to school.
d.
I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past. If everyone were to leave 30 minutes earlier for work, we'd all get to work faster.
ANSWER:
d
104. Which of the following statements best illustrates the fallacy of composition?
a.
the error of omitting relevant variables from an economic model
b.
the error of confusing normative economics with positive economics
c.
the error of generalizing from the individual to the whole
d.
the error of confusing correlation with causation
ANSWER:
c
105. “To make it to the NBA and play professional basketball, one should practise more. If everyone who plays in the minors practises more, then everyone who wants to play professional basketball can.” What is the problem with the logic in this statement?
a.
There is causation but no correlation.
b.
There is correlation but no causation.
c.
It is a normative statement, but it should be a positive statement.
d.
There is a fallacy of composition.
ANSWER:
d
106. Which of the following statements confuses association with causation?
a.
The provincial policy on fighting unemployment has reduced the rate of unemployment in recent years, which means that that the policy has been effective.
b.
A rise in incomes leads to a rise in the demand for a good, indicating that there is a positive relation between the two variables.
c.
A fall in the cost of production leads to an increase in the supply of a good, which implies there is a positive relation between the two.
d.
It always rains when Padme plays her guitar, which implies playing a guitar makes it rain.
ANSWER:
d
107. In a parliamentary debate about international trade tariffs, Members of Parliament and other experts made the following four statements. Which one of these statements is a normative statement?
a.
Without tariffs, the number of jobs lost will be just over 15 percent.
b.
Tariffs are essential because Canada should protect its manufacturing sectors.
c.
The fall in prices due to the removal of tariffs will result in large companies filing for bankruptcy.
d.
The money collected from tariffs in Canada is $345 million.
ANSWER:
b
108. Your father tells you, "Studying more will help increase your grade point average." Why is this a positive statement?
a.
Your father is concerned with your well-being.
b.
Your father wants you to think about the opportunity costs of studying.
c.
It is a proposition that can be tested.
d.
It is your father's opinion.
ANSWER:
c
109. Why is it important to be able to distinguish positive from normative statements about economic policy?
a.
Positive statements are always true and are the basis of economic policy while normative statements are false and should never be used.
b.