Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The Third Principle of Economics: Empiricism
5) Which of the following is a feature of a good theory?
A) A good theory does not rely on data.
B) A good theory cannot be tested with data.
C) A good theory is free from approximations.
D) A good theory closely predicts actual behavior.
Answer: D
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The Third Principle of Economics: Empiricism
6) What is the rationale behind empiricism in economic analysis?
Answer: Empiricism refers to the use of data to test theoretical ideas or concepts. Empiricism is
important, because it enables economists to determine whether economic theories are consistent with
actual human behavior. This allows economists to refute faulty theories or modify them so that they are a
better fit to the real world. Empiricism also enables researchers to identify causal relationships between
different sets of variables.
Difficulty: Easy
AACSB: Analytical Thinking
Topic: The Third Principle of Economics: Empiricism
27
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1.6 Is Economics Good for You?
1) Which of the following statements is true?
A) Economics is concerned with money, not choices.
B) Economics can be used to predict peopleʹs actions.
C) Economics does not provide insights into human behavior.
D) Economic reasoning tends to reduce the quality of decision making.
Answer: B
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Is Economics Good for You?
2) Economic reasoning allows economic agents to make decisions ________.
A) by random selection
B) by comparing the costs and benefits of various options
C) by replicating the choices made by other economic agents
D) solely on the basis of tastes and preferences for various options
Answer: B
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Is Economics Good for You?