Answer: C
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
2) Einstein was quoted saying "Everything should be made as simple as possible, but not simpler." When it comes to economic models this means that
A) models shouldn't be too complex.
B) models shouldn't be too simple.
C) models should have a level of abstraction appropriate to the topic investigated.
D) All of the above.
Answer: D
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
3) If a model's predictions are correct, then
A) its assumptions must have been correct.
B) it is proven to be correct.
C) Both A and B above.
D) None of the above.
Answer: D
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
4) Economists tend to judge a model based upon
A) the reality of its assumptions.
B) the accuracy of its predictions.
C) its simplicity.
D) its complexity.
Answer: B
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
5) Economic models are most useful in
A) explaining outcomes resulting from management decisions.
B) predicting the direction of the stock market.
C) explaining the future with the past.
D) generating untestable hypotheses.
Answer: A
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
6) If an important assumption is omitted from an economic model,
A) the model's predictions will only be accurate 50% of the time.
B) the model's predictions may be inaccurate.
C) the model will not predict anything.
D) the model is not simple enough.
Answer: B
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
7) Economic models are most often tested
A) using computer simulations.
B) using data from the distant past.
C) using data from the real world.
D) using logic alone.
Answer: C
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
8) A microeconomic model CANNOT be used to
A) evaluate the impact of a price change on a firm's revenue.
B) predict the impact of an increase in the minimum wage on unemployment.
C) evaluate the fairness of a proposal to nationalize health insurance.
D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets.
Answer: C
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
9) Economic models are only useful in analyzing government policy.
A) True, individuals are irrational and therefore economic models are useless.
B) False, economic models can be used to predict individual and firm behavior.
C) True, economists only model those questions for which they are hired.
D) False, economic models are not even useful in analyzing government policy.
Answer: B
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
10) Microeconomic models are used to