A) make predictions.
B) explain real-life phenomena.
C) evaluate production alternatives.
D) All of the above.
Answer: D
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
11) If a theory's predictions are incorrect,
A) then economists always reject it.
B) then the data used was clearly faulty.
C) then economists will likely reduce their confidence in the theory.
D) then the model must be too simple.
Answer: C
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
12) Which of the following is an example of a normative statement?
A) A higher price for a good causes people to want to buy less of that good.
B) A lower price for a good causes people to want to buy more of that good.
C) To make the good available to more people, a lower price should be set.
D) If you decrease the amount of sugar in soda drinks, sales to children will decrease.
Answer: C
Skill: Conceptual
AACSB: Analytical Thinking
Status: New
13) Which of the following is an example of a normative statement?
A) Since this food is bad for you, you should not consume it.
B) This food has negative health effects.
C) If you consume this food, you will get sick.
D) People usually get sick after consuming this food.
Answer: A
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
14) Which of the following is an example of a positive statement?
A) Since this food is bad for you, you should not consume it.
B) If this food is bad for you, you should not consume it.
C) If you consume this food, you will get sick.
D) None of the above.
Answer: C
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
15) Behavioral economics is the study of why people
A) choose not to optimize.
B) optimize.
C) sometimes don't optimize.
D) behave badly when buying and selling.
Answer: C
Skill: Definition
AACSB: Analytical Thinking
Status: New
16) Legislators argue that a minimum wage law is instituted to help poor people. Economists can attack the minimum wage law on two fronts. First, some argue that government should not help the poor. Second, some argue that minimum wage laws actually hurt the poor because it creates unemployment. Which argument is normative and which is positive?
Answer: An opinion about the role of government is a normative statement. An observation about the impact of a law is a positive statement.
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
17) Explain why a model that delivers good enough approximations is a good model.
Answer: Models make simplifying assumptions in order to make them less complex and complicated and therefore usable. But when we simplify, we do leave out parts of the real world that have an impact on the results. If a model gives predictions or approximations that are close to reality, then the model is useful.
Skill: Analytical
AACSB: Analytical Thinking
Status: New
18) Explain why economists might disagree on the content of a model.
Answer: Economists might have different theories or might make different simplifying assumptions.
Skill: Conceptual