Question 1

When it is impossible to carry out a controlled experiment, economists often turn to a:

Accepted Answer

A)  natural experiment. 
B)  precommitment strategy. 
C)  self-confirming equilibrium. 
D)  irrational behavior. 
A)  natural experiment. 
B)  precommitment strategy. 
C)  self-confirming equilibrium. 
D)  irrational behavior.

Question 2

When modern economists cannot solve a model analytically, they can estimate the solution by:

Accepted Answer

A)  abandoning models altogether. 
B)  changing from the inductive back to the deductive approach. 
C)  simulating the model with a computer to arrive at a numerical solution. 
D)  using induction to solve a series of equations. 
A)  abandoning models altogether. 
B)  changing from the inductive back to the deductive approach. 
C)  simulating the model with a computer to arrive at a numerical solution. 
D)  using induction to solve a series of equations.

Question 3

If people start to buy more expensive fuel-efficient cars rather than cheaper SUVs, even though the additional cost of fuel-efficient cars is greater than the savings in gas over the life of the car, this would be explained by which of the following types of models?

Accepted Answer

A)  Heuristic models using traditional building blocks 
B)  Heuristic models using behavioral building blocks 
C)  Empirical models using regression analysis 
D)  Path-dependent models 
A)  Heuristic models using traditional building blocks 
B)  Heuristic models using behavioral building blocks 
C)  Empirical models using regression analysis 
D)  Path-dependent models

Question 4

Traditional models see no role for the government in pushing individuals toward the preferred equilibrium.

Accepted Answer

A) True 
 B)False

Question 5

Scientists are very hesitant to base any knowledge on heuristic models because:

Accepted Answer

A)  they do not contain any implications for government policy and influencing choice. 
B)  it is easy to believe a story and make sense of it within its own frame. 
C)  they only use the deductive approach. 
D)  they contain too many equilibria. 
A)  they do not contain any implications for government policy and influencing choice. 
B)  it is easy to believe a story and make sense of it within its own frame. 
C)  they only use the deductive approach. 
D)  they contain too many equilibria.

Question 6

Traditional economic models highlight social dimensions of economic problems.

Accepted Answer

A) True 
 B)False

Question 7

The assumptions that form the basis of any economic model are referred to as:

Accepted Answer

A)  theorems. 
B)  precepts. 
C)  building blocks. 
D)  objectives. 
A)  theorems. 
B)  precepts. 
C)  building blocks. 
D)  objectives.

Question 8

The main advantage that ACE models have over other models is that:

Accepted Answer

A)  economists do not have to "solve" the model on their own. 
B)  they look only at single equilibrium outcomes. 
C)  they eliminate the importance of mathematics. 
D)  they primarily use deductive methods. 
A)  economists do not have to "solve" the model on their own. 
B)  they look only at single equilibrium outcomes. 
C)  they eliminate the importance of mathematics. 
D)  they primarily use deductive methods.

Question 9

A ________ is a simplified representation of a problem that captures the essential issues.

Accepted Answer

A)  precept 
B)  theorem 
C)  hypothesis 
D)  model 
A)  precept 
B)  theorem 
C)  hypothesis 
D)  model

Question 10

An economist observes that a pharmaceutical company is sponsoring a diabetes clinic and providing free medications. She concludes that the pharmaceutical company is concerned not only about profits but also about fair distribution of drugs to those who need them. This economist is most likely a(n):

Accepted Answer

A)  traditional economist. 
B)  behavioral economist. 
C)  irrational economist. 
D)  engineering economist. 
A)  traditional economist. 
B)  behavioral economist. 
C)  irrational economist. 
D)  engineering economist.

Question 11

Being able to find stable patterns in data means that empirical models can be labeled as:

Accepted Answer

A)  butterfly effect models. 
B)  heuristic models. 
C)  pattern-finding models. 
D)  traditional models. 
A)  butterfly effect models. 
B)  heuristic models. 
C)  pattern-finding models. 
D)  traditional models.

Question 12

Andy is offered the following two income scenarios: (1) earn $10,000 the first year, $12,000 the second year, and $15,000 the third year or (2) earn $15,000 the first year, $12,000 the second year, and $10,000 the third year. Which is the rational option?

Accepted Answer

A)  Option 1 
B)  Option 2 
C)  Neither even though option 2 is better than option 1. 
D)  Neither; the options are the same. 
A)  Option 1 
B)  Option 2 
C)  Neither even though option 2 is better than option 1. 
D)  Neither; the options are the same.

Question 13

An economist observes that a pharmaceutical company is sponsoring a diabetes clinic and providing free medications. She concludes that the pharmaceutical company is reducing short-term profits for the possibility of higher long-term profits. This economist is most likely a(n):

Accepted Answer

A)  traditional economist. 
B)  behavioral economist. 
C)  irrational economist. 
D)  engineering economist. 
A)  traditional economist. 
B)  behavioral economist. 
C)  irrational economist. 
D)  engineering economist.

Question 14

A supply and demand model is a:

Accepted Answer

A)  path-dependent model. 
B)  model that considers only important feedback effects. 
C)  model that considers all feedback effects. 
D)  model that does not consider feedback effects. 
A)  path-dependent model. 
B)  model that considers only important feedback effects. 
C)  model that considers all feedback effects. 
D)  model that does not consider feedback effects.

Question 15

What distinguishes scientific from engineering models?

Accepted Answer

A)  Scientific models are likely to be more useful than engineering models. 
B)  Scientific models require mathematics, whereas engineering models do not. 
C)  Scientific models rely on assumptions, whereas engineering models do not. 
D)  Scientific models focus on understanding, whereas engineering models focus on policy. 
A)  Scientific models are likely to be more useful than engineering models. 
B)  Scientific models require mathematics, whereas engineering models do not. 
C)  Scientific models rely on assumptions, whereas engineering models do not. 
D)  Scientific models focus on understanding, whereas engineering models focus on policy.

Question 16

Assuming that people follow enlightened self-interest allows behavioral economists to create a single clear-cut model that can be applied across many different contexts.

Accepted Answer

A) True 
 B)False

Question 17

The primary problem with heuristic models is that:

Accepted Answer

A)  they are too deductive. 
B)  it is hard to test their validity. 
C)  they do not include enough mathematics. 
D)  they are not very convincing. 
A)  they are too deductive. 
B)  it is hard to test their validity. 
C)  they do not include enough mathematics. 
D)  they are not very convincing.

Question 18

What distinguishes a deductive approach from an inductive approach to modeling?

Accepted Answer

A)  An inductive approach begins by looking at the data, whereas a deductive approach develops the implications of a model first. 
B)  Inductive modeling uses data, whereas deductive modeling does not. 
C)  The deductive approach begins by looking at the data, whereas the inductive approach begins with the model. 
D)  The inductive approach does not have conclusions for viable policies, whereas the deductive approach does. 
A)  An inductive approach begins by looking at the data, whereas a deductive approach develops the implications of a model first. 
B)  Inductive modeling uses data, whereas deductive modeling does not. 
C)  The deductive approach begins by looking at the data, whereas the inductive approach begins with the model. 
D)  The inductive approach does not have conclusions for viable policies, whereas the deductive approach does.

Question 19

In behavioral economics people gravitate toward certain points. These points are called:

Accepted Answer

A)  path-dependent points. 
B)  best fit points. 
C)  anchor points. 
D)  feedback points. 
A)  path-dependent points. 
B)  best fit points. 
C)  anchor points. 
D)  feedback points.

Question 20

Say that Janie is exhibiting the endowment effect as she makes a decision. She is:

Accepted Answer

A)  deciding on the basis of sunk costs. 
B)  valuing what she already has more because she owns it. 
C)  consuming on the basis of endorsements by celebrities. 
D)  buying something she can't really afford right now because she expects to have savings in the future. 
A)  deciding on the basis of sunk costs. 
B)  valuing what she already has more because she owns it. 
C)  consuming on the basis of endorsements by celebrities. 
D)  buying something she can't really afford right now because she expects to have savings in the future.

Exam 21: Thinking Like a Modern Economist

When it is impossible to carry out a controlled experiment, economists often turn to a:

When modern economists cannot solve a model analytically, they can estimate the solution by:

If people start to buy more expensive fuel-efficient cars rather than cheaper SUVs, even though the additional cost of fuel-efficient cars is greater than the savings in gas over the life of the car, this would be explained by which of the following types of models?

Traditional models see no role for the government in pushing individuals toward the preferred equilibrium.

Scientists are very hesitant to base any knowledge on heuristic models because:

Traditional economic models highlight social dimensions of economic problems.

The assumptions that form the basis of any economic model are referred to as:

The main advantage that ACE models have over other models is that:

A ________ is a simplified representation of a problem that captures the essential issues.

An economist observes that a pharmaceutical company is sponsoring a diabetes clinic and providing free medications. She concludes that the pharmaceutical company is concerned not only about profits but also about fair distribution of drugs to those who need them. This economist is most likely a(n):

Being able to find stable patterns in data means that empirical models can be labeled as:

Andy is offered the following two income scenarios: (1) earn $10,000 the first year, $12,000 the second year, and $15,000 the third year or (2) earn $15,000 the first year, $12,000 the second year, and $10,000 the third year. Which is the rational option?

An economist observes that a pharmaceutical company is sponsoring a diabetes clinic and providing free medications. She concludes that the pharmaceutical company is reducing short-term profits for the possibility of higher long-term profits. This economist is most likely a(n):

A supply and demand model is a:

What distinguishes scientific from engineering models?

Assuming that people follow enlightened self-interest allows behavioral economists to create a single clear-cut model that can be applied across many different contexts.

The primary problem with heuristic models is that:

What distinguishes a deductive approach from an inductive approach to modeling?

In behavioral economics people gravitate toward certain points. These points are called:

Say that Janie is exhibiting the endowment effect as she makes a decision. She is:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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