An economist’s use of experiments and real-world data to test a theory is an example of

1. An economist’s use of experiments and real-world data to test a theory is an example of:

         a.  the scientific method in economics.

         b.  macroeconomics.

         c.  economic growth.

         d.  normative analysis.

         e.  comparative advantage.

ANS: A        

    3.  Economists use the scientific method and the tools of economics to study:

         a.  only the decisions of individuals.

         b.  only the decisions of business firms.

         c.  only economic growth and gross domestic product (GDP).

         d.  only the production possibilities curve.

         e.  anything around them; the world is the economist’s laboratory.

ANS: E         

    5.  A positive statement:

         a.  is a claim that can be tested.

         b.  is a statement about what ought to be.

         c.  is a declaration of opinion.

         d.  is a claim that cannot be tested.

         e.  cannot be evaluated using the scientific method.

ANS: A        

    7.  Which of the following is a normative statement?

         a.  The sky is blue.

         b.  The sky is green with pink polka dots.

         c.  Points on the production possibilities frontier (PPF) are efficient.

         d.  Points outside the PPF are unattainable with current resources.

         e.  We should strive to push the PPF outward.

ANS: E         

    9.  Which of the following is a normative statement?

         a.  You should wear a helmet when cycling.

         b.  The sky is blue.

         c.  A bicycle has two wheels.

         d.  A unicycle has five wheels.

         e.  Electricity follows the path of least resistance.

ANS: A       

  11.  Which of the following is a positive statement?

         a.  Winters in Arkansas are too cold.

         b.  Everyone should work in a bank to understand the true value of money.

         c.  Harvard University is the top education institution in the country.

         d.  On average, people save 15% when they switch to GEICO.

         e.  Everyone ought to have a life insurance policy.

ANS: D       

  13.  The important act of holding all other variables constant while examining a particular variable is known as:

         a.  endogeneity.

         b.  a normative statement.

         c.  a positive statement.

         d.  macroeconomics.

         e.  ceteris paribus.

ANS: E         

  15.  Which of the following is necessary to build a good economic model?

         a.  normative statements

         b.  assumptions

         c.  opinions

         d.  complex math

         e.  realism

ANS: B