Multiple Choice Questions:
1. Which of the following is most likely a topic of discussion in macroeconomics?
a. An increase in the price of a pizza
b. A decrease in the production of VCRs by a consumer electronics company
c. An increase in the wage rate paid to automobile workers
d. A decrease in the unemployment rate
e. The entry of new firms into the software industry
2. Economists use theories to
a. Abstract from the complexities of the world.
b. Understand economic behavior.
c. Explain and help predict human behavior.
d. Do all of the above.
e. Do none of the above.
3. The importance of the ceteris paribus assumption is that it
a. Allows one to separate normative economic issues from positive economic ones.
b. Allows one to generalize from the whole to the individual.
c. Allows one to analyze the relationship between two variables apart from the influence of other variables.
d. Allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
4. Which of the following statements can explain why correlation between Event A and Event B may not imply causality from A to B?
a. The observed correlation may be coincidental.
b. A third variable may be responsible for causing both events.
c. Causality may run from Event B to Event A instead of in the opposite direction.
d. All of the above can explain why the correlation may not imply causality.
5. Ten-year-old Tommy observes that people who play football are larger than average and tells his mom that he's going to play football because it will make him big and strong. Tommy is
a. Committing the fallacy of composition.
b. Violating the ceteris paribus assumption.
c. Mistaking correlation for causation.
d. Committing the fallacy of decomposition.
6. Which of the following correlations is likely to involve primarily one variable causing the other, rather than a third variable causing them both?
a. The amount of time a team's third string plays in the game tends to be greater, the larger the team's margin of victory.
b. Ice cream sales and crime rates both tend to increase at the same time.
c. A lower price of a particular good and a higher quantity purchased tend to occur at the same time.
d. The likelihood of rain tends to be greater after you have washed your car.
7. Which of the following is a positive statement?
a. New tax laws are needed to help the poor.
b. Teenage unemployment should be reduced.
c. We should increase Social Security payments to the elderly.
d. An increase in tax rates will reduce unemployment.
e. It is only fair that firms protected from competition by government-granted monopolies pay higher corporate taxes.