Exam 1: The Art and Science of Economic Analysis

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A) only the rich get everything they want
B) choices must be made
C) there will be more services produced than goods
D) people search for spiritual fulfillment rather than material fulfillment
E) poor people never get anything they want

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A) normative statements
B) comparing predictions to evidence
C) formulating a hypothesis
D) a hypothesis
E) behavioral assumptions

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A) government market
B) classified market
C) communication market
D) resource market
E) product market

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A) construct simplifying assumptions about the real world
B) explain reality in all its complexity
C) collect empirical data to support the facts
D) construct situations where controlled experiments can be carried out
E) provide explanations for, and predictions of, economic events

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A) a key variable
B) the hypothesis of the model
C) a behavioral assumption
D) a prediction of the model
E) a method of testing the model

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A) studies human behavior when scarcity exists and choices must be made
B) provides the only reasonable explanation of how people make decisions
C) can accurately explain all human behavior since it is based on the assumption of rationality
D) is better at showing the way things ought to be than the other social sciences are
E) is the only social science that can explain the existence and behavior of public institutions

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A) individual who has much education
B) organizer who seeks profitable opportunities and is willing to accept risks
C) business organization that uses inputs to produce output
D) administrator who runs an enterprise without accepting any risk of financial loss
E) depot or storehouse for commercial products

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A) fallacy of composition
B) fallacy that association is causation
C) fallacy of segmentation
D) mistake of ignoring secondary effects
E) mistake of ignoring the obvious

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A) people think only of themselves and disregard the well­being of others
B) people undertake all those activities that yield benefits to themselves
C) people only consider the costs of an activity to decide whether it is worthwhile
D) the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that
Deed
E) people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile

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A) in order to breathe life into economic theory and personalize abstract ideas
B) because economics is an art, not a science
C) as a way of rigorously testing economic theory
D) because doing so is a required part of the scientific method
E) to show how their theory can predict at least one real­world situation

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A) how to get rich by playing the stock market
B) the best ways to reduce people's wants, given the scarcity of resources
C) how rational government officials determine what goods should be produced
D) money and why it is good
E) how people use limited resources to try to satisfy unlimited wants

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A) fallacy of composition
B) fallacy that association is causation
C) fallacy of segmentation
D) mistake of ignoring secondary effects
E) mistake of looking beyond the obvious

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A) become wealthy
B) control the government's decision­making processes
C) understand how the economy works
D) discover which stock prices will decrease
E) understand the psychology of participants in markets

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