Ch. 2 Economic Methods And Economic Questions

Question 1

How does the sample size affect the validity of an empirical argument?

Answer 1

The larger the sample size the better.

Question 2

Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response?

Answer 2

No, the model is a simplified representation of reality.

Question 3

What is meant by randomization in the context of an economic experiment?

Answer 3

Subjects are assigned by chance, rather than by choice, to a group.

Question 4

Causation occurs when there is ____

Answer 4

A logical cause and effect relationship.

Question 5

More police officers and lower crime rates is likely to be ____.

Answer 5

Causation

Question 6

More economic growth and higher employment levels is likely to be ____.

Answer 6

Causation

Question 7

The length of women’s skirts and stock market performance is likely to be ____.

Answer 7

Correlation

Question 8

The name of the ongoing process that economists, other social scientists, and natural scientists use to: develop models of the world and test those models with data.

Answer 8

Scientific method.

Question 9

A simplified description, or representation of the world.

Answer 9

Model

Question 10

Facts, measurements, or statistics that describe the world.

Answer 10

Data

Question 11

A set of facts established by observation and measurement.

Answer 11

Empirical evidence.

Question 12

Predictions that can be tested with data.

Answer 12

Hypothesis

Question 13

Occurs when one thing directly affects another.

Answer 13

Causation

Question 14

There is a mutual relationship between two things.

Answer 14

Correlation

Question 15

Implies that two variables tend to move in the same direction.

Answer 15

Positive correlation.

Question 16

Implies that two variables tend to move in opposite directions.

Answer 16

Negative correlation.

Question 17

Two variable that are not related.

Answer 17

Zero correlation

Question 18

Something that has been left out of a study that, if included, would explain why two variables are correlated.

Answer 18

Omitted variable.

Question 19

Occurs when we mix up the direction of cause and effect.

Answer 19

Reverse causality.

Question 20

A controlled method of investigating causal relationships among variables.

Answer 20

Experiment.

Question 21

The assignments of subjects by chance, rather than by choice, to a treatment group or to a control group.

Answer 21

Randomization.

Question 22

An empirical study in which some process out of the control of the experimenter has assigned subjects to control and treatment groups in a random or nearly random way.

Answer 22

Natural experiment.

Question 23

To say that economists use the scientific method means that they are using____.

Answer 23

An ongoing process to develop models of the world and then test and evaluate those models.