Chapter 2 Homework

What tool would you employ to analyze the relationship between gasoline prices and consumer​ behavior? A. Economic models. B. Accounting models. C. Refining models. D. Fashion models.

A. Economic models.

Give an example of a pair of variables that have negative correlation. A. The number of physicists and the speed of sound. B. The number of winter coats sold and the temperature outside. C. The quantity of fertilizers used and crop yield. D. The color of a​ person's shirt and the number of meals sold at Chinese restaurants.

B. The number of winter coats sold and the temperature outside.

Which of the following is not true about economic​ models? A. Models are not perfect replicas of reality. B. They are not​ useful, since they do not include all variables. C. A model is only an approximation. D. They can be highly complex and based on lengthy mathematical analysis.

B. They are not​ useful, since they do not include all variables.

Which of the following questions is not an example of an issue a researcher could study to contribute to the welfare of​ society? A. What will be the turnout of the next Woody Allen film in​ theaters? B. What combination of colors can one use to paint his bedroom​ wall? C. What is the average unemployment age group in a​ country? D. What will be the side effects of watching television on a​ child?

B. What combination of colors can one use to paint his bedroom​ wall?

Empiricism is a principle in economics that​ _________. A. aggregates data to create graphs. B. collects data using the scientific method. C. uses data to test economic models. D. gathers data using surveys.

C. uses data to test economic models.

Debbie, a member of your​ team, advocates finding random people and then breaking them up into two groups. Group A would be shown an increase in the price of gas before taking the survey. Group B would be told there was no increase in the price of gas before taking the survey.​ Troy, another member of your​ team, recommends finding two groups of people already sorted by whether or not they have recently noticed an increase in the price of gas. ​Debbie's method is a ________ and​ Troy's method is a _________ . Group A is the ________ and Group B is the ________ .

controlled experiment, natural experiment. treatment group, control group.

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. In your first presentation to​ management, how would you describe your planned methodology to perform the​ analysis? A. Scientific method. B. Economic method. C. Price discrimination method. D. Management consulting method.

A. Scientific method.

What is the average percentage change in gasoline sold for all four service stations analyzed​ above? The average percentage change is ______ percent.

-20.59

In the virtual model developed by​ Professor, when demand for a particular share consists of​ 10% of all student​ investors, the share price is $10. When demand increases to​ 30% of the student​ investors, the price increases to $14. However, in an actual stock​ market, it is generally​ noticed, when demand consists of​ 10% of all​ investors, a share price of ​$135 increases to $230 when demand for the share is increases to​ 30% of the total investors. Therefore, by testing the accuracy of the model and the real​ data, we find that the share prices in the virtual stock market increases by ______% compared to ______% increase in actual stock market. ​Therefore, we conclude that the model is ____________ compared to the actual data. Which of the following are true about a​ model? ​ (Check all that apply​.) A. It is not always the exact replica of the data. B. It is a simplified description of a theory. C. The outcomes of the model are used in comparison with the actual data. D. It makes hypotheses on empirical evidence.

40%, 70%, inaccurate A. It is not always the exact replica of the data. C.The outcomes of the model are used in comparison with the actual data.

You should collect _________ an odd-numbered a large an even-numbered a small amount of data to create ____________ derived evidence government-generated evidence hypothetical evidence empircial evidence to test the ___________ best guesses hypotheses random data unbiased data indicated by the economic model.

A large; Empirical Evidence; Hypothesis

This chapter discussed natural and randomized experiments. Which of the following is not a characteristic of a natural​ experiment? A. It is an inferior approach to a randomized method. B. It may utilize historical data for analysis. C. It can yield accurate results. D. It uses a​ process, out of the control of the​ experimenter, to assign subjects to groups in a random way.

A. It is an inferior approach to a randomized method.

An argument against​ evidence-based economics would​ be: A. it is only an​ approximation, often based on averages. B. it​ can't be backed up with factual data. C. it always ends with assumptions. D. it is more complicated than real life.

A. it is only an​ approximation, often based on averages.

You are able to collect the following data on the impact of a​ one-cent increase in gasoline prices. Calculate the percentage change in demand for each service station. ​(Round your responses to two decimal places. If the change is​ negative, be sure to include a minus sign.​) Service Station Gasoline Sold​ (thousands of​ gallons) With No Price Increase Gasoline Sold​ (thousands of​ gallons) With​ 1-Cent Price Increase Percentage Change A 110 80 B 170 130 C 210 170 D 320 280

A. -27.27 B. -23.53 C. -19.05 D. -12.50

A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus.​ However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model​ incorrect? A. ​No, because it predicts the outcome of increased bus ridership on average. B. ​Yes, because it does not predict the outcome with 100 percent accuracy. C. ​Yes, it's possible that certain​ factors, such as the price of​ gas, were not included in the model. D. ​No, because it is based on an incorrect assumption.

A. No, because it predicts the outcome of increased bus ridership on average.

How would you test this​ model? A. You should run a natural experiment by analyzing bus ridership and price changes. B. You should randomly question people to see if they prefer taking the bus to other forms of transportation. C. You should determine whether increased bus ridership implies causation or correlation. D. All of the above are appropriate ways to test your model.

A. You should run a natural experiment by analyzing bus ridership and price changes.

Which of the following​ statements, confirmed by empirical​ research, would you be most likely to​ trust? A. using orange and black during a campaign increases candy sales B. sales circulars with coupons generate increased sales C. using pictures of Pilgrims sells more turkeys D. ​heart-themed advertising campaigns are among the most effective

B. sales circulars with coupons generate increased sales

Instead of relying on​ Debbie's college story to make a​ conclusion, you decide it is smarter to collect and analyze​ __________. A. a small sample of empirical data. B. a large amount of empirical data. C. a survey of other team​ members' anecdotes. D. a survey of anecdotes collected on the Internet.

B. a large amount of empirical data.

Which of the following statements regarding economic questions is not​ correct? A. The questions should be such that they can be answered with past data. B. The questions should be associated with some economic research. C. The questions must have implication on​ individuals' choices and their budget. D. The questions should contribute to the welfare of society.

C. The questions must have implication on​ individuals' choices and their budget.

All of the following statements about means and medians are​ true, except A. the mean is another term for average. B. a mean sample would gain more accuracy with more observations. C. the median is more skewed by extreme values. D. a median uses a mean with even number observations.

C. the median is more skewed by extreme values.

Professor Adams decides to teach his 10 students how the stock market works.​ Therefore, he plans to develop a virtual stock market for the class that includes five different shares. Students are given​ $50 each to invest in any of the five shares. This exercise helps the students understand the overall stock market investing process. Which of the following statements is true for the above​ case? A. It is not a​ model, though its predictions can be checked with empirical evidence. B. It is a model.​ However, its predictions cannot be checked with empirical evidence. C. It is not a​ model, and its predictions cannot be checked with empirical evidence. D. It is a​ model, and its predictions can be checked with empirical evidence.

D. It is a​ model, and its predictions can be checked with empirical evidence.

Which of the following is not an important property of an economic​ model? A. It is based on a theoretical construct. B. It predicts what would happen on average. C. It makes predictions that can be tested with data. D. It predicts actual results over half the time.

D. It predicts actual results over half the time.

Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on​ customers' gasoline purchasing habits when they notice price increases. You suggest that the team​ _____________. A. develop a model that allows for scenario analysis. B. collect competitor data. C. utilize artificial intelligence to model human behavior. D. design and execute an experiment.

D. design and execute an experiment.

Suppose you are on a date with an economics​ major, and you want to impress them by asking good economic questions. Two characteristics of a good economic question​ are:

It is important to individuals or society. It can be answered.

Some studies have found that people who owned guns were more likely to be killed with a gun. On this evidence​ alone, do you think there is conclusive evidence in favor of stricter gun control​ laws? _________ because it is possible that the studies may be confusing __________ with __________.

No, correlation, causation

Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client wants to know what will happen to gasoline demand if it increases gasoline prices by one cent higher than its nearest competitors. One of the members of your consulting​ team, Debbie, shares that one time in college she stopped buying gasoline from a service station that was one cent more expensive. Based on this​ story, should you conclude that demand will fall to zero if the client raises gas prices by one​ cent? ___________, since this is an ________​, which can lead to _________ .

No​, argument by anecdote​, which can lead to wrong conclusions.