Chapter 2 Study Plan
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?
No, because it predicts the outcome of increased bus ridership on average.
How do economists distinguish between models that work and those that don't?
They test their models against real-world data.
Which of the following is least likely to be a question or study of economic concern?
What is the motivation of the Red Cross?
Every day, you go to the gym to practice free throws. Each time, you attempt 10 shots. In the last four days, you have made 8, 7, 7, and 3 shots. Your average free-throw percentage is nothing percent. (Round your answer to 2 decimal places as needed)
62.50%
Which of the following statements would imply positive correlation?
Countries with higher tax rates have more government services.
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group. Subjects are assigned by chance, rather than by choice, to a group.
All the workers in the manufacturing sector in a particular country fit into one (and only one) of the following three categories: 31.5 percent are high school dropouts, 63.5 percent have a regular high school diploma, and the rest have a vocational training certificate. This could best be represented with a ▼
pie chart
A study was conducted examining diabetes rates by ethnicity. It was determined that Hispanics had the highest rate of diabetes. A conclusion might be made that people of Hispanic origin are the most inclined to be diabetic. However, that ▼ correlation could be the result of ▼ , given that other factors, such as diet, that were not considered.
positive, omitted variables
Empiricism is a principle in economics that _________.
uses data to test economic models.
All of the following are properties of the most exciting economic questions, except good questions
cannot be answered
Argument by anecdote ▼ be taken seriously. Anecdotes ▼ appropriate when contradicting a blanket statement.
should not, are
In general people with more education earn higher salaries. Economists have offered two explanations of this relationship. The human capital argument says that high schools and colleges teach people valuable skills, and employers are willing to pay higher salaries to attract people with those skills. The signaling argument says that college graduates earn more because a college degree is a signal to employers that a job applicant is diligent, intelligent, and persevering. The ▼ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. The ▼ implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
signaling argument, human capital argument
Your roommate admits that he was able to make 4 shots out of 10. Based on this information, it is ▼ suggestive but not conclusive both suggestive and conclusive neither suggestive nor conclusive that you are a better shooter than your roommate.
suggestive but not conclusive
All of the following statements about means and medians are true, except
the median is more skewed by extreme values
Give an example of a pair of variables that have negative correlation.
the number of winter coats sold and the temp. outside
Which of the following would not be considered a cause for concern with economic experiments?
the subjects are often randomized.
Some people go to a new gym because it just happened to open up right next to where they live.Some people go to a new gym because it just happened to open up right next to where they live.People who live farther away do not go to this new gym as much.People who live farther away do not go to this new gym as much.You compare fitness between these two groups.You compare fitness between these two groups. Using the concept of a natural experiment, which of the following statements is true about the scenario?
this a good natural experiment
How would you represent the following graphically? Income inequality in the United States has increased over the past 10 years. This could best be represented with a ▼
time series graph
An argument against evidence-based economics would be:
it is only an approximation, often based on averages.
Which of the following is not an important property of an economic model?
It predicts actual results over half the time
Suppose 4,248 people bought popsicles on a hot summer day. If the average number of popsicles that each person bought is 3, the number of popsicles sold that day is nothing.
12,744
This third principle of economics, supported by the scientific method, is:
empiricism
Demonstrate causation or correlation with the following examples: More ▼ and ▼ crime rates is likely to be ▼ . More ▼ and ▼ employment levels is likely to be ▼ .The length of women's skirts and stock market performance is likely to be ▼ .
police officers, lower, causation, economic growth, higher, causation, correlation
he mean and the median are closely related concepts. The median is the numerical value separating the higher half of your data from the lower half. You can find the median by arranging all of the observations from lowest value to highest value and picking the middle value (assuming you have an odd number of observations). Although the mean and median are closely related, the difference between the mean and the median is sometimes of interest. Suppose country A has five families. Their incomes are 11,000, 20,000, 30,000, 39,000, and 49,000. Country A's median income is $ nothing, and its mean income is $ nothing. (Round your responses to the nearest dollar.)
30,000 29,800
Suppose country B also has five families. Their incomes are $11 comma 00011,000, $20 comma 00020,000, $30 comma 00030,000, $39 comma 00039,000, and $151 comma 000151,000. Country B's median income is $ nothing, and its mean income is $ nothing. (Round your responses to the nearest dollar.)
30,000 50,200
An economist makes an assumption that each additional year of education causes future wages to rise by 10 percent. In this model, if a person with 12 years of education makes $22,500 per year, then a person with 4-year college degree would earn $ nothing per year. (Round your intermediate calculations to two decimal places.)
32,850
How does a natural experiment differ from a randomized one?
A natural experiment uses existing variation, while a randomized experiment generates variation.
Country ▼ has greater income inequality.
B
Which of the following is the best example of causation (versus correlation)?
Oil prices go up and gasoline prices go up.
Suppose you had to find the effect of seatbelt rules on road accident fatalities. Would you choose to run a randomized experiment or would it make sense to use natural experiments here? Explain.
Randomized, because seatbelt rules may be influenced by road accident fatalities.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better.
How is the mean calculated from a series of observations?
The mean is the sum values of the observations divided by the number of observations.
Which of the following is not true about economic models?
They are not useful, since they do not include all variables.
Suppose you come across a study that has discovered a link between reading books and life expectancy: People who read more books live longer. Which of the following correlations might exist between reading books and life expectancy even though there is no direct causal link between them?
Wealthy individuals who can afford to spend more time reading can also afford better medical care
How would you test this model?
You should run a natural experiment by analyzing bus ridership and price changes.
As the text explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is ____________.
a logical cause-and-effect relationship.
To say that economists use the scientific method means that they are using ___________.
an ongoing process to develop models of the world and then test and evaluate those models.
The median income of a household in Alabama was $43,464 in 2012 and the median income of a household in Connecticut was $64,247 in 2012. This could best be represented with a ▼ .
bar graph
An experiment would be conducted to determine ▼ among the chosen variables. Subjects should be assigned ▼ to either a test or control group in order to get the most unbiased comparison.
causation, randomly
You decide to run an experiment. You invite 20 friends to a party. You randomly select 10 friends and tell them that there will be free food: most of them show up to your party. For the other 10 friends you do not mention the free food: none of these friends show up. Based on the correlation in your data and also assuming that the correlation is not spurious, you conclude that free food causes people to come to parties. Given this information, it can be concluded that ▼ .
correlation implies causation
The scientific method uses ▼ for setting forth predictions and ▼ to support or deny them. It is more important for a model to be ▼ than ▼ .
hypotheses, data, usable, accurate
This chapter discussed natural and randomized experiments. Which of the following is not a characteristic of a natural experiment?
it is an inferior approach to a randomized method
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
Which type of experiment is likely to yield more accurate results?
randomized, because a natural experiment may not be completely randomized
Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain.
risen, because means change more with extreme values
Which of the following statements, confirmed by empirical research, would you be most likely to trust?
sales circulars with coupons generate increased sales
