Homework Ch 2
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
Which of the following statements would imply positive correlation? A. Countries with lower tax rates have higher productivity. B. Countries with higher tax rates have lower productivity. C. Countries with lower tax rates have superior government services. D. Countries with higher tax rates have more government services.
D. Countries with higher tax rates have more government services.
What is meant by randomization in the context of an economic experiment? A. Eonomic experiments are not arranged in a logical sequence. B. Group numbers are arranged in a nonsequential order. C. Subjects are assigned to control and test groups by noneconomic factors such as race. D. Subjects are assigned by chance, rather than by choice, to a group.
D. Subjects are assigned by chance, rather than by choice, to a group.
The 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, $19,000, $29,000, $39,000, and $51,000. Country A's median income is ___________, and its mean income is ___________. (Round your responses to the nearest dollar.) Suppose country B also has five families. Their incomes are $11,000, $19,000, $29,000, $39,000, and $150,000. Country B's median income is __________, and its mean income is ___________. (Round your responses to the nearest dollar.) Country ____ has greater income inequality. 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. A. Fallen, because means change less with standard deviation. B. Risen, because medians increase with variance but means do not. C. Risen, because means increase but medians decrease with income. D. Risen, because means change more with extreme values.
$29,000 $29,800 $29,000 $49,600 B D. Risen, because means change more with extreme values.
How does a natural experiment differ from a randomized one? A. A natural experiment uses existing variation, while a randomized experiment generates variation. B. A natural experiment generates variation, while a randomized experiment uses existing variation. C. Natural experiments are not influenced by omitted variables; randomized experiments contain omitted variables. D. A natural experiment is expensive, while a randomized experiment is cheap. Which type of experiment is likely to yield more accurate results? A. Natural, because there could be an omitted variable. B. Randomized, because a natural experiment may not be completely randomized. C. Natural, because there could be reverse causality. D. Randomized, because a natural experiment may be completely influenced by chance. 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. A. Natural, because seatbelt rules may be unrelated to road accident fatalities. B. Natural, because seatbelt rules may increase road accident fatalities. C. Randomized, because natural experiments with seatbelt rules may exist. D. Randomized, because seatbelt rules may be influenced by road accident fatalities.
A. A natural experiment uses existing variation, while a randomized experiment generates variation. B. Randomized, because a natural experiment may not be completely randomized. D. Randomized, because seatbelt rules may be influenced by road accident fatalities.
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 a model, and its predictions can be checked with empirical evidence. B. It is not a model, though its predictions can 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. However, its predictions cannot be checked with empirical evidence. 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 $13. However, in an actual stock market, it is generally noticed, when demand consists of 10% of all investors, a share price of $130 increases to $220 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. (Round your answer to the nearest percent.) 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 a simplified description of a theory. B. It makes hypotheses on empirical evidence. C. The outcomes of the model are used in comparison with the actual data. D. It is not always the exact replica of the data.
A. It is a model, and its predictions can be checked with empirical evidence. 30% 69% Inaccurate C. The outcomes of the model are used in comparison with the actual data. D. It is not always the exact replica of the data.
Which of the following is the best example of causation (versus correlation)? A. Oil prices go up and gasoline prices go up. B. Ice cream sales and the number of drownings. C. The groundhog sees its shadow and winter lasts longer. D. Women's skirts get shorter and the stock market goes up.
A. Oil prices go up and gasoline prices go up.
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. What tool would you employ to analyze the relationship between gasoline prices and consumer behavior? A. Accounting models. B. Economic models. C. Refining models. D. Fashion models. You should collect ___________ amount of data to create ____________ to test the ___________ indicated by the economic model.
A. Scientific method. B. Economic models. A large Empircial evidence Hypothesis
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. design and execute an experiment. B. utilize artificial intelligence to model human behavior. C. develop a model that allows for scenario analysis. D. collect competitor data. 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 ____________.
A. design and execute an experiment. Controlled experiment Natural experiment Treatment group Control group
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. No, because it is based on an incorrect assumption. C. Yes, it's possible that certain factors, such as the price of gas, were not included in the model. D. Yes, because it does not predict the outcome with 100 percent accuracy. 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. No, because it predicts the outcome of increased bus ridership on average. A. You should run a natural experiment by analyzing bus ridership and price changes.
How is the mean calculated from a series of observations? A. It is calculated as the product of all the different items divided by the number of items. B. The mean is the sum values of the observations divided by the number of observations. C. It is calculated as the difference of all the different items divided by the number of items. D. The mean is the median value of a set of observations. Suppose 1,357 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 ___________.
B. The mean is the sum values of the observations divided by the number of observations. 4,071
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
Causation implies ____________. A. if a and b occurred at the same time, then a was the cause of b. B. a and b are independent events. C. there is always correlation between two variables. D. a causes b if, because of a, b has occurred. An example of causation is ____________. A. when families eat dinner together, it decreases the risk of drug addiction for teens. B. eating more ice cream cones increases the number of drownings. C. if you work fewer hours, you will earn less money. D. when an NFL team wins the Super Bowl, stock markets close higher the following year.
D. a causes b if, because of a, b has occurred. C. if you work fewer hours, you will earn less money.
All of the following statements about means and medians are true, except A. a median uses a mean with even number observations. B. the mean is another term for average. C. a mean sample would gain more accuracy with more observations. D. the median is more skewed by extreme values.
D. the median is more skewed by extreme values.
Empiricism is a principle in economics that _________. A. collects data using the scientific method. B. gathers data using surveys. C. aggregates data to create graphs. D. uses data to test economic models.
D. uses data to test economic models.
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 to his question? A. Yes, the model includes all factors. B. Yes, the model includes every result from related academic papers and all industry expertise. C. No, since the economic convention is to limit inclusion to the top three variables. D. No, the model is a simplified representation of reality. Your client becomes critical of your "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this criticism? A. Even a simplified economic model can provide two standard deviations accuracy. B. Economic models are meant to exactly predict each and every outcome by using all variables. C. Even a simplified economic model can provide 99 percent accuracy. D. Economic models are meant to be approximations that predict what happens in most circumstances. He is still unconvinced about the reliability of using economic models to make business decisions. You can answer this concern by sharing that you will confirm the accuracy of the model by ___________ with ____________.
D. No, the model is a simplified representation of reality. D. Economic models are meant to be approximations that predict what happens in most circumstances. Testing its predictions Empirical data
The following data gives the respective salaries of the two top managers, two middle managers, and two first-line managers at a particular firm: $300,000, $270,000, $110,000, $95,000, $80,000, $70,000. We can conclude that the mean is ____________ than the median. Thus, the mean salary of all of the managers ____________ by the salary of the top managers. Which of the following statements is true in the case of an anecdotal argument? (Check all that apply.) A. It can lead to skeptical and misleading conclusions. B. It helps in judging a statistical relationship. C. It is appropriate when contradicting a blanket statement. D. It never has a counter example. Which of the following can be categorized as an anecdotal argument? (Check all that apply.) A. A researcher studies all of the students at New York University to find out current fashion trends among the freshman class of that university. B. John and Tina, the brightest students in the class, are very poor. Therefore, the conclusion is drawn that every bright student is poor. C. Alfred received a promotion when he became the father of a baby girl. Marshall lost his job when he became the father of a baby boy. Therefore, the conclusion is drawn that the gender of a newborn child is related to the fathers' job status. D. A random sample of 80% of the middle class in a particular town concludes a positive relationship between income and expenditure among the middle class of that particular town.
Greater than Is impacted A. It can lead to skeptical and misleading conclusions. C. It is appropriate when contradicting a blanket statement. B. John and Tina, the brightest students in the class, are very poor. Therefore, the conclusion is drawn that every bright student is poor. C. Alfred received a promotion when he became the father of a baby girl. Marshall lost his job when he became the father of a baby boy. Therefore, the conclusion is drawn that the gender of a newborn child is related to the fathers' job status.
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. You have assigned your staff member, Troy, to divide a group of survey participants into a treatment group and a control group. The intent is tell Group A that gas prices have increased, and group B will be told that gas prices have not changed. Participant members will then be surveyed about their purchasing habits. When you come back from lunch you notice how Troy has set up the groups: https://imgur.com/JvBysvV You tell Troy that __________ because the groups are ___________.
He has done a bad job Not randomly constructed https://imgur.com/a/VVkdjMZ
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: 1. ___________ 2. ___________
It is important to individuals or society It can be answered
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask ____________ and normative questions ask ____________. Which of the following examples do you provide as a normative question? A. How many people are on food stamps? B. What is the rate of change of disability enrollment? C. Should welfare be repealed? D. How much does welfare drive up the deficit? Which of the following do you provide as a positive question? A. How much is the national debt? B. Who is the most to blame for the national debt? C. Is passing on a high national debt to our children an immoral act? D. Will our high national debt lead to a breakdown of family values?
What is or what will be What ought to be C. Should welfare be repealed? A. How much is the national debt?
