Heterodox Economics Quiz 1

Which of the following statements best characterizes the idea of "the invisible hand" in classical economics: A) The person who ended up paying a tax was not the person on whom the tax was placed -- for example, a tax on wages would end up being paid by capitalists in the form of lower profits B) Even though capitalists were motivated by self interest, their actions helped others in society, by causing faster economic growth and the production of goods most valued by consumers C) Workers did not realize that having more children would contribute to the poverty of the working class D) Government policy should be designed to "trick" people into behaving in the public interest without them realizing it, for example, high taxes on alcoholic beverages.

B) Even though capitalists were motivated by self interest, their actions helped others in society, by causing faster economic growth and the production of goods most valued by consumers

According to Professor Biddle (who narrates the slides) a good reason for studying heterodox approaches to economics is: A) Mainstream economists failed to predict the Great Recession of 2008 B) Studying the ideas of the heterodox economists helps one to gain a better understanding of the limitations of the mainstream approach. C) Only heterodox economics offers a convincing and helpful of social problems like racism, sexism, and other forms of oppression D) It will not be long before most educated people realize that the heterodox economists have a better understanding of how the economy works

B) Studying the ideas of the heterodox economists helps one to gain a better understanding of the limitations of the mainstream approach.

Which of the following policies would a typical classical economist recommend? A) A tax on profits B) Subsidized school tuition for the children of the poor C) Nationalization of land D) Taxes on imported grain to encourage self-sufficiency in food production E) A and B F) None of the above

B) Subsidized school tuition for the children of the poor

Which of the following was not an important part of classical economic theory? A) The Malthusian population theory B) The law of diminishing marginal utility C) The law of diminishing returns D) The idea that prices of goods and services tended to equal their costs of production E) The theory of comparative advantage

B) The law of diminishing marginal utility

Heterodox economists differ from orthodox economists over A) The scope of economics B) The method of economics C) The best assumptions to make when creating economic theory D) All of the above E) A and B

D) All of the above

For a classical economist, capital accumulation: A) Refers to the fact that money invested in a bank grows in value B) leads to increasing demand for labor C) occurs at a faster rate when profits are higher D) B and C E) All of the above

D) B and C

In comparison to the classical economists, the marginalist economists A) Were more interested in making economic science relevant to policy B) Made more use of empirical data in developing their theories C) Had a broader view of the scope of economics D) Developed more abstract theories E) All of the above

D) Developed more abstract theories

Which of the following questions would a mainstream economist consider to be within the scope of economics? A) Why has the average age of first marriage been rising in the United States and Europe? B) Why is the unemployment rate so much higher in Spain than in Germany? C) Why does the average lawyer earn more than the average nurse? D) Why has the crime rate in the United States been falling since 1992? E) All of the above

E) All of the above

Which of the following statements comparing Classical economics to modern mainstream economics is correct? A) Classical economists assumed that most human behavior was a result of habits, while modern mainstream economics assumes that people make reasoned choices based on relevant information B) Classical economists believed that grouping people into social classes was a useful starting point for analyzing economic activity, while modern mainstream economists do not. C) The classical and definition of idea of "capital" is different from the modern mainstream definition of "capital". D) Classical economists believed that the price of a good would tend to equal its cost of production when there was competition, but modern mainstream economists no longer believe this E) B and C F) All of the above

E) B and C

The "models" of modern mainstream economics A) Are usually computer programs that simulate what happens in the real economy B) Are much too mathematically complicated to teach to undergraduates. C) Are representations of how individuals make choices, and of the social consequences of those choices D) Typically characterize an equilibrium of forces E) C and D F) All of the above

E) C and D

Alfred Marshall took the position that A) The marginalist theory of demand did not contradict earlier classical theories of how markets worked B) mathematical tools would help to clarify and improve the doctrines of the classical school, rather than refuting them C) The classical doctrine that price was equal to cost of production in the long run did not contradict the marginalist emphasis on demand, which played a more important role in the short run D) The marginalists' unified theory of value and distribution, in which all values were ultimately determined by utility, was the correct theory of value. E) A and C F) All of the above

F) All of the above

T/F: Classical economists believed that free markets could effectively function to allocate resources efficiently without the government needing to take any action.

False

T/F: Modern mainstream economists consider it very important that an economic theory be based on assumptions that are realistic.

False Economists do not consider realism of assumptions to be an essential feature of an economic model. They focus on whether the predictions of the model are accurate.

T/F: The marginalists were particularly interested in analyzing the factors leading to changes in preferences and technological knowledge over the long run.

False In constructing their theory of value, which was the focus of the marginalists' theoretical efforts, they assumed tastes and technologies to be fixed, that is, they made no effort to analyze changes in these factors.

T/F: Since the 1960s the scope of mainstream economics has narrowed considerably, as economists have focused on trying to answer a much narrower range of questions, but answer those questions more rigorously and accurately.

False The scope of economics has broadened greatly since the 1960s, to include almost any phenomenon that results from human choice.

T/F: Classical economists believed that the root cause of the tendency for workers' wages to wages to remain near subsistence levels was that capitalists had greater bargaining power when negotiating wages with workers.

False Worker's wages tended towards subsistence, because when wages were above subsistence, the workers would have more children and increase the supply of labor in the subsequent generation, driving down the wage.

T/F: The marginalists were the only group of economists to oppose the orthodoxy of classical political economy in the second half of the 1800s.

False Socialists (including Karl Marx) and "historicist" economists also opposed the classical orthodoxy during this time

T/F: A heterodox school's views about the "scope" of economics are its views about what topics or questions economists should be studying.

True

T/F: Classical Economists analyzed economic activity in part out of a desire to help the government to formulate better economic policies.

True

T/F: Mainstream economists accept that many of the criticisms of the heterodox economists have some validity

True Mainstream economists accept that there are problems with their approach, but believe it to be better than the approaches used by the heterodox schools