Micro midterm chapter 2

Which is the best statement about the way economists study the economy?

• They study the past, but do not try to predict the future.

  
  

• They devise theories, collect data, then analyze the data to test the theories.

  
  

• They use a probabilistic approach based on correlations between economic events.

  
  

• They use controlled experiments in much the same way a biologist or physicist does.

  
  

The scientific method can best be defined as

• the use of modern electronic testing equipment in understanding the world.

  
  

• the use of controlled experiments in understanding the way the world works.

  
  

• the dispassionate development and testing of theories about how the world works.

  
  

• finding evidence to support preconceived theories about how the world works.

  
  

Albert Einstein once made the following observation about science:

• “In order to understand science, one must rely solely on abstraction.”

  
  

• “The whole of science is nothing more than an interesting intellectual exercise.”

  
  

• “The whole of science is nothing more than the refinement of everyday thinking.”

  
  

• “In order to understand science, one must transcend everyday thinking.”

  
  

Sir Isaac Newton’s development of the theory of gravity after observing an apple fall from a tree is an example of:

• controlled experiments used to develop scientific theories.

  
  

• being in the right place at the right time.

  
  

• an idea whose time had come.

  
  

• the interplay between observation and theory in science.

  
  

The use of theory and observation is more difficult in economics than in sciences such as physics due to

• the difficulty in actually performing an experiment in an economic system.

  
  

• the difficulty in devising an economic experiment.

  
  

• the difficulty in evaluating an economic experiment.

  
  

• all of the above.

  
  

Because it is difficult for economists to use experiments to generate economic data,

• they do without.

  
  

• they use whatever data the world gives them.

  
  

• they make up the data.

  
  

• . they ask policymakers to conduct experiments for them.

  
  

The most common data for testing economic theories come from

• carefully controlled and conducted laboratory experiments.

  
  

• centrally planned economies.

  
  

• traditional economies.

  
  

• historical episodes of economic change.

  
  

Economists make assumptions

• to diminish the chance of wrong answers.

  
  

• to make certain that all necessary variables are included.

  
  

• because all scientists make assumptions.

  
  

• to make the world easier to understand.

  
  

The art of scientific thinking involves

• deciding which assumptions to make.

  
  

• understanding every scientific field - physics, biology and economics.

  
  

• knowing how the major organs of the human body work.

  
  

• being able to mathematically express natural forces.

  
  

If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods,

• the theory can be useful only in situations involving two countries and two goods.

  
  

• it is a total waste of time, since the actual world has many countries trading many goods.

• the theory can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

  
  

• the theory can be useful in the classroom, but has no use in the real world.