Question 1

(Last Word) The fallacy of composition is essentially the error of
A)omitting relevant variables in constructing a model.
B)reasoning from the general to the particular.
C)confusing cause and effect in economic relationships.
D)generalizing from the particular to the general.Topic: Theories, Principles, and Models

Accepted Answer

The fallacy of composition occurs when one assumes that what is true for a part is also true for the whole, which is generalizing from the particular to the general.

Question 2

(Consider This) The assertion by economists that "there is no free lunch"
A)is contradicted by the presence of free goods offered by firms.
B)applies to goods that have prices, not to goods given away free by firms.
C)remains true even for goods given away free by firms.
D)applies to agricultural goods but not to manufactured goods.

Accepted Answer

The assertion by economists that "there is no free lunch" means that everything has a cost, and that even if something appears to be free, someone somewhere has to pay for it. This applies even to goods given away for free by firms, as the cost of producing and distributing those goods is still being borne by the firm, and ultimately by the consumers who are buying other products from that firm. Therefore, option C is the correct choice.

Question 3

(Consider This) Consumers might leave a fast-food restaurant without being served because
A)they are misinformed about the marginal cost and marginal benefits of the food being served.
B)they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.
C)the environment is not conducive to a rational choice.
D)the lines waiting for service are not of equal length.

Accepted Answer

Consumers might leave a fast-food restaurant without being served because they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit. This means that the cost of waiting in line and paying for the food outweighs the benefits of actually eating the food. Therefore, they choose to leave without being served.

Question 4

(Last Word) Which of the following best illustrates the post hoc, ergo propter hoc fallacy?
A)Because it was 90 degrees today, I worked up a sweat playing tennis.
B)I took the day off work to go to the beach, and that's why it rained.
C)Because it rained at the football game, my new sweater got wet.
D)Because I have studied diligently this semester, my grade average has improved.

Accepted Answer

This choice suggests that the rain was caused by taking the day off, implying a causal relationship based solely on the sequence of events, which is the essence of the post hoc fallacy.

Question 5

(Last Word) The post hoc, ergo propter hoc fallacy suggests that
A)positive statements are always followed by normative judgments.
B)positive statements can never be proven true or false.
C)if one acts on one's expectations, those expectations will always be fulfilled.
D)cause and effect can be determined merely by observing the sequence of events.

Accepted Answer

The post hoc, ergo propter hoc fallacy is a logical fallacy that assumes that if one event occurs after another, then the first event must have caused the second, without any further evidence of causation.

Question 6

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined.Which of the following would best explain Japan's economic growth despite having a smaller population?
A)immigration of new workers into Japan
B)advancements in technology that make labor more productive
C)reduced employment of capital because fewer workers are available to use it
D)greater consumption of goods imported from other countries

Accepted Answer

Advancements in technology have made labor more productive, which has allowed Japan to increase output and economic growth despite a declining population.

Question 7

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when
A)tuition expenses are high and rising.
B)the opportunity cost of attending college is extraordinarily high.
C)the price of textbooks is high and rising.
D)the economy is growing rapidly and jobs are plentiful.

Accepted Answer

The advice to go to college, stay in college, and earn a degree is generally sound and proven to lead to higher earning potential over a person's lifetime. However, there are exceptions to this rule when the opportunity cost of attending college is extraordinarily high. This could occur if someone has a guaranteed job opportunity that does not require a college degree, has family or other personal obligations that require them to work instead of attend college full-time, or if the cost of tuition and fees is simply too high for them to justify the investment. In these cases, it may make more sense for the individual to forego college and pursue other options for career development and success.

Question 8

(Consider This) In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods.The government's decision reflects their assessment that
A)the marginal benefits of additional defense goods outweighed the marginal cost.
B)the marginal cost of additional defense goods outweighed the marginal benefit.
C)there cannot be too many defense goods.
D)civilian goods are not worth producing.

Accepted Answer

The government's decision to allocate more resources toward defense goods indicates that they believed the additional benefits of increased defense capabilities were greater than the costs associated with producing those goods.

Question 9

(Last Word) A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of
A)loaded terminology.
B)the "after this, therefore because of this fallacy."
C)the fallacy of composition.
D)the economic perspective.

Accepted Answer

The phrase "greedy price gougers" uses emotionally charged language to provoke a reaction, which is an example of loaded terminology.

Question 10

(Last Word) If variables X and Y are positively correlated, this means that
A)X is the cause of Y.
B)Y is the cause of X.
C)causation necessarily exists, but we don't know whether X or Y is the cause.
D)causation may or may not exist between X and Y.

Accepted Answer

Correlation does not imply causation; X and Y may be related without one causing the other.

Question 11

(Consider This) Free products offered by firms
A)may or may not be free to society but are never free to individuals.
B)may or may not be free to individuals but are never free to society.
C)are produced and distributed at no cost to society.
D)are usually items nobody wants.

Accepted Answer

Free products offered by firms may seem free to individuals, but they come at a cost to society in terms of resources, production, and distribution. Therefore, they are not truly free to society. However, they may or may not actually be free to individuals, depending on the specific product and situation.

Question 12

A country can achieve some combination of goods outside its production possibilities curve by
A)idling some of its resources.
B)specializing and engaging in international trade.
C)buying the debt (bonds and stocks) of foreign nations.
D)producing more capital goods and fewer consumer goods.

Accepted Answer

By specializing in producing the goods that it has a comparative advantage in and engaging in international trade, a country can obtain goods that it cannot produce itself because they lie outside its production possibilities curve. This allows the country to consume a combination of goods that are unattainable by using only its own resources.

Question 13

(Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of
A)the fallacy of composition.
B)the economic perspective.
C)loaded terminology.
D)marginal analysis.

Accepted Answer

The caller uses loaded terminology by employing emotionally charged labels to describe the protesters, which can influence the audience's perception.

Question 14

(Last Word) The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience.This assertion illustrates the
A)"after this, therefore because of this" fallacy.
B)correlation fallacy.
C)fallacy of composition.
D)fallacy of limited decisions.

Accepted Answer

The fallacy of composition occurs when one assumes that what is true for an individual is also true for a group. In this case, what is safest for one person (running for the nearest exit) may not be safest for a large audience, as it could lead to chaos and danger.

Question 15

(Last Word) Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?
A)the law of large numbers
B)the law of averages
C)the post hoc, ergo propter hoc fallacy
D)the fallacy of composition

Accepted Answer

The post hoc, ergo propter hoc fallacy refers to the mistaken belief that if one event follows another, the first event must have caused the second. This is directly related to the problem of distinguishing cause and effect.

Question 16

(Consider This) A direct cost of going to college is
A)tuition, while an indirect cost (opportunity cost) is books and other supplies.
B)forgone income while in college, while an indirect cost (opportunity cost) is tuition.
C)tuition, while an indirect cost (opportunity cost) is forgone income while in college.
D)books and supplies, while an indirect cost (opportunity cost) is food and housing.

Accepted Answer

The direct cost of going to college is tuition, which is a fee charged by educational institutions for enrollment. The indirect cost or opportunity cost is forgone income while in college, as students are not able to work full-time jobs while pursuing their education. Books and supplies, food, and housing are also indirect costs, but they are not the best option for this question, as the question asks for only one indirect cost.

Question 17

(Consider This) The economic perspective used in customer decision making at fast-food restaurants is reflected in
A)customers selecting the shortest line.
B)decisions for which marginal costs exceed marginal benefits.
C)all customer lines tending to be of different lengths.
D)irrational purchasing of high-fat-content food.

Accepted Answer

The answer of (Consider This) The economic perspective used in...

Question 18

(Last Word) "The government deregulated the electricity industry in California, and a shortage of electricity soon occurred.It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the
A)fallacy of composition.
B)post hoc, ergo propter hoc fallacy.
C)use of loaded terminology.
D)law of averages.

Accepted Answer

The statement assumes that because the shortage occurred after deregulation, the deregulation must have caused it, which is an example of the post hoc, ergo propter hoc fallacy.

Question 19

(Consider This) At fast-food restaurants
A)consumers enjoy complete and accurate information.
B)decisions are usually made by trial and error.
C)decisions entail comparisons of marginal costs and marginal benefits.
D)benefits always exceed costs.

Accepted Answer

Decisions at fast-food restaurants often involve comparing the marginal costs (such as price and calories) and marginal benefits (such as taste and convenience) of different menu items. This can help consumers to make informed choices that align with their preferences and objectives. However, there may still be some trial and error involved in finding the best option. It is not necessarily true that benefits always exceed costs or that consumers enjoy complete and accurate information.

Question 20

(Last Word) The post hoc fallacy and the correlation problem both relate to
A)the calculation of marginal costs and marginal benefits of any economic activity.
B)the issue of determining causation.
C)the frequent inability of households and businesses to behave rationally.
D)the trade-off problem associated with competing goals.

Accepted Answer

Both the post hoc fallacy and the correlation problem are related to the issue of determining causation, as they involve incorrectly inferring a causal relationship from a sequence of events or a correlation between variables.

Quiz 1: Limits, Alternatives, and Choices

(Last Word) The fallacy of composition is essentially the error of

(Consider This) The assertion by economists that "there is no free lunch"

(Consider This) Consumers might leave a fast-food restaurant without being served because

(Last Word) Which of the following best illustrates the post hoc, ergo propter hoc fallacy?

(Last Word) The post hoc, ergo propter hoc fallacy suggests that

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined.Which of the following would best explain Japan's economic growth despite having a smaller population?

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when

(Consider This) In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods.The government's decision reflects their assessment that

(Last Word) A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of

(Last Word) If variables X and Y are positively correlated, this means that

(Consider This) Free products offered by firms

A country can achieve some combination of goods outside its production possibilities curve by

(Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of

(Last Word) The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience.This assertion illustrates the

(Last Word) Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

(Consider This) A direct cost of going to college is

(Consider This) The economic perspective used in customer decision making at fast-food restaurants is reflected in

(Last Word) "The government deregulated the electricity industry in California, and a shortage of electricity soon occurred.It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

(Consider This) At fast-food restaurants

(Last Word) The post hoc fallacy and the correlation problem both relate to