Question 1

Consider the functional relationship between two variables,X and Y.If Y is an increasing function of X,then

Accepted Answer

If Y is an increasing function of X, it means that as X increases, Y increases as well. Therefore, option B is the correct answer.

Question 2

FIGURE 2- 3 
-Refer to Figure 2- 3.At X2 on curve A,the

Accepted Answer

At X2 on curve A, the slope of the curve is zero, indicating a point of inflection or a local maximum/minimum.

Question 3

If the graph of a function is a horizontal line,the slope of this line is

Accepted Answer

A horizontal line has no vertical change, and therefore its slope is zero.

Question 4

Economics is scientific because

Accepted Answer

Economics is considered scientific because economists test hypotheses by using empirical evidence, which involves analyzing real-world data to validate or refute economic theories.

Question 5

Using the scientific method to approach an economic issue involves

Accepted Answer

The scientific method involves building a theory to explain the issue, then testing the theory to determine if it can be refuted by evidence. This involves using empirical data to test and refine the theory, which can be done through observation, measurement, and experimentation. Formulating normative statements about the issue (A) is not a part of the scientific method, as normative statements involve opinions or value judgments about what ought to be, rather than what is. Considering stock and flow variables (B) is a common element in economic analysis, but it is not specifically related to the scientific method. Finding the correct data to validate the theory (C) is a key step in the scientific method, but it is only one part of the process. Experimentation (E) can be a valuable tool in validating economic theories, but it is not always possible or practical to conduct controlled experiments in the social sciences.

Question 6

Of the following,which is the most important characteristic of a successful theory?

Accepted Answer

While it would be ideal for all assumptions to be true and for a theory to explain all economic behavior, these are often unrealistic expectations. The most important characteristic of a successful theory is its ability to predict behavior reasonably accurately. This allows economists to use the theory to make informed decisions and develop policies.

Question 7

When an increase in one variable is associated with a decrease in a second variable,the two variables are

Accepted Answer

When an increase in one variable is associated with a decrease in a second variable, the two variables are said to be negatively related. This means that as one variable increases, the other variable decreases, and vice versa. This is also sometimes referred to as an inverse relationship.

Question 8

The table below shows hypothetical per- minute cell phone charges for "pay- and- talk" service over several years. $$\begin{array} { | l | l | } 
\hline 2008 & 0.55 \
\hline 2009 & 0.50 \
\hline 2010 & 0.40 \
\hline 2011 & 0.35 \
\hline 2012 & 0.25 \
\hline
\end{array}$$ TABLE 2- 2
-Refer to Table 2- 2.Assume that 2008 is used as the base year,with the index number = 100.The value of the index number in 2012 is

Accepted Answer

The index number is calculated by dividing the charge in 2012 by the charge in 2008 and then multiplying by 100: (0.25 / 0.55) * 100 = 45.45.

Question 9

The table below shows hypothetical tuition costs at a Canadian university. $$\begin{array} { | c | c | } 
\hline \text { Year } & \text { Tuition } \
\hline 2008 & \$ 5000 \
\hline 2009 & \$ 5050 \
\hline 2010 & \$ 5100 \
\hline 2011 & \$ 5150 \
\hline 2012 & \$ 5200 \
\hline
\end{array}$$ TABLE 2- 1
-Refer to Table 2- 1.Assume that 2008 is used as the base year,with the index number = 100.The value of the index number in 2010 is calculated as follows:

Accepted Answer

The index number is calculated by dividing the current year's value by the base year's value and multiplying the result by 100. In this case, the base year is 2008 and the current year is 2010. So, the index number for 2010 is (5100/5000) × 100 = 102.

Question 10

Disagreements over positive statements

Accepted Answer

Disagreements over positive statements can be resolved by appealing to the facts and evidence. It is important to base arguments on objective evidence and not personal opinions or emotions in order to come to a resolution.

Question 11

On a coordinate graph,what is the X intercept of the function X = 60 + 3Y?

Accepted Answer

The answer of On a coordinate graph,what is the X...

Question 12

Suppose an economist tells you that the unemployment rate in Canada last year was 7.8%.This is an example of a(n)statement.

Accepted Answer

This is a factual statement about the unemployment rate in Canada, providing a description of reality rather than a statement about what ought to happen (normative) or a measure of the impact of a particular action (induced or imputed). It is also not related to autonomous actions or events. Therefore, this is an example of a positive statement.

Question 13

Choose the statement that best characterizes an economic theory.An economic theory

Accepted Answer

An economic theory should be judged on its ability to explain and predict real-world phenomena, which means it should be tested against empirical data to evaluate its accuracy and usefulness. This is the essence of the scientific method that applies to all social sciences. The other options are either too narrow or too broad in their criteria for evaluating economic theories. For example, option B implies that economic theories must have realistic assumptions, but this is not always possible, especially in models that simplify or abstract from reality to capture essential features. Option C suggests that mathematical complexity improves predictive power, but this is not always true, and sometimes simple models outperform complex ones. Option D assumes that human behavior is always rational, which is not realistic or necessary to make sense of economic phenomena. Finally, option E suggests that logical consistency is sufficient for an economic theory to be useful, but this is not the case unless the theory also conforms to reality.

Question 14

FIGURE 2- 3 
-At the minimum or the maximum of the graph of a non- linear function (with x on the horizontal axis and y on the vertical axis)the marginal response of y to a small change in x is

Accepted Answer

At the minimum or maximum of a graph of a non-linear function, the slope of the tangent (derivative) is zero, indicating no change in y for a small change in x.

Question 15

Suppose economists at the Department of Finance in Ottawa employ an economic model that predicts the effects of an increase in the GST.After implementation of the change,researchers find that the empirical data rejects the prediction.They are likely to

Accepted Answer

When faced with empirical data that rejects a predicted outcome from an economic model, economists are likely to modify the theory in light of the new empirical knowledge. This is because empirical evidence is crucial for validating economic theories and models, and any conflict between the two must be addressed through modification of the theory. Rejecting the empirical data or ignoring it is not a viable option, and modifying the prediction or modifying the data itself would not address the underlying problem with the original theory.

Question 16

A scatter diagram

Accepted Answer

A scatter diagram plots a series of observations, showing the relationship between two variables. It does not necessarily depict a theoretical relationship, nor is it limited to time series or cross-sectional data. The purpose of a scatter diagram is to visually display the strength and direction of the relationship between two variables.

Question 17

Suppose that a particular theory predicts that on Monday,Wednesday,and Friday the stock market will rise and that on Tuesday and Thursday the stock market will fall.If an economist tests this theory and finds that over a six- month period the theory predicts accurately,the economist would likely say that the theory

Accepted Answer

The economist would likely say that the theory is not rejected by the evidence because the observed data over the six-month period aligns with the predictions made by the theory. However, this does not prove the theory correct, as further testing and evidence would be needed for such a conclusion.

Question 18

If we seek to explain the number of seats sold on a particular air route,say Toronto to Halifax,over a one- year period,we would consider many variables.Which of the following variables would be endogenous to our theory?

Accepted Answer

The number of airline seats sold on this route is directly related to the demand for air travel on this route, making it endogenous to our theory. The other variables may have some influence on the number of seats sold, but they are not directly related to the demand for air travel on this route.

Question 19

When it is said that variable A depends on variable B,then A is

Accepted Answer

When we say that variable A depends on variable B, it means that the value of A is determined by the value of B. In other words, A is a function of B.

Question 20

Negatively related variables change such that as the value of one variable

Accepted Answer

When two variables have a negative relationship, it means that as the value of one variable increases, the value of the other variable decreases. Therefore, option A is the correct choice.

Quiz 2: Economic Theories,data,and Graphs