Question 1

When speed boat sales rise, the city of Las Vegas takes in more revenue. The omitted common variable between these outcomes is likely to be:

Accepted Answer

Increased disposable income is most likely the common variable between the rise in speed boat sales and the increase in revenue for the city of Las Vegas, as individuals with higher disposable incomes are likely to have more money to spend on leisure activities such as purchasing a speed boat and traveling to Las Vegas. The other options do not have a clear connection to either the sale of speed boats or the revenue of Las Vegas.

Question 2

A journal reports that students who attend private schools have higher test scores. Which of the following is an example of an omitted variable that could explain this correlation?I. Parents' education levelII. Socio-economic statusIII. Private school tuition

Accepted Answer

Both parents' education level and socio-economic status could potentially explain the correlation between attending a private school and having higher test scores. Private school tuition, on the other hand, is not an omitted variable as it is directly related to attending a private school.

Question 3

Suppose researchers are interested in the health effects of diet soda. It has been observed that individuals who consume diet soda are more likely to be overweight. Which of the following describes how reverse causation could explain this correlation?

Accepted Answer

Reverse causation could explain the observed correlation between diet soda consumption and overweight if individuals who wish to lose weight choose to drink diet soda. In this case, being overweight would not be the cause of consuming diet soda, but rather a factor that leads individuals to choose diet soda as a potential solution to their weight loss goals. Options A and C do not provide a clear explanation of how reverse causation could explain the correlation. Option D is incorrect as not all of the options could be correct.

Question 4

Suppose that out of the two cities that send football teams to the Super Bowl, the city with the lowest unemployment rate wins 70 percent of the time. What does this imply?

Accepted Answer

The fact that the city with the lowest unemployment rate wins 70 percent of the time implies a positive correlation between Super Bowl wins and low unemployment rates. It suggests that cities with better employment conditions tend to have better football teams, but it doesn't necessarily mean that richer cities always have better football teams or that the condition of ceteris paribus is present in the winning cities. There is no evidence given to suggest a negative correlation between Super Bowl wins and low unemployment rates.

Question 5

When the unemployment rate rises, college enrollment increases as workers seek to expand training. This is an example of:

Accepted Answer

This scenario illustrates both correlation and causation because the increase in unemployment rate (cause) leads to an increase in college enrollment (effect), showing a direct relationship between the two variables.

Question 6

When toilet paper sales increase, quarterly economic growth rates tend to rise. This is an example of:

Accepted Answer

Correlation without causation means that two variables may show a relationship, but one does not cause the other. In this example, it is unlikely that toilet paper sales directly cause economic growth rates to rise. There may be other variables at play that are driving both trends, such as consumer confidence or changes in government policies. Therefore, the correlation between toilet paper sales and economic growth rates is not indicative of a causal relationship.

Question 7

When the price of milk rises, there is no change in the amount of dog food purchased. This is an example of:

Accepted Answer

This scenario demonstrates that the two goods, milk and dog food, are uncorrelated. The price of milk rising does not affect the demand for dog food, indicating that the two items are not economically related.

Question 8

The statement "People who drink coffee tend to wake up early" implies that:

Accepted Answer

The statement implies a positive correlation between drinking coffee and waking up early. It does not state that drinking coffee causes people to wake up early or vice versa. Therefore, the best choice is C, which reflects a positive correlation.

Question 9

In the past, there was a strong correlation between ice cream consumption and polio diagnoses in children. However, this was shown not to be a causal relationship by:

Accepted Answer

A strong correlation between two variables does not necessarily indicate a causal relationship. Identifying a common underlying omitted variable can explain the correlation and eliminate the possibility of a causal relationship.

Question 10

When two variables have been observed to have a tendency to occur at the same time, we can say there is ______ but not necessarily ______.

Accepted Answer

When two variables have been observed to have a tendency to occur at the same time, we can say there is correlation but not necessarily causation. This means that just because two variables are correlated, it does not necessarily mean that one causes the other. There can be other factors at play that influence both variables. Therefore, Option B is the correct answer. Option A, C, and D are incorrect as they do not accurately describe the relationship between two variables that are observed to have a tendency to occur at the same time.

Question 11

As corn prices rise, salsa sales tend to fall. This is an example of:

Accepted Answer

This is an example of a negative correlation, meaning that as the price of corn rises, the demand for salsa decreases. This is because corn is a key ingredient in many salsa recipes, so as the price of corn increases, the cost of producing salsa also increases, leading to higher prices for the consumer and potentially decreasing demand.

Question 12

Consider two neighbors who each run a small business. Juan grows and sells vegetables. Amber grows and sells flowers. Currently, Juan uses a herbicide on his vegetables, because he can grow more crops with the use of herbicide. Specifically, he earns $1,500 more during the years when he uses herbicide. Amber's flower farm is harmed by Juan's use of herbicide because it drifts to her farm and kills $3,000 worth of flowers each year. Which would be an efficient solution to this problem?

Accepted Answer

This solution creates an incentive for Juan to stop using herbicide while compensating him for the loss in income. It also ensures that Amber is fairly compensated for the harm caused to her business. The government ban on herbicide (option A) would be too extreme and may not necessarily be the most efficient solution. Selling the flower business (option B) would be unfair to Amber and may not solve the problem in the long run. Lastly, the current situation is not efficient as it creates a negative externality for Amber's business.

Question 13

You read a news article that states "More people purchase ChapStick after the weather report predicts a windy week." Which of the following statements is true?

Accepted Answer

The statement indicates a positive correlation between the prediction of a windy week and the purchase of ChapStick, suggesting that people buy more ChapStick after hearing the forecast. Therefore, option C is correct. Option A is incorrect because a negative correlation signifies that the opposite occurs, i.e., people buy less ChapStick after the announcement of a windy week. Option B does not apply because the statement does not suggest a causal relationship between the two variables, but only a correlation. Option D is incorrect because the statement is an empirical observation rather than a normative statement expressing values or opinions.

Question 14

A news article reports that students who take SAT preparation courses tend to have higher test scores. Which of the following describes an omitted variable that could explain this correlation?I. Parents with more education are more likely to enroll their children in SAT preparation courses.II. SAT preparation courses improve students' test-taking abilities.III. Students who are more motivated to attend college are more likely to enroll in SAT preparation courses.

Accepted Answer

I and III are examples of omitted variables that could explain the correlation between taking SAT preparation courses and higher test scores, without necessarily attributing the improvement directly to the courses themselves.

Question 15

The Widgetville County Wolfpack has won 90 percent of their last 20 games played under a full moon. What does this imply?

Accepted Answer

The statement implies that there is a positive correlation between the Widgetville County Wolfpack's play and playing under a full moon. It does not necessarily imply that full moons cause the team to play better or that there is causation between their play and a full moon. The statement also does not mention anything about weather affecting the team's play.

Question 16

A journal reports that both minivan sales and birth rates are on the rise. If you were to conclude that minivans cause people to have children you would be making the mistake of:

Accepted Answer

The answer of A journal reports that both minivan sales...

Question 17

As monthly rain levels rise, golf course revenue falls because casual golfers prefer to stay dry. This is an example of:

Accepted Answer

This scenario describes a correlation between monthly rain levels and golf course revenue, but it does not necessarily show causation. It is important to understand the difference between correlation (two things happening together) and causation (one thing causing another thing to happen). In this case, it is possible that other factors may be contributing to the decline in revenue, such as overall economic conditions or changes in golf course management.

Question 18

When the occurrence of one event brings about the other, the relationship between the two events is best described as:

Accepted Answer

When the occurrence of one event brings about the other, it implies that there is a cause and effect relationship between the two events. This relationship is known as causation, where one event is the cause and the other is the effect. This is different from correlation, which refers to a relationship between two events where they are linked, but not necessarily causally related.

Question 19

Suppose the owner of a rare piece of art has recently died, and their will specified that an economist should make sure that the painting is passed on "efficiently". Which of the following methods is most likely to result in efficiency?

Accepted Answer

Auctioning the painting to the highest bidder would most likely result in efficiency as it would allow the market to determine the painting's value and ensure that it ends up with the person who values it the most. Giving the painting to the owner's only child may not necessarily be efficient, as there may be other individuals or organizations willing to pay more for the painting. Putting the painting into storage may preserve its quality, but it does not ensure that it is being passed on efficiently.

Question 20

The classic conundrum, "Which came first, the chicken or the egg?" seeks to address the common fallacy of _________ in the context of correlation and causation.

Accepted Answer

The classic conundrum of "Which came first, the chicken or the egg?" highlights the fallacy of reverse causality, which occurs when the presumed cause of an event is actually the result of the event. In this case, it is unclear whether the chicken or the egg came first, as both are necessary for the other to exist. This highlights the importance of carefully examining the relationship between two variables to determine causality, and not just assuming that correlation implies causation.

Quiz 1: Economicsand Life