Question 1

The four criteria that are frequently used in judging the outcome of economic policy are

Accepted Answer

The four criteria frequently used in judging the outcome of economic policy are efficiency (how well resources are used), equity (the fairness of resource distribution), stability (the avoidance of large economic fluctuations), and economic growth (the increase in the economy's ability to produce goods and services over time).

Question 2

At a political rally, you stand up to see better. Everyone else stands up, as well. This is an example of

Accepted Answer

This is an example of the fallacy of composition, which is assuming that what is true of one part is true of the whole. In this case, standing up to see better may have been a reasonable decision for an individual, but when everyone does it, it may not necessarily lead to a better view for everyone.

Question 3

It always rains about an hour after you finish washing your car. Concluding that washing your car caused it to rain is an example of the

Accepted Answer

The statement that washing the car causes rain is based on the post hoc, ergo propter hoc fallacy, which assumes that just because two events happened in sequence, one must have caused the other. In this case, there is no logical connection between washing the car and the occurrence of rain, meaning that the statement is not supported by evidence or reason.

Question 4

Rent control laws are imposed when city officials believe landlords have been exploiting tenants. Which of the following criteria are they using to guide their actions?

Accepted Answer

Rent control laws are imposed to ensure a fair and equitable distribution of housing resources. This is done to protect tenants from being exploited by landlords who may charge excessive rents due to the lack of competition in the market. The primary goal of rent control laws is to promote equity in housing, rather than efficiency, growth, or stability, which are not the primary criteria used to guide their actions.

Question 5

The fallacy of composition is

Accepted Answer

The fallacy of composition occurs when someone assumes that what is true for a part must also be true for the whole.

Question 6

I have lived in a house on the Mississippi River for many years and have never seen a flood. Therefore, there is no reason for anyone to buy flood insurance. This statement is an example of

Accepted Answer

The statement is an example of the fallacy of composition because it assumes that what is true for one part of a group is true for the entire group. In this case, the person assumes that because they have not seen a flood in their house, no one else will see a flood in their house. This is not necessarily true, as there may be other factors that could cause a flood in someone else's house, such as living in a different location or having a different type of house.

Question 7

Experimental research in small cities suggests that mandating work for welfare recipients increases their income. Therefore, we should mandate work requirements for all welfare recipients. This statement is an example of

Accepted Answer

The statement assumes that what is true for small cities will be true for all welfare recipients, which is an example of the fallacy of composition.

Question 8

A government policy that tries to minimize inflation and unemployment can best be described as trying to achieve economic

Accepted Answer

A government policy that aims to minimize inflation and unemployment focuses on achieving economic stability. This involves maintaining a steady and acceptable rate of inflation while also keeping unemployment levels low, thereby promoting a stable and predictable economic environment. Achieving stability is often seen as a key precondition for economic growth and prosperity.

Question 9

The mistake of inferring causality from two events happening one after the other is called

Accepted Answer

The mistake of inferring causality from two events happening one after the other is known as the post hoc, ergo propter hoc fallacy. This Latin phrase means "after this, therefore because of this," and it suggests that simply because one event occurred before another, it must have caused the second event. However, this is not always the case, as there may be other variables at play.

Question 10

You have observed that every time you do 30 minutes of cardio exercise before taking an exam you get an A. You therefore conclude that to get an A on an exam, all you have to do is 30 minutes of cardio exercise before you take an exam. You have committed the

Accepted Answer

The conclusion that doing 30 minutes of cardio exercise before an exam is the cause of getting an A is based on the post hoc, ergo propter hoc fallacy, which assumes that because one event occurred before another, it must have caused it. The observed correlation may not necessarily indicate causation.

Question 11

The collection and use of data to test economic theories is

Accepted Answer

Empirical economics involves the collection and use of data to test economic theories, focusing on evidence-based research to validate or refute theoretical predictions.

Question 12

You have noticed that there is an increase in the number of homeless people in your city. At the same time you observe that there are also a number of vacant apartments. You believe that the government could reduce the number of homeless people if landlords were required to rent their apartments for less than they are currently charging. This policy recommendation would be motivated by concerns over

Accepted Answer

Concerns over equity are at play in this scenario, as the policy recommendation is aimed at reducing homelessness, which is often linked to poverty and inequality of resources. The proposal to require landlords to rent their apartments for less than current prices is intended to redistribute resources and reduce inequality, which is a key goal of equity.

Question 13

Whenever the Democrats gain control of the Congress, spending on social programs increases; whenever Republicans gain control of the Congress, spending on defense increases. Hence, we know what the next party in control will do. This statement is an example of

Accepted Answer

This statement is an example of the post hoc, ergo propter hoc fallacy, which assumes that because two events occur in sequence, the first event must have caused the second event. In this case, the assumption is that the party in control of Congress is the cause of the increase in spending on certain policies, without considering other factors that may influence the budget.

Question 14

An efficient economy is an economy

Accepted Answer

An efficient economy is one that produces the goods and services that consumers demand at the lowest possible cost. This means that resources are used effectively and wasteful practices are minimized. The emphasis is on maximizing productivity and output, which leads to economic growth and stability. While a fair distribution of wealth and equality among all consumers are important societal goals, they do not necessarily guarantee an efficient economy. Similarly, while steady or growing output and low inflation are positive indicators of economic performance, they do not necessarily indicate efficiency if production is not being carried out in a cost-effective manner.

Question 15

You know that the computer lab at school gets very crowded at about 3:00 p.m. To avoid the crowds, you start going to the computer lab one hour earlier every day. However many students make the same decision, and now the computer lab becomes very crowded at 2:00 p.m. This is an example of the

Accepted Answer

This is an example of the fallacy of composition because the assumption is made that if one person avoids the crowds by going earlier, everyone doing the same will have the same result. However, this assumption is incorrect as it leads to more students going earlier and causing the crowds to shift to an earlier time.

Question 16

Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes to rise with income. Which of the following criteria best explains the goal of this tax system?

Accepted Answer

The goal of this tax system is equity, which is achieved by reducing income inequality through redistribution of income from the rich to the poor.

Question 17

An efficient market is characterized by the fact that

Accepted Answer

An efficient market is one in which information is rapidly and accurately reflected in prices, eliminating profit opportunities almost instantaneously. This means that any new information about a company or its assets will quickly be incorporated into the price of those assets, making it difficult for investors to consistently earn above-average returns.

Question 18

The economy was expanding during all of the years that I was a student, but as soon as I graduated, the economy contracted. Therefore, the labor market was waiting until I started looking for a job to contract. This statement is an example of

Accepted Answer

This statement is an example of the post hoc, ergo propter hoc fallacy, which claims that because one event happened after another, the first event must have caused the second event. In this case, the author assumes that because the economy contracted after they graduated, it must have been waiting for them to start looking for a job to do so, which is not necessarily true.

Question 19

If you observe that Event A happens before Event B happens, and you conclude that Event A caused Event B, you would be guilty of an error called the

Accepted Answer

The post hoc, ergo propter hoc fallacy is the error of assuming that because one event happened before another event, the first event caused the second event. This is a common mistake in causal reasoning, as correlation does not necessarily imply causation. The other answer choices refer to different types of fallacies, but they are not directly applicable to this scenario.

Question 20

A change in economic output is potentially efficient

Accepted Answer

A change in economic output is considered efficient if the overall gains exceed the losses. This means that some individuals may be made worse off, but as long as the gains are larger than the losses, overall economic welfare has increased. This concept is known as the Pareto efficiency.

Quiz 1: The Scope and Method of Economics