Question 1

Which of the following best describes the difference between endogenous and exogenous variables in an economic model?

Accepted Answer

Endogenous variables are explained inside the model, while exogenous variables are given outside the model.

Question 2

A researcher is studying the effect of weather on coffee prices using a simple supply and demand model. In this context, which variable is most likely to be exogenous?

Accepted Answer

The weather in Brazil

Question 3

Why is abstraction used in economic modeling, and what principle guides the level of abstraction?

Accepted Answer

Abstraction is used to omit unnecessary details and focus on essential relationships; Ockham’s razor guides it.

Question 4

What does the term 'ceteris paribus' mean in economic analysis?

Accepted Answer

Other things equal; only the relationship between two variables is isolated while others are held constant.

Question 5

Which of the following is a positive economic statement?

Accepted Answer

A higher minimum wage will reduce employment among teenagers, other things equal.

Question 6

A policy recommendation is incomplete unless it:

Accepted Answer

States the criterion used to rank predicted outcomes.

Question 7

Which of the following best illustrates the difference between correlation and causation?

Accepted Answer

Correlation means two variables move together, but causation requires a credible research design to establish that one variable causes the other.

Question 8

In the context of research design, what is the main purpose of random assignment?

Accepted Answer

To create groups that are similar on average before treatment, reducing selection as an alternative explanation.

Question 9

Given the equation of a straight line $$Y = 8 - X$$, what are the Y-intercept and X-intercept?

Accepted Answer

Y-intercept is $$8$$, X-intercept is $$8$$

Question 10

Which of the following graphs best represents a variable that does not respond at all to changes in another variable?

Accepted Answer

A horizontal line (slope of zero)

Question 11

If the price of coffee increases and people buy less coffee, what does this represent on a demand curve?

Accepted Answer

A movement along the demand curve

Question 12

Which of the following would cause a shift of the entire demand curve for coffee?

Accepted Answer

An increase in consumer income

Question 13

A time-series graph is most useful for:

Accepted Answer

Displaying the value of a variable across different time periods

Question 14

Which of the following is a key precaution when interpreting graphs in economics?

Accepted Answer

Check the variables, units, and scale before drawing conclusions.

Question 15

Suppose a model predicts that $$Y = 2X + 3. If$$ $$X$$ increases from $$4 to$$ $$6$$, what is the change in $$Y$$?

Accepted Answer

$$4$$

Question 16

Which of the following statements about empirical testing in economics is correct?

Accepted Answer

Empirical testing requires defining variables, stating predictions, and identifying evidence that could challenge the model.

Question 17

If a line on a graph has an undefined slope, what does this mean in economic terms?

Accepted Answer

The variable on the horizontal axis does not change as the vertical variable changes.

Question 18

Which of the following is NOT a typical policy criterion in economics?

Accepted Answer

Popularity

Question 19

A model of the gasoline market includes price and quantity as endogenous variables. Which of the following would most likely be an exogenous variable in this model?

Accepted Answer

The average income of consumers

Chapter 1: The Scope and Method of Economics – Models, Analysis, and Graphing

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