Question 1

Which of the following best explains why economics is fundamentally about making choices?

Accepted Answer

Because economic resources are scarce.

Question 2

During an economic recession, why might college enrollment increase according to opportunity cost theory?

Accepted Answer

Because the opportunity cost of going to college is smaller since fewer jobs are available.

Question 3

Which of the following is NOT considered one of the three key principles of economics?

Accepted Answer

Scarcity

Question 4

In economic equilibrium, which of the following statements is true?

Accepted Answer

Everyone simultaneously optimizes, so that nobody benefits by changing their own behavior.

Question 5

Which of the following best describes an economic model?

Accepted Answer

A simplified description of reality used to generate testable predictions.

Question 6

Suppose a model predicts that an additional year of education increases wages by 10%. If a worker earns $15/hour with 13 years of education, what would their wage be after 16 years of education, assuming the model holds?

Accepted Answer

$21.97

Question 7

Given the following data: High school graduates earn $$35,620 and college graduates earn 55$$,660. What is the percentage increase in earnings from high school to college?

Accepted Answer

$$\frac{55,660 - 35,620}{35,620} = 56\%$$

Question 8

Why might the mean not be an accurate measure of central tendency in a dataset with large outliers?

Accepted Answer

Because outliers can skew the mean, making it unrepresentative of most data points.

Question 9

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

Accepted Answer

Correlation means two variables move together, but does not imply one causes the other.

Question 10

A study finds that gamblers over 65 are healthier than non-gamblers over 65. Which of the following is a possible explanation for this correlation?

Accepted Answer

Healthier people are more likely to go out and gamble (reverse causality).

Question 11

Which of the following is an example of omitted variable bias?

Accepted Answer

Assuming that naming cows causes them to produce more milk, without considering that named cows may receive more care.

Question 12

Which of the following best describes a controlled experiment in economics?

Accepted Answer

Subjects are randomly assigned to treatment and control groups, and only the treatment differs between groups.

Question 13

A natural experiment is best described as:

Accepted Answer

An experiment where group assignment is determined by external factors, not by the researcher, but is close to random.

Question 14

Which of the following is a property of a good economic question?

Accepted Answer

Both A and B.

Question 15

Suppose a model predicts a 10% increase in earnings for each additional year of education. If a person starts at $20/hour, what would their wage be after 3 more years of education?

Accepted Answer

$$20 	imes 1.10^3$ = 26.62$$

Question 16

Which of the following is an example of argument by anecdote?

Accepted Answer

Concluding that dropping out of college leads to billionaire status because one billionaire dropped out.

Question 17

Why is it important to test economic models with data?

Accepted Answer

To evaluate how closely the model matches what we actually observe.

Question 18

Which of the following is a real-world example of a natural experiment used to study the return to education?

Accepted Answer

The U.K. raising the minimum school drop-out age from 14 to 15 in 1947.

Question 19

Which of the following statements about models is correct?

Accepted Answer

Models are simplifications that generate predictions which can be tested with data.

Question 20

If a flat map is used to plan a flight from New York to Tokyo, why might the predicted shortest path differ from the actual flight path?

Accepted Answer

Because flat maps distort the shape of the Earth, so the shortest path on a globe is not a straight line on a flat map.

Microeconomics: Using Data and Models to Understand the World

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