,1. One of the aims of positive economics is to rank policies under consideration from most desirable to least desirable.
a. True
b. False
ANSWER: False
RATIONALE: Positive economics aims to predict the consequences of policies, not to evaluate them as more or less
desirable.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIED 2/11/2015 10:52 PM
:
2. Positive economics can tell us which policies are efficient and which are not.
a. True
b. False
ANSWER: True
RATIONALE: Efficiency is an objectively defined concept: A situation is efficient if there is no way to make some
people better off without making others worse off. To say that one situation is more efficient than
another is not a normative statement --- even if often people think it is the same as saying that one
situation is better than another.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIE 2/11/2015 10:52 PM
D:
3. When economists say that policy A is more efficient than policy B, they mean policy A is better than policy B.
a. True
b. False
ANSWER: False
RATIONALE: To say that policy A is more efficient than policy B is only to say that, at least in principle, it is possible
to make everyone better off (or at least as well off) under policy A than policy B. This is not the same as
making a normative judgment about which policy is better.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
Copyright Cengage Learning. Powered by Cognero. Page 1
,DATE MODIFIE 2/11/2015 10:52 PM
D:
4. Economists talk about trade-offs a lot because they have come to understand that whenever there is a winner from a
policy or transaction, there must also be a loser.
a. True
b. False
ANSWER: False
RATIONALE: One of the fundamental lessons of economics is that there are many situations when everyone can win.
In a willing trade (i.e., I pay $2 for a cappuccino to the coffee shop owner), no one is hurt, and both of
us are better off.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIE 9/4/2015 2:12 PM
D:
5. A spontaneous order emerges from individual decisions that cause something to “work” without anyone planning for it
to “work”.
a. True
b. False
ANSWER: True
RATIONALE: A spontaneous order is an order that is unplanned but simply arises from individuals doing the best
they can given their circumstances. One example of this is the provision of complex goods and services
in the market where thousands of individuals participate in the creation of something without most of
them being aware that this is what they are doing.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIE 2/11/2015 10:52 PM
D:
6. When economists assume that people are rational, they are assuming that people generally agree what is good for
human beings.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 2
, RATIONALE: When economists assume people are rational, they are assuming that people are goal-oriented --- that
they have in mind something they are trying to achieve and then do the best they can to achieve it. This
is not the same as saying that people agree what is good for human beings --- only that individuals
think they know what is good for themselves and then act accordingly.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIE 2/11/2015 10:52 PM
D:
7. If medical patients are rational (in the way economists think of the term), they will do what medical experts believe is
best for them.
a. True
b. False
ANSWER: False
RATIONALE: A rational patient’s view of what is “best” may differ from a medical expert’s view --- and thus the patient
may rationally violate the expert’s advice.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
DATE MODIFIE 9/25/2015 3:31 PM
D:
8. Suppose two economic models give the same predictions --- but one is simplistic and unrealistic in its assumptions
while the other is rich in detail and resembles the real world more closely. If the sole goal of the economist is to predict,
then the economist should use the simple and unrealistic model.
a. True
b. False
ANSWER: True
RATIONALE: If two models predict equally well, then it makes more sense to use the simple model that’s easy to
use, even if the assumptions are unrealistic.
POINTS: 1
DIFFICULTY: A & B-Section Material
QUESTION TYPE True / False
:
HAS VARIABLES: False
DATE CREATED: 2/11/2015 10:52 PM
Copyright Cengage Learning. Powered by Cognero. Page 3
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