Chapter 2 Review

MULTIPLE CHOICE

1. Which is the best statement about the way economists study the economy? a. They study the past, but do not try to predict the future. b. They use a probabilistic approach based on correlations between economic events. c. They devise theories, collect data, then analyze the data to test the theories. d. They use controlled experiments much the same way a biologist or physicist does.

2. Terms used by an economist would include a. vector spaces and axioms. b. torts and venues. c. ego and cognitive dissonance. d. comparative advantage and elasticity.

3. A common thread between economics and other sciences such as physics is that a. experiments are most often conducted in a lab. b. real-world observations often lead to theories. c. a Ph.D. is required to truly understand any science. d. both deal primarily with abstract concepts.

4. The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. evaluating an economic experiment. b. devising an economic experiment. c. actually performing an experiment in an economic system. d. All of the above are correct.

5. Economists make assumptions a. to diminish the chance of wrong answers. b. to make the world easier to understand. c. because all scientists make assumptions. d. to make certain that all necessary variables are included.

6. The art of scientific thinking includes a. knowing how the major organs of the human body work. b. understanding every scientific field—physics, biology and economics. c. deciding which assumptions to make. d. being able to mathematically express natural forces.

7. The 1973 war in the