1. Which of the following statements is correct? (a) Theory and hypothesis are interchangeable terms for the same thing. (b) A hypothesis may result from a tested and conrmed theory. (c) A theory may result from a tested and conrmed hypothesis. ((1) A hypothesis is a theory whose formulation relies on mathematics. 2. Economists use models in order to (a) experiment with alternative circumstances. (b) make educated guesses about real life events. (c) predict outcomes under various hypothetical conditions. ((1) All of the above are correct. 3. Empirical economists (a) reason inductively to develop economic models. (b) impose ceterir parfbus conditions to conduct controlled experiments. (c) collect and use data to test economic theories. ((1) reason deductively to develop economic theories. 4. Which of the following statements is incorrect? (a) Economists use the phrase \"ceteris paribus\" to express the assumption, \"everything affects everything else.\" (b) The scientic method used by economists involves: reducing 2 the complexity of reality to manageable proportions, formulating a hypothesis that explains reality, and testing the hypothesis. (c) A hypothesis is a logical conclusion based on a theoretical model. ((1) Prediction is a conclusion deduced from a model before the conclusion is observed. 5. Which of the following lists the steps to building a model in the correct order? (a) Create simplifying assumptions; identify the problem; test the model using data. (b) Identify the problem; develop a model; collect data and test the model. (c) Collect data; identify the problem; develop simplifying assumptions. (d) Identify the problem; test the model; generate data. 6. If you calculate the slope of a line that shows an inverse relationship between two variables, the resulting number will be (a) between 1 and l. (b) zero. (c) positive. (d) negative. 7. Most economists believe that the appropriate methodology of economics is to test a theory by: (a) its ability to predict accurately. (b) whether the predictions follow logically from the assumptions. (c) the internal consistency of its assumptions. (d) All of the above are correct. Use the following table to answer question 8. Price of bread $3.00 $2.50 $2.00 $1.50 $1.00 Quantity supplied of bread 16 12 10 S 6 3 Price of bread $3.00 $2.50 $2.00 $1.50 $1.00 Quantity demanded of bread 6 S 10 11 12 3. Which of the following statements is incorrect? (a) There is an indirect relationship between the price of bread and the quantity supplied of bread. (b) The law of demand is proven by the relationship between the price of bread and the quantity demanded of bread. (c) The equilibrium occurs at P = $2.00. (d) Graphically, the supply curve for bread will slope upward. 22. The opportunity cost to a city for using local tax revenues to construct a new park is the: (a) best alternative foregone by building the park. (b) dollar cost of constructing the park. (c) dollar cost of the old park. ([1) increased taxes necessary to pay for maintenance of the new park. 23. According to marginal analysis, you should spend more time studying economics if the extra benet from an additional hour of study (a) is positive. (b) outweighs the extra cost. (c) exceeds the benets of the previous hour of study. (d) will raise your exam score. 24. A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than: (a) $12.50 per pound. (b) $20 per pound. (c) $80 per pound. (d) $100 per pound. 25. The value of the slope of a society's production possibility frontier is called its (a) marginal rate of substitution. (b) ination rate. (c) unemployment rate. (d) marginal rate of transformation