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 confirmed theory.

(c)A theory may result from a tested and confirmed hypothesis.

(d)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.

(d)All of the above are correct.

3.Empirical economists

(a)reason inductively to develop economic models.

(b)impose ceteris paribus conditions to conduct controlled experiments.

(c)collect and use data to test economic theories.

(d)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 scientific method used by economists involves: reducing

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.

(d)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 - 1.

(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.