11Chapter 1 What Do Schoolteachers and Sumo Wrestlers Have in Common? I. Multiple-Choice Questions 1. Which of the following statements best captures the essence of economic analysis? a) b) c) d) No pain, no gain. Everything has a price. Incentives matter. Scarcity is only relative. Correct Answer: C 2. Which of the following is not an example of an economic incentive? a) A factory is required to pay a fine for each unit of pollution it produces in excess of the legal limit. b) A tax is imposed on each bottle of French wine imported into the country. c) A jewelry salesman is paid on commission. d) Posting the pictures of convicted prostitutes on the Internet. Correct Answer: D 3. According to the example in the text, when a monetary fine was imposed for picking up one’s child late at a day care center, the number of late pickups actually rose. Which of the following correctly explains this behavior? a) The monetary fine was less than the moral cost the tardy parent incurred when there was no fine. b) The monetary cost of the fine was greater than the opportunity cost of being on time. c) The marginal benefit from being on time exceeded the marginal cost. d) The marginal cost of being late was zero. Correct Answer: A 4. In which of the following situations would a moral incentive more likely be effective than a modest economic incentive? a) Someone is considering letting the time on a parking meter expire. b) A politician is considering having an illicit affair. c) An employee is considering embezzling a small amount of money from the place where she works. d) Someone is considering driving while under the influence of alcohol. Correct Answer: B 2 5. Which of the following explains why people are willing to give more blood when there is only a moral incentive than when they are offered a small amount of cash (an economic incentive)? a) The value of the moral incentive (praise for their kind-hearted act) is greater than the value of the economic incentive. b) The value of the moral incentive (praise for their kind-hearted act) is equal to the value of the economic incentive. c) The value of the moral incentive (praise for their kind-hearted act) is less than the value of the economic incentive. d) None of the above. Correct Answer: A 6. From an economic perspective, the incentive to cheat will be greatest when: a) b) c) d) the total benefits are as large as possible. the expected benefits exceed the expected costs by the greatest amount. the marginal expected costs of cheating are zero. the cheater thinks he is unlikely to get caught. Correct Answer: B 7. Some school teachers cheat because: a) b) c) d) high-stakes testing encourages them to cheat. they believe that the No Child Left Behind law is an unfair law. incentives are set up to reward teachers for improving their student’s test scores. all of the above. Correct Answer: D 8. Which of the following incentives associated with “high-stakes” testing would contribute most to a student’s learning? a) b) c) d) The incentive for the teacher to alter student responses on exams. The incentive for teachers to focus on students who don’t test well. The incentive for teachers to “teach to the exam.” The incentive students have to study harder. Correct Answer: D 9. From a teacher’s perspective, the knowledge that teacher cheating is rarely looked for and hardly ever punished has the effect of: a) b) c) d) reducing the expected cost of cheating. increasing the economic benefits of cheating. increasing the moral benefits of cheating. reducing the net benefits of cheating. Correct Answer: A 3 10. Assume 50 students take the same multiple-choice exam. Which of the following would be least likely to suggest some form of cheating took place? a) b) c) Every student gets the last seven questions correct. The good students all get the same set of six hard questions correct. The poor students get the same five hard questions correct and four other easy questions wrong. The poor students get an average of four of the first five questions, which are easy, correct. d) Correct Answer: D 11. Which of the following is not a distinguishing characteristic of the typical teacher who was caught cheating in the Chicago school system? a) b) c) d) The person was teaching in one of the lowest scoring classrooms. Someone who began teaching in the system before 1996. The teacher was a male. The teacher was young and less qualified than average. Correct Answer: C 12. It’s difficult to document cheating among sumo wrestlers in Japan because: a) b) c) d) sumo wrestling is a Japanese sport associated with the civility and honor of Japan. there is very little cheating among sumo wrestlers. it is difficult to find quantitative methods to analyze sumo wrestling. there are no data retained for sumo wrestling matches after the event is completed. Correct Answer: A 13. A sumo wrestler has the greatest incentive to cheat during a tournament when: a) b) c) d) he has eight consecutive losses. his opponent has more wins than he does. he is “on the bubble,” i.e., when he has 7 wins and 7 losses. his losses exceed his wins. Correct Answer: C 14. In which of the following scenarios would cheating in a sumo match be most likely to occur? a) b) c) d) Wrestler A has a 6-8 record and wrestler B has an 8-6 record. Wrestler A has a 7-7 record and wrestler B has a 10-4 record. Wrestler A has an 8-6 record and wrestler B has a 7-7 record. Wrestler A has a 7-7 record and wrestler B has a 7-7 record. 4 Correct Answer: C 15. Referring to the previous question, cheating most likely occurs in the scenario you selected because: a) b) c) d) the gains to the winner outweigh the losses to the loser by the greatest amount. the marginal gains and losses are equal. the combined total benefits are greatest. the combined total losses are lowest. Correct Answer: A 16. What incentive would a sumo wrestler with a winning record in a tournament have to help an opponent who is “on the bubble”? a) b) c) d) The good feeling he gets from helping his fellow man, i.e., a moral incentive. The knowledge that the opponent would do the same thing for him in the next tournament, which translates into one less win he has worry about the next time around. By losing an occasional match, the wrestler with the winning record can lull future opponents into believing that he is not that good. A sumo wrestler with a winning record in a tournament has no incentive to help an opponent who is “on the bubble.” Correct Answer: B 17. Which of the following characteristics distinguishes white-collar crime from street crime? a) b) c) d) There are no good data on white collar crime. Only a very small fraction of white-collar criminals are caught. There is frequently no obvious victim in the case of white-collar crime. All of the above. Correct Answer: D 18. Using economic principles, how can we explain why a particular individual would be more likely to steal from someone they don’t know than they would be to steal from someone they know and like? a) b) c) d) The cost the thief incurs stealing from the friend is greater than the cost he incurs stealing from the stranger. The marginal cost the thief incurs stealing from the friend is less than the marginal cost he incurs stealing from the stranger. The benefit the thief incurs stealing from the friend is greater than the benefit he incurs stealing from the stranger. There is no difference. Someone who steals is just likely to steal from one person as another, regardless of whether they know and like the person. 5 Correct Answer: A 19. How does a moral incentive differ from an economic incentive? . 2. In other cases. all else constant. For example. How a real estate agent. Give examples to illustrate your answer. an automobile mechanic or any other subject matter expert treats his or her clients depends primarily on: a) b) c) d) how much the expert is paid for his or her services. how the expert’s incentives are aligned. Almost all people are dishonest some of the time. Short Answer/Essay Questions 1. Suggested Answer: An incentive is a device designed to try to get people to do more of a good thing or less of a bad thing. In the course of analyzing the data from his bagel business. executives get promoted to their current position precisely because they are willing to cheat to get what they want. the degree to which a personal relationship has evolved between the expert and the client. what can we reasonably conclude about the honesty of people? a) b) c) d) Most people are honest most of the time. Correct Answer: B II. Correct Answer: C 20. Based on Paul Feldman’s “honor-system” bagel business. we use fines to discourage such behaviors as illegal parking (a bad thing). whether the profession is regulated by the government. This suggests that: a) b) c) d) the argument that as income increases so does willingness to pay is wrong. Most people are dishonest most of the time. Almost all people are honest all of the time. willingness to pay is determined by more than simply one’s income level. Correct Answer: A 21. Briefly describe what we mean by the word “incentive” as it is used in economic analysis. bonuses are sometimes paid to employees as a means to encourage them to be more productive (a good thing). Paul Feldman discovered that executives at one business were more likely than the lower level administrators to cheat. executives are more likely to be criminals. 4. i. but not proof.e.e. consumers and firms. it could be that all of the questions involved are easy and the students are all exceptionally bright. A string of the same answers may be evidence of a cheating teacher. it’s not polite to be late. Explain. why did charging a fee to parents for picking up children late cause parental tardiness to increase? Suggested Answer: Charging a fee for tardiness had the effect of replacing a moral incentive. why Levitt expected cheating to be more likely when a wrestler on the bubble... 5. Why did some Chicago public school teachers cheat to increase their students’ test scores? Suggested Answer: Teachers are rewarded or punished depending on how their students perform on standardized tests. They make these choices based on the incentives they face. duplicated by several students in the same class. Referring to the example in the book regarding the day-care center and the problem of parents picking up their children late. the choices people.e. the fee (fine) placed a price on being late. how did Levitt arrive at the conclusion that some sumo wrestlers were cheating? Suggested Answer: Given an individual wrestler’s records. Some teachers responded to those incentives by cheating.6 Suggested Answer: A moral incentive appeals to one’s conscience while an economic incentive appeals to one’s financial or economic well being. In effect. with a small economic incentive. with a 7-7 record. e. a fine. prove the teacher is cheating? Why or why not? Suggested Answer: No.. make. i. There are other possible explanations for this. 8. and obviously lower than the “cost” incurred when the parent was considered impolite. Others did not. Explain this statement. For example. Suggested Answer: Economists study. more parents were willing to pay it. he predicted whether the wrestler would win the next match. Because the fee was relatively low. using economic principles. 3. According to Freakonomics. This reward/punishment structure in turn created incentives for teachers to cheat. it could simply be coincidence. to understand incentives is to better understand an individual’s choices. i. 7. . economics is the study of incentives. Does a string of correct answers on a test. Therefore. Briefly.” He concluded that cheating was likely when a wrestler won with significantly greater frequency than his record would indicate. Alternatively. among other things. 6..g. was competing against a wrestler with an 8-6 record than when the same wrestler was competing with someone with a 10-4 record. He did this for wrestlers who were “on the bubble. the use of secretive methods. the combined benefits of cheating outweigh the combined costs. However. while winning probably would not move him up. the shame factor. Jim Crow laws passed in southern states. Hence. Referring to Paul Feldman’s bagel business. The Ku Klux Klan’s goals were largely achieved by: a) b) c) d) intimidation and violence. Wade. the cost of losing would be minimal because his ranking would not drop. i. so we need to focus on the expected costs of cheating. Multiple-Choice Questions 1. The benefits to the wrestler on the bubble are obvious. the cost of not winning is much higher for the 10-4 wrestler because he has a good chance of winning the tournament with an 11-4 record or at least getting a substantial bonus. With so many hands reaching for bagels and dropping money in the box.. but not the latter. Consider first the likelihood that someone who cheats will get caught. An eighth win would ensure that he would not drop in the standings. Fellow employees are more likely to know the thief in the small office than in the large office. than it would be when there are only a few employees present. the movement of blacks to northern industrial cities.e. Supreme Court essentially approve racial segregation? a) Brown v. Chapter 2 How Is the Ku Klux Klan Like a Group of Real-Estate Agents? I.. with the result that the net benefits from cheating in the large office are greater. i. These two factors combine to reduce the costs of cheating in the large office compared to the small office. For the 8-6 wrestler. Board of Education.S. while in the second case just the reverse is true. the probability of getting caught is likely lower in the large office than it is in the small office. a free bagel. Thus. the benefits from cheating are the same in both cases. it is harder to detect an individual who does the former. the cost of getting caught is greater the fewer the number of employees because of the social costs that come with getting caught. Second. 9. Suggested Answer: In this case. use economic principles to explain why cheating would be more likely in an office with a few hundred employees than it would be in an office with a few dozen employees. in the first case. we need to consider benefits and costs. Correct Answer: A 2 In which of the following cases did the U. b) Roe v.e.7 Suggested Answer: To answer this. . Stetson Kennedy exposed secrets of the Ku Klux Klan by: a) b) c) d) publishing its secrets in the newspaper. it was able to effectively limit the extent to which blacks exercised their basic rights because: a) b) c) d) the perceived costs of doing so frequently exceeded the benefits. So long as the Ku Klux Klan possessed an informational advantage regarding its terrorist activities. Ferguson. Its secret handshake. Its special language. the expected benefits of doing so were always zero. writing the book: “The Fiery Cross. Georgia how to make a game of it. The fact that the Klan and law enforcement in Georgia were “brothers in arms. Florida. b) Terrorist actions directed at blacks and whites were intended to ensure that blacks acquired additional rights only so long as the benefits of doing so exceeded the costs incurred. Correct Answer: C 3.” exposing its secrets on a nation-wide radio show. All of the following are reasonable economic interpretations of the Ku Klux Klan’s efforts to oppress black citizens except: a) Terrorist actions directed at liberal whites were intended to increase the costs liberal whites incurred relative to the benefits they derived from assisting blacks. d) Gore v. c) Terrorist actions directed at blacks were intended to increase the costs they incurred relative to the benefits they derived from acquiring such rights as the vote and the ability to acquire land. the actual costs of doing so exceeded the expected benefits. Correct Answer: C 6. Which of the following pieces of information had its greatest value to the Ku Klux Klan by being made public? a) b) c) d) Its secret passwords.” Correct Answer: D 5. telling children in Atlanta. Correct Answer: B 4.8 c) Plessy v. d) Terrorist actions directed at blacks and liberal whites substantially increased the costs blacks incurred in their efforts to secure basic rights. the benefits of doing so were always zero. . for so long? a) The fact that the Klan was everywhere. b) The Klan’s informational advantage. What then explains the Ku Klux Klan’s continuing ability to influence the behavior of blacks. its marginal value is zero. Which of the following statements is correct? a) Because the reproduction of information is essentially costless. Which of the following best explains how Stetson Kennedy’s ability to reveal the Ku Klux Klan’s secret information led to its demise? a) The costs the Klan would incur to create new secret codes exceeded the benefits of doing so.9 Correct Answer: A 7. Correct Answer: B 9. lynchings of blacks were much less common than usually thought. c) The Klan’s continuing ability to evade the efforts of law enforcement officials through the use of secret codes. Correct Answer: A 8. d) Kennedy singled-handedly arrested all of the Klan’s top officers. Correct Answer: C . It knew when and where it might strike. c) From the organization’s perspective. b) Information only has value if everyone possesses it. As the data clearly show. Which of the following statements best explains how Stetson Kennedy’s efforts contributed to the Klan’s demise? a) By revealing many of its closely guarded secrets. c) Simply put. Kennedy was able help the police identify and arrest the Klan’s leaders. the costs of being identified as a member exceeded the benefits derived from membership. The average citizen did not. d) The Klan possessed superior fire power. d) For individual members. b) By infiltrating the Klan. c) By infiltrating the Klan. d) There is no well-established relationship between information and market power. Kennedy was able to eliminate the Klan’s informational advantage. the possession of specific information gives the party who has it a competitive advantage. b) For individual members. Correct Answer: D 10. the marginal benefits of membership exceeded the marginal costs. and those who tried to help them. Kennedy was then able to embezzle almost all of the Klan’s operating funds. the benefits of terrorizing blacks and others fell to zero. All else constant. stay the same. they work for low wages.10 11. the marginal costs of doing so are infinite. selling a house for the most money possible. Correct Answer: A 15. The major similarity between the Ku Klux Klan and real estate agents is that: a) b) c) d) both groups best achieve their goals by possessing crucial information other parties do not. decrease. The Internet has caused the marginal cost of obtaining information to: a) b) c) d) increase. Correct Answer: A 12. cannot be determined with the information given. the incentive to get the highest price possible will: a) b) c) d) increase. cannot be determined with the information given. the marginal benefits of doing so are zero. decrease. the marginal benefits of doing so exceed the marginal costs. Correct Answer: A 13. being sensitive to the needs of his or her clients. from the agent’s perspective: a) b) c) d) the marginal costs of doing so exceed the marginal benefits. Correct Answer: C . Simply put. According to Freakonomics. while both groups exhibit the image of high pay. both groups use encrypted phrases they share only with the media. a real estate agent does not have an incentive to help someone selling his/her home get the highest price possible because. stay the same. they have both organized groups in order to avoid getting an education. persuading buyers and sellers to get the highest price possible as quickly as they can. as the commission a real estate agent receives for selling a house (measured as a percentage of the selling price) increases. a big part of a real estate agent’s job is: a) b) c) d) persuading the homeowner to sell for less than the house is worth. Correct Answer: A 14. Subject matter experts abuse information by: a) b) c) d) publishing deceitful information in order to create conventional wisdom. knows only the benefits of the exchange while the other party knows only the costs. net benefits of waiting longer are zero.11 16. are just as likely to abuse information in their personal lives. Correct Answer: B 19. total costs of waiting longer are less. have little incentive in their ordinary lives to alter the truth. “Information asymmetry” refers to the situation in which one party to a transaction: a) b) c) d) is smarter than the other party. has better information than the other party. withholding true information or editing the information they choose to put forth. Correct Answer: B . A new car loses so much of its value when it is sold because a potential buyer of the now used car cannot answer which of the following questions? a) b) c) d) What is the current market value of the car? Why is the owner selling it so soon? What did the current owner pay for the car when it was new? What is the car’s likely value five years from now? Correct Answer: B 17. telling outright lies since people without proper information can’t tell anyway. ordinary people: a) b) c) d) are more inclined to disclose the truth. Correct Answer: D 20. Correct Answer: C 18. While subject matter experts are known to sometimes distort information. A real estate agent is willing to take a longer period of time to sell his/her own house than he/she would take to sell a client’s house because the: a) b) c) d) marginal costs of waiting longer are less. knows everything and the other party knows nothing. telling potential competitors about your personal information. are only slightly less informed than subject matter experts. marginal benefits of waiting longer are greater. Correct Answer: B 22. to a large degree. can leave the discriminatee worse off. Considering the relationship between the terminology used by real estate agents and the type of information about the value of a house that is actually being conveyed. can leave society worse off. a) b) c) d) can leave the discriminator worse off. not posting a picture of your self. Correct Answer: A 23. quasi-racial discrimination. . Quaint styling. unemployed. The most certain way to fail on an Internet dating site is by: a) b) c) d) describing your self truthfully. Which of the following is the most reasonable summary of the information in this chapter? a) Innovations such as the Internet have. discrimination by one party against another. c) Information asymmetries can convey considerable advantages to those who with information. implying through your description that you are uneducated. Correct Answer: C 25. As the analysis of voting behavior of contestants on The Weakest Link demonstrates. eliminated significant information asymmetries. which of the following terms would most likely be signaling a potential buyer to bid low? a) b) c) d) Stainless steel. all of the above. The incentive to further distort such information to one’s advantage is also often quite compelling. bald man. Solid oak. b) Anyone who possesses asymmetrical information is bound to exploit that information in immoral ways. Hardwood floors. The situation in which one person discriminates against another simply because he prefers not to interact with that type of person is referred to as: a) b) c) d) taste-based discrimination. information-based discrimination. ignorance-based discrimination. Correct Answer: D 24.12 21. being a low-income. either deliberately or subconsciously. poorly educated. the advantage individual firms had previously possessed relative to potential customers disappeared. they will make up their minds.” Suggested Answer: In determining the sales price or interest in a house. regardless of what was written or said. How did the exposure of the Ku Klux Klan’s secrets significantly diminish the Klan’s presence and influence in society? Suggested Answer: The Klan had been powerful prior to the exposure of its secrets because it controlled information on when and where it would strike next.13 d) Information relevant to a transaction is only valuable if one party to the transaction has it and the other party does not. once the information asymmetry disappears.e. the advantage the institution had previously maintained is weakened or eliminated. Almost immediately. how it is described is very important. the Klan has been able to keep its illegal actions from having legal consequences. causing prices to fall by a considerable amount. Correct Answer: C II. the Internet. Without these secret means it was more likely that someone would expose the Klan’s illegal activities and individual members would have to bear the legal consequences of those activities. This in turn makes the institution less powerful and less able to take advantage of the uninformed.e. The text cites the example of what happened to the price of term life insurance once pricing policies and prices offered by different companies were made available in one common location. . Briefly evaluate the following statement indicating whether you agree or disagree with the statement and why. It was able to do this because the membership was loyal to the organization and had secret means of communicating. how can an ordinary person abuse information? Give an example. i. In addition. For the majority of prospective buyers this initial information is critical to their decision whether looking over a house is worth their time.. What does the exposure of secret or hard-to-find information do to the institution that had maintained that informational advantage? Give an example of where this has occurred in the past few years. Not knowing who the next victim would be severely constrained the actions of most blacks and people who tried to help them who feared they could be the Klan’s next target. Short of outright lying. Short Answer/Essay Questions 1. i. 2. 4. Suggested Answer: Once that information is made public. “How a seller (or real estate agent) describes a house that is on the market is unimportant. Once the prospective buyers sees the house. 3.. who fear they are not receiving the maximum possible price. As such the demand curve represents the buyer’s true willingness and ability to pay. compared to the competitively determined outcome. imperfect information limits the ability of buyers to determine their true willingness to pay. the analysis of the Internet dating scene tell us that people tend to exaggerate their qualities to make themselves sound better than they really are. the item in question may not in fact go to the party who values it most.. people selling a home. e. 5.g. . For example. when this assumption no longer holds? Suggested Answer: When constructing the basic model of supply and demand. The result is that. it is assumed that buyers and sellers have perfect information. In constructing the model of supply and demand and the model of perfect competition. in certain situations.14 Suggested Answer: By withholding important information or by combining information in such a way that it tells a distorted tale. It also inhibits sellers. we assume perfect information on the part of both buyers and sellers. What happens to the outcome in a market. However. A less-thanefficient outcome results. All of the following are examples of “conventional wisdom” which is in fact wrong except: a) b) c) d) Dealing crack is highly profitable for everyone involved in the business. A crack dealer has the image of one who has “state of the art weapons and a bottomless supply of cash” because: a) on average. the conventional wisdom regarding the cause of or solution to a sticky social problem is often wrong because: a) b) c) d) political pundits and TV journalists are several steps away from “real life. b) self-interested police departments wanted to provide the public with an explanation of why the crack epidemic was so out of hand. . it’s created by people who have an interest in the explanations. conventional wisdom is usually the first explanation for something and it tends to “stick. One in three women will be a victim of rape or attempted rape during their lifetime. Multiple-Choice Questions 1. Freakonomics is based on all of the ideas below. except: a) b) c) d) economists often have a difficult time sorting out cause and effect relationships. Listerine can effectively fight bad breath. and comforting. According to John Kenneth Galbraith. comfortable. it’s a realistic description. Correct Answer: B 3. incentives are the cornerstone of modern life. knowing what to measure and how to measure it makes a complicated world less so. Forty-five homeless people die each second in the United States. Correct Answer: C 4. Correct Answer: C 5. Correct Answer: A 2. According to Freakonomics.” people seldom use quantitative techniques to analyze social problems. conventional wisdom comes into existence because: a) b) c) d) it’s usually a good explanation of the way conditions really are. it’s simple.” “experts” use information available to them to serve their own agenda.15 Chapter 3 Why Do Drug Dealers Still Live with Their Moms? I. it’s derived from a close examination of the data. the conventional wisdom is often wrong. Analysis of its financial data revealed that the organizational structure of the Black Disciples was most similar to: a) b) c) d) a pharmacy. c) J.T. Correct Answer: A 7. d) this is how a crack dealer is viewed by residences of ‘the projects. Correct Answer: B 8.” Correct Answer: B 6.T. a McDonalds.T. was grooming Vankatesh to take his place as leader of the gang.16 c) it began with a story in the New York Times written by a journalist who used fictitious sources. which of the following statements is correct regarding the income earned by the Black Disciples? a) b) c) d) Income was fairly evenly distributed among the various employees. d) There is no way to explain J. None of the above. The top 2 percent of employees received slightly more than 90 percent of all employee income. believed the benefits that might come from Vankatesh’s presence exceeded the costs that might be incurred.’s behavior in economic terms. Based on the gang’s financial records. b) J.T. The top 25 percent of employees received slightly less than half of all employee income.’s willingness to allow Vankatesh to embed himself in the branch of the Black Gangster Disciple Nation run by J. The average officer earned about $7 per hour. which of the following statements regarding the income earned by the Black Disciples is false? a) b) c) d) The average foot soldier earned about $3.T. The top 2. Viewed from the economist’s perspective.2 percent of employees received slightly more than half of all employee income. Correct Answer: C 9. how would we explain J.T.? a) J. an upside down pyramid. believed the costs of Vankatesh’s presence were zero. Based on the gang’s financial records.30 per hour. . The average rank-and-file member was paid nothing. a well-run Protestant church. d) street dealers are willing to earn very little pay in exchange for the possibility of moving up in the organization. but the probability of success is rather small. Which of the following is not identified by Levitt and Dubner as one of the four meaningful factors that determine the wage rate for a particular job? a) b) c) d) The number of people willing and able to do the job. the only emotional connection a dealer has is with his mother. Based on the available data. and college football players all have in common? a) b) c) d) So long as they work hard. Even among the lowest paid workers in each group. c) decrease. Correct Answer: C 12.17 Correct Answer: D 10. The potential financial rewards can be quite large. b) regardless of the high incomes.S. The specialized skills the job requires. The supply of workers is relatively low. Working as a police office in Detroit. c) drug dealers are afraid to show off their money for fear they will be investigated by the I. Correct Answer: D 13. aspiring actors. Working as a crack dealer in Chicago. All else constant. while the demand for them is quite high. Most drug dealers live with their mothers because: a) most of their mothers are poor and need help with expenses. the wage workers receive for that job will: a) increase. The unpleasantness of the job. as the number of people who are willing and able to do a particular job decreases. they are all assured of making a great deal of money. . The prices paid to other factors of production. What do crack dealers. Correct Answer: D 11. which of the following is the most dangerous job in the United States? a) b) c) d) Serving in the military. Working as a timber cutter. Correct Answer: B 14. average wages are relatively high.R. b) stay the same. c) The incentives of the leader and the dealer are at odds with one another. Correct Answer: C 18. Many people growing up on Chicago’s South Side opted for a career in crack dealing in the 1990s because: a) b) c) d) it was the best job they had access to. d) there is no connection between the of risk associated with a job and the wage workers must be paid. Correct Answer: A 17. the wage workers must be paid depends on whether the wage is initially high or low. c) as the risk associated with a job increases. anyone involved in the business was guaranteed to earn far more than the minimum wage. the leader and the street dealer work together to maximize the gang’s profit. the wage workers must be paid goes down because the risk represents a side benefit to workers who love adventure. which of the following would cause the wage paid for a particular job to increase? a) b) c) d) An increase in the number of people willing and able to do the job.18 d) cannot be determined with the information given. so does the wage workers must be paid. A significant improvement in working conditions. Correct Answer: C 16. As J. it was less risky than many other jobs that were available. An increase in the level of skill the job requires. b) as the risk associated with a job increases. there were considerable opportunities for advancement up through the ranks of the organization. Which of the following best describes the relationship between a drug gang leader and a street dealer? a) There is no contact between the two so as to protect the leader from arrest. A decrease in demand for the good the worker who does the job produces. d) All of the members of the gang are one big happy family.T.’s experience with his foot soldiers when a turf war broke out demonstrates: a) as the risk associated with a job increases. All else constant. Correct Answer: A 15. Correct Answer: A . b) Just like a legal business. Which of the following costs is attributable to the rise in the popularity and availability of crack cocaine? .A was covertly supporting the dealers’ efforts. everyone involved in gang-related crime was becoming rich. b) The incomes of drug users. the supply of potential criminals was very low. increased dramatically in the 1970s. All of the above. viewed from the customer’s perspective there were few if any viable substitutes. c) The decriminalization of drugs in the United States. d) A large decrease in the supply of cocaine. d) The C. was so low. They each had broad appeal among their target consumer group.I. the cost of committing crime. From an economic perspective. c) Police departments avoided going after crack dealers and users for fear of being labeled as racists. Correct Answer: B 21. Which of the following best explains why crack dealers were able to sell so much crack for so long? a) Because it was so cheap and addictive. and hence demand for drugs. b) A dramatic increase in the supply of cocaine which drove down its price. such as heroin and marijuana. which in turn caused the price of cocaine to fall. and especially gang-related crime.19 19. flourished in the 1970s largely because: a) b) c) d) legal jobs paid much less than drug dealing. Both were easy to produce in large scale quantities. Correct Answer: A 23. Correct Answer: D 20. Crime. measured by the probability of capture and punishment. what did crack cocaine have in common with nylon stockings? a) b) c) d) Both were made available to consumers at relatively low cost. Correct Answer: D 22. Which of the following most facilitated the expansion of the market for crack cocaine in the United States? a) An increase in the demand for alternatives to cocaine. Alternatively. but those who do are richly compensated. the high wages paid to upper management in both organizations act as an incentive to make lower level employees work harder in hopes that they will be able to ascend the corporate ladder. the organizational structure of the Black Gangster Disciple Nation is extremely similar to that of McDonald’s. he only works 6-9 hours per week. However. According to Levitt and Dubner. As another example. That being said. as the number of suppliers increased relative to demand. . For example. As the market for crack cocaine expanded. the number of dealers expanded dramatically as well. conventional wisdom can be used to refer to some set of “facts” about a particular situation that people conveniently assume are true. relatively few employees are successful in the “tournament” and most never rise above their initial level of employment. increase or stay the same. it is commonly believed that people get involved in dealing drugs because it is highly profitable for everyone involved in dealing. The vast majority of employees in both organizations are located at the bottom of the pyramid and make relatively low wages. decrease. A widening of the performance gap between black and white schoolchildren. All of the above.” Use examples to illustrate your answer. Assuming the quality of crack is relatively uniform across suppliers. 2. A tripling of the number of blacks who were sent to prison. stay the same. Define the term “conventional wisdom. Correct Answer: D 24. we would predict that the profits of individual dealers would: a) b) c) d) increase. Suggested Answer: In each organization. many people believe that because the typical college professor only teaches 2-3 courses per week. Suggested Answer: Conventional wisdom refers to the unquestioned belief most people use to explain a social or economic phenomenon. Short Answer/Essay Questions 1. relatively few employees have high-level jobs.20 a) b) c) d) A dramatic increase in black infant mortality in the 1980s. Correct Answer: D II. Describe the relevant similarities between the two organizations and explain how the organizational structure affects the incentives workers at the lower levels face. (2) the specialized skills the job requires. the introduction of crack cocaine into the market would cause the supply curve to shift right. In contrast. In addition. Suggested Answer: A “tournament” form of labor market is a labor market in which there are many capable workers and only a few highly desirable jobs. 4. 6.21 3. This in turn makes the worker more valuable and the demand for workers increases. The few jobs pay very well. so does the value of the worker’s output to the firm. Graphically illustrate the effect the introduction of crack cocaine had on the market for the type of high offered by cocaine and similar drugs. i. 5. .. both because of an increase in the number of sellers of this type of high and because of the lower production costs associated with crack. Briefly describe a “tournament” form of labor market. according to Levitt and Dubner. and the demand for the good or service the worker produces all cause the wage rate to increase. it is like a tournament because only the winner gets the prize. an increase in the number of people who are willing to do the job causes the wage rate to fall. which in turn causes market price to increase). and (4) the demand for the good or service the worker produces. the unpleasantness of the job. List the four factors which. though many compete. determine a wage. causing the wage to rise as well. The resulting excess supply at the initial equilibrium price causes market price to fall until equilibrium is reestablished in the market. Therefore.e. (3) the unpleasantness of the job. how should we expect this to affect the wage earned by those workers? Why? Suggested Answer: An increase in demand for the service produced by a particular group of workers would cause the price paid for the service to increase (the increase in demand causes excess demand at the initial price. explain the effect each factor has the wage paid to a particular type of labor. All else constant. As the price of the service produced increases. All else constant. Suggested Answer: Assuming the demand and supply curves have the usual shape. an increase in the specialized skills the job requires. the supply of workers exceeds demand. Suggested Answer: The four factors include (1) the number of people willing and able to do the job. Assume there is an increase in the demand for a service produced by a particular group of workers. c) a dramatic increase in the population and corresponding increase in the standard of living for most Romanian citizens. by abortion policies enacted in each country several years earlier. He used economic incentives (taxes) to encourage fertility among women. the supply of labor. Correct Answer: B 2. One of the major consequences on Ceausescu’s ban on abortion and emphasis on increased fertility among women was: a) a dramatic increase in the population and corresponding decrease in the standard of living for most Romanian citizens. Correct Answer: B . Which of the following was not part of Communist dictator Ceausescu’s strategy to modernize the Romanian economy? a) b) c) d) He favored manufacturing over agriculture. Multiple-Choice Questions 1. Economically. consequently. Correct Answer: A 4. d) a dramatic decrease in the population and corresponding decrease in the standard of living for most Romanian citizens. Correct Answer: D 3. He made abortion illegal.22 Chapter 4 Where Have All the Criminals Gone? I. d) increase the population and. c) They both precipitated recessions in the respective countries. What do the overthrow of the Ceausescu regime and the decrease in crime in the United States in the 1990s have in common? a) They were both the result of a dramatic increase in the level of unemployment in each country. b) facilitate increased production in the agricultural sector of the economy. d) There is no reasonable explanation for either event. Ceausescu’s ban on abortion was intended to: a) free up medical resources to provide alternative forms of health care. b) a dramatic decrease in the population and corresponding increase in the standard of living for most Romanian citizens. stimulate economic growth. c) provide a source of increased demand for goods and services and hence. in large part. b) They can both be explained. He set an example of self sacrifice for the rest of the population. Which of the following is not one of the frequently cited explanations for the decline in crime that occurred in the 1990s? a) b) c) d) The use of innovative policing strategies. Which of the following explanations for the drop in crime that occurred in the 1990s is supported by the data? a) b) c) d) A strong economy.. Which of the following is not a possible economic explanation of how increased reliance on prisons leads to a decrease in crime? a) As more criminals are put in jail. so does the cost of committing the crime. b) As more criminals are put in jail. and therefore crime. Tougher gun control laws. .e. Changes in illegal drug markets. Increased reliance on prisons. Which of the following explanations for the drop in crime that occurred in the 1990s is not supported by the data? a) b) c) d) A strong economy. Increased reliance on prisons. Correct Answer: A 8. The increased use of capital punishment. Increased reliance on more lenient sentencing practices (i. c) As the sentence a person receives for committing a crime increases. decreases. d) Seeing other people put in jail reduces the incentive for would-be criminals to actually engage in crime.23 5. Changes in crack and other drug markets. All else constant. The use of innovative policing strategies. Correct Answer: B 6. Correct Answer: C 7. this causes the efficient amount of crime to go down. An increase in the number of police. the supply of criminals. it causes the benefits from crime available to the criminals who remain on the street to increase. less reliance on prisons). additional police should be hired up to the point at which: a) b) c) d) the additional benefits from hiring one more police officer equal the additional cost incurred. the cost of committing the crime is irrelevant. d) The supply of capital crimes is perfectly inelastic. the crime rate is reduced to zero. Correct Answer: B 12. the total benefits from hiring police are maximized. the benefits of a capital crime always outweigh the costs.24 Correct Answer: B 9. a) b) c) d) one tenth one quarter one third one half Correct Answer: C 11. from the criminal’s perspective the expected cost of the death penalty is quite low. b) Only two percent of all criminals on death row are actually executed in a given year. The observation that “crime rates tend to be high when imprisonment rates are high” led some criminologists to conclude that crime rates would fall if imprisonment rates were lowered. There is strong evidence supporting the argument that increasing the number of police reduces crime. normative theory. Therefore. Correct Answer: A . As such. This is an example of: a) b) c) d) confusing correlation with causation. the argument that incentives matter. positive economic analysis. c) From the criminal’s perspective. the marginal cost of hiring one more police officer is zero. Which of the following best explains why the increased use of capital punishment has not contributed to the decrease in crime? a) Individuals who commit capital crimes believe life is not worth living. Therefore. they view capital punishment as a benefit rather than a cost. From the economist’s perspective. The increased use of prisons accounted for approximately _____________ of the drop in crime experienced in the 1990s. Correct Answer: A 10. All of the following are explanations why gun buyback programs fail to reduce crime except: a) the price offered is less than the benefits the criminal receives from using a gun when committing a crime. Which of the following best explains why gun control laws such as the Brady Act have had little or no effect on crime rates? a) Guns are not a significant factor in crime. Correct Answer: D 15. Which of the following statements regarding economist John Lott Jr. to ready availability of guns. b) Depending on who possesses a gun when an altercation takes place. the NYPD grew by 45 percent. in fact. responsible for the decrease in crime in New York in the 1990s? a) Crime in New York had started to fall in 1990. c) Such laws have caused the price in the black market for guns to dramatically increase. b) there is virtually no effect on the supply of guns that remain available to potential criminals. in part. c) the guns turned in during such programs are generally not the types of guns used by criminals.25 13. four years before such strategies were implemented. c) There are more guns than there are adults in the United States. Which of the following is evidence that innovative policing strategies were not. Correct Answer: D 14. c) Crime fell everywhere in the 1990s. the existence of the gun may lead to either more or less violence. d) All of the above. b) Criminals view the black market for guns (which is unaffected by such laws) as a near perfect substitute for the legal gun market. Which of the following statements is false? a) Research shows that the high homicide rate in the United States is due. d) Police routinely refuse to enforce such laws. Many cities didn’t employ any innovative strategies. d) criminals use the money they get from participating in such programs to buy better guns.’s hypothesis that “rightto-carry” laws have reduced crime in areas governed by such laws is correct? . Correct Answer: D 17. b) Between 1991 and 2001. d) Gun control laws contributed significantly to the drop in crime that occurred in the 1990s. Correct Answer: B 16. Correct Answer: B 18. d) While Lott produced evidence supporting his hypothesis. A dramatic decrease in the number of crack dealers.26 a) There is strong evidence in support of his hypothesis. a general improvement in the economy. an increase in competition among crack dealers. a relatively small subset of males of a given age is responsible for the majority of crime committed by males of that age. he nonetheless argues that gun ownership should be severely restricted. all else constant: a) efforts to reduce crime should be focused primarily on young males. the use of innovative policing strategies by police departments around the country. The innovative policing strategies employed by police departments around the country. Correct Answer: A 20. c) Locking up older criminals for long periods of time is probably not a very effective way to deter crime. was only available to an extremely small number of people. The profits crack dealers were able to earn declined in the 1990s primarily as a result of: a) b) c) d) a decrease in demand for crack. b) a decrease in the percentage of young males in the population should result in a decrease in crime rates. Moreover. was a relatively easy means to earn a considerable amount of income in a short amount of time. was not nearly as difficult as passing an economics class. For many individuals growing up on the South Side of Chicago. Which of the following is the primary explanation for the decline in crime among crack dealers in the 1990s? a) b) c) d) The huge decline in the profits from selling crack. c) Lott failed to produce any empirical evidence in support of his hypothesis. A large decrease in the demand for crack. d) all of the above. b) While Lott produced strong evidence in support of his hypothesis. the majority of the crime that occurs in the United States is committed by males between the ages of 16 and 24. other scholars have been unable to reproduce his results. Based on available data. Correct Answer: C 21. . Correct Answer: A 19. These data suggest that. which casts doubt on his findings. a career in crack dealing: a) b) c) d) was the best job they had access to. Suggested Answer: An increase in the number of police officers increases the likelihood that a criminal will be caught and punished. abortions performed during the 1970s. immoral economic analysis. the precipitous decline in the homicide rate in the 1990s was largely a result of: a) b) c) d) a change in the demographics of Americans. The argument that the legalization of abortion is a primary factor in the explanation of the decrease in crime in the 1990s is an example of: a) b) c) d) normative economic analysis. consequently. resulting in a higher average age. c) Because abortion had been illegal. counterfactual economic analysis. Correct Answer: B 23. This in turn increases the likely cost the person who commits a crime will incur. Use basic economic principles to explain how each of the following would result in a decrease in crime. innovative police strategies. it is then reasonable for the rational person to engage in less crime. a. b) The increase in abortion caused a reduction in the percentage of the population accounted for by young males (the segment of the population most likely to commit crime). According to a study by Donahue and Levitt. Correct Answer: C 24. beginning in New York. Increased reliance on prisons to punish criminals. b. positive economic analysis. An increase in the number of police in a city. Holding the benefit from the crime constant. the number criminals. a significant uptick in economic activity. d) The type of woman who gets an abortion invariably gives birth to children who turn to crime as they get older. Short Answer/Essay Questions 1. Which of the following statements best describes the logic supporting the hypothesis that the legalization of abortion led to a decrease in crime roughly 18 years later? a) The increase in abortion caused a decrease in the population and. legalizing it naturally caused crime to decrease. An increased reliance on prisons to punish criminals . as well as the number males born into dysfunctional families.27 Correct Answer: D 22. Correct Answer: B II. e. This left dealers less inclined to engage in criminal acts such as retaliation against competitors because the costs of such acts were now higher relative to the potential benefits.28 has a similar effect. what is it? Suggested Answer: Approximately one half of the reduction in crime rates that occurred in the 1990s is accounted for by the legalization of abortion in 1973. In particular. or expected. why capital punishment has not had a measurable effect on the amount of crime in the United States. while the effect on equilibrium price would be uncertain without more specific information on the magnitude of the shift in each curve. Obviously. cost of committing a capital crime is much less. Describe the study by Donahue and Levitt which examines the link between the legalization of abortion and the decline in crime rates that began to appear roughly 18 years later. the Brady Act. 2. Explain how competition among crack dealers contributed to the decrease in crime that occurred in the 1990s. As such. . This in turn led to a decrease in total revenues. being put to death constitutes a rather severe cost to most people. using basic economic concepts. profits fell. Suggested Answer: The purpose of punishment for a crime is to increase the cost to the person who commits the crime. 3. it is rational for the person to continue to commit the crime. affect the equilibrium in the black market for guns. when we consider that only 2 percent of persons on death row are actually executed each year. Suggested Answer: As competition increased. So long as the expected benefits exceed the expected costs. All else constant.. Explain. does their study provide a viable explanation for the decline in crime rates that occurred in the 1990s? If so. individual dealers reduced the price they charged for their product. but costs did not change. As such. Explain how gun control laws. the expected cost to the criminal is increasing because the cost associated with punishment is greater. The same conclusion applies. 5. 4.g. Suggested Answer: Gun control laws make it more costly for certain individuals—both buyers and sellers—to compete in the legal market for guns. this would have the effect of causing the equilibrium quantity of guns exchanged to increase. the perceived. both demand for and supply of guns in black market could be expected to increase. However. In this case. especially when compared to the benefits the person expects to gain from committing the crime. Which parenting author believed that an infant’s brain is growing so much that overstimulation might cause “a great deal of harm. Carefully consider all sides of the issue before taking a specific position. Correct Answer: A 4. Berry Brazelton Correct Answer: D 2. Argument. Thought. Correct Answer: D 3. what is the enemy of rational argument? a) b) c) d) Emotion.29 Chapter 5 What Makes a Perfect Parent? I. According to Levitt and Dubner. None of the above. Which emotion is more potent than the rest when someone is attempting to sway public opinion? a) Fear. Babies should sleep with parents. b) Love. Analysis. Considering the range of opinions on virtually every aspect of parenting. there is no commonly agreed upon conventional wisdom. All of the above. Take out an expensive ad.” and cautioned parents that their child is not a “plaything”? a) b) c) d) L. Multiple-Choice Questions 1. . How does the typical parenting expert best argue his point in order to make others agree with him? a) b) c) d) Plant his flag firmly on one side of the argument and engage the public’s emotions. Which of the following would be considered part of the conventional wisdom regarding proper parenting that has withstood the test of time? a) b) c) d) Babies should always sleep on their backs. Emmett Holt Ann Hulbert Gary Ezzo T. Correct Answer: A 5. Bottle feeding is preferred to breast feeding. 3 boaters die as a result of being struck by lightning for every 100. Correct Answer: D 7. Which of the following statements is correct? a) The probability of dying as a result of a hunting accident is greater than probability of dying as a result of being struck by lightning while boating. they are equally risky. Why is that? a) b) c) d) Separating facts from rumors is frequently hard work. which activity is more risky: driving or flying? a) b) c) d) Driving. The per hour death rates are equal. According to the data. b) The probability of dying as a result of being struck by lightning while boating is greater than the probability of dying as a result of a hunting accident. Assume one hunter dies from an accidental gunshot for every 100. Correct Answer: A 8.30 c) Joy. Correct Answer: C 9. According to Levitt and Dubner. Flying. White noise generated by experts is overwhelming. i. Correct Answer: A 6. According to Freakonomics. in which of the following ways is a child in the United States most likely to die? a) b) c) d) Drowning. Struck by lightning. c) The probability of dying as a result of a hunting accident and the probability of dying as a result of being struck by lightning while boating are the same. parents are often scared of the wrong things. Facts are often varnished or taken out of context to serve specific agendas. Being shot by a gun.e. d) Anger. Dog attack. At the same time.000 days spent hunting and 1 million days are spent hunting each year. d) None of the above Correct Answer: B .000 days spent boating and 2 million days are spent boating each year.. All of the above. There are no per hour death rate statistics for either activity. Risk = Hazard/(Hazard + Outrage). Correct Answer: C 14. found what kind of correlation between the child’s personality traits and those of his/her adopted parents? a) b) c) d) Positive correlation. even though the risks they can control may be much greater. None of the above. Negative correlation. In the interest of economic efficiency. The one for which the amount of money spent per lives saved is the lowest. when deciding between two options we have for reducing the risk of someone dying which option should we choose? a) b) c) d) The one which results in the greatest number of lives saved. b) It is possible that “bad” parenting and “good” parenting are related to some other variable which in fact influences the way a child turns out.31 10. Correct Answer: A 12. How can we reconcile Levitt and Dubner’s assertion that “bad” parenting matters a great deal. “The basic reality is that the risks that scare people and the risks that kill people are very different”? What did Sandman mean by this statement? a) People are usually incapable of assessing risks of any type. which followed the lives of 245 babies put up for adoption. Risk = Emotion + Hazard.” was once quoted as saying. c) People are afraid of the risk of dying but they are not afraid of death itself. Correct Answer: B 11. Perfect correlation. Correct Answer: C 13. c) The total benefits of “good” parenting are less than the total benefits of “bad” parenting. d) The only thing people have to fear is fear itself. b) People are much more frightened by risks they can’t control than those they can. . a self-described “risk communications consultant. The one which costs the least amount of money. What is Peter Sandman’s equation for assessing risk? a) b) c) d) Risk = Hazard + Outrage. Peter Sandman. while “good” parenting does not? a) The marginal cost of “bad” parenting is greater than the marginal cost of “good” parenting. No correlation. The amount of money spent should never be a consideration when we are talking about saving lives. Risk = Emotion + Outrage. The Colorado Adoption Project. The problem of reverse discrimination. Assume we discover that education and income are positively correlated? Based on this information. An increase in education causes an increase in income. c) Adjusting for a student’s abilities. The decision whether to desegregate schools should be left to each individual state. When one variable increases. which of the following accounts most for the income gap between black and white adults? a) b) c) d) The black-white education gap that occurs in the first few years of schooling. attending a better school increased the probability the student would graduate. Supreme Court’s 1954 ruling in Brown v. the other variable decreases. d) None of the above. They can’t have it both ways. attending a better school had no effect on the probability the student would graduate. Correct Answer: B 16. The fact that blacks are less likely than whites to complete a four-year college degree. what did the Supreme Court rule? a) b) c) d) Schools did not need to be desegregated. about the relationship between these two variables? a) b) c) d) An increase in income causes an increase in education. b) Adjusting for a student’s abilities.32 d) We can’t.S. attending a better school decreased the probability the student would graduate. Correct Answer: C . When one variable increases. with certainty. What did a careful analysis of the data from the Chicago School District lottery reveal regarding the relationship between a student’s probability of graduating and attending the “right” school? a) Adjusting for a student’s abilities. Schools needed to be desegregated. what can we say. Board of Education of Topeka. Continuing discrimination against blacks in the labor force. Correct Answer: C 17. According to academic studies. so does the other variable. Correct Answer: B 15. Correct Answer: A 18. None of the above. In the U. the study of regressive genes. The term regression analysis is used to refer to: a) b) c) d) a type of psychiatric treatment. Based on the ECLS data. Correct Answer: D 21. Correct Answer: D 22. Parent’s socioeconomic status. Correct Answer: D 20. Correct Answer: C 23. Having an intact family. which of the following statements is correct? a) White children in a bad school perform just as poorly as black students attending the same school. Low birth weight. b) The analysis obviously did not control for the type of books parents read to their children and this is the problem. Based on analysis of the data collected in the Early Childhood Longitudinal Study (ECLS). c) Blacks in good schools outperform whites in bad schools. a statistical technique used to identify systematic relationships among two or more variables. d) All of the above. The child’s parents read to him nearly every day. Based on the ECLS data. . b) Black students in good schools do as well as their white counterparts in the same school. which of the following four factors is not correlated. How can we reconcile the finding that there is a positive correlation between having books in the home and a child’s test scores but there is no correlation between the fact that a child’s parents read to him almost every day and the child’s test scores? a) The analysis obviously did not control for the type of books that are present in the home and this is the problem. which of the following four factors is positively correlated with children’s test scores? a) b) c) d) Attending Head Start. Speaking English in the home.33 19. with children’s test scores? a) b) c) d) Parent’s education. Being adopted. the study of one’s ancestors. positively or negatively. what parents are but not what they do. Briefly explain the meaning of Sandman’s equation: Risk = hazard + outrage.e. Explain the difference between correlation and causation.e. . Short Answer/Essay Questions 1. What does it say about the relationship between the perceived risk and the actual risk of many events? Suggested Answer: Hazard represents the objectively determined risk. they form the subjective or perceived risk people associate with a particular event. Overall. Correct Answer: C 24. As such depending on how large the outrage factor is. Those who tend to get more noticed are those who market the “surety” or “certain success” of their methods. Correct Answer: D II. well educated. i. Briefly describe how the scientific analysis of a biologist or a physicist differs. analysis of the ECLS data suggests that what is most important in a child’s development is: a) b) c) d) what parents do and who they are. 4.34 c) The fact there is a positive correlation between books in the home and a child’s test scores is picking up the influence of what those children’s parents are. The economist seldom has this luxury in studying economic phenomenon and must rely on other means to “tease out” results from whatever data are available. even though the objective probability of event A’s occurrence is lower. Suggested Answer: A biologist or a physicist can often conduct a controlled experiment in the lab or in the field where one or two variables are allowed to change and the results observed and recorded. from the scientific approach of an economist. people may perceive event A as more risky than event B.. d) We can’t. 3. i. Outrage is the degree of emotional response by people to the event’s occurrence. multi-sided advice to parents? Suggested Answer: Because there are many parenting experts attempting to get the attention of parents. Together. what parents do but not who they are. It’s further evidence that regression analysis is unreliable. Why do parenting experts tend not to give objective. neither what parents do nor who they are but rather something else altogether. the probability of a particular undesirable event. generally speaking. 2.. is more important than what the parent does for the child. having a parent who reads every night to his or her child doesn’t matter. 6. Causation implies that a change in one variable causes the value of another variable to change in some predictable way. As such. in so far as performance on tests is concerned. they move in a systematic fashion. 5.35 Suggested Answer: If two variables are correlated. measured in terms of socio-economic standing. causation implies correlation. having lots of books at home or having a parent who reads those books every day to his or her child? What does this suggest about the marginal benefit of reading to one’s child in so far as success on standardized tests is concerned? Suggested Answer: According to the data. . According to the ECLS data discussed by Levitt and Dubner. i. so far as academic success goes. correlation does not imply causation. which is a more important indicator of a child’s success on standardized tests.. i. is zero (or close to it). what the parent is.e. which is statistically more important: what a parent does for a child or what the parent is? Suggested Answer: According to the ECLS data. they move together or in opposite directions. but the reverse is not true.. This would suggest that the marginal benefit of reading to one’s child.e. having lots of books in a child’s home matters. Considering only the measurement of a child’s performance on standardized tests. d) distinctive black culture has substantially increased the economic disparity between whites and blacks.36 Chapter 6 Perfect Parenting. The example in this chapter about Winner Lane and Loser Lane: a) is used to illustrate the bizarre trend of renaming in the court system. Multiple-Choice Questions 1. c) A child’s name tends to reflect the parent’s life. d) There is no identifiable relationship between a child’s name and his/her prospects for success in later life. Correct Answer: B 2. c) supports the “conventional wisdom” belief about the effect a child’s name has on his/her success in life. b) shows that Winner’s and Loser’s chances for success were not affected by their names. Which of the following statements is correct? a) The name a parent gives a child has a significant effect on the child’s success in later life. is failing to consider the relationship between a parent’s success and that of his/her child. Correct Answer: B . b) The more unique a child’s name is. Someone who argues. or: Would a Roshanda by Any Other Name Smell as Sweet? I. that a child’s name has a direct influence on the child’s success in later life: a) b) c) d) has failed to fully consider the implications of the data. all of the above. Correct Answer: C 3. Roland Fryer’s analysis of the California names data strongly suggests that: a) distinctive black culture is a cause of the economic disparity between whites and blacks. Part II. Correct Answer: D 4. d) is used to illustrate how a name can strongly affect how a child views himself/herself. c) distinctive black culture has substantially reduced the economic disparity between whites and blacks. is confusing correlation with causation. b) distinctive black culture is a reflection of the economic disparity between whites and blacks. the more likely he/she is to be successful in later life. on the basis of the California birth certificate data. and the latter is the more important determinant of a child’s success in later life. the dissimilarity between names is greatest when comparing: a) b) c) d) white and Asian-American children. Correct Answer: B . is declining as segregation declines. it is likely that: a) Jake and DeShawn will live extremely different lives based solely on their different names. is stronger among boys names than girls names. c) will be doomed to failure because of his/her name. d) will have the same amount of opportunities to succeed as does anyone else. d) we have no idea what will happen. On average. Usually a boy with a “white” name will tend to earn more money in his life than a boy with a “black” name.37 5. b) will enjoy greater economic success when compared to a distinctively “white” named individual. Correct Answer: A 9. Correct Answer: C 8. his name is an indicator. Hispanic and white children. Assuming Jake Williams and DeShawn Williams are born in the same neighborhood and into the same familial and economic circumstances. This is because: a) b) c) d) the world is still overcoming race issues. not a cause. white and black children. a person with a distinctively “black” name: a) will have a worse life outcome than a person with a distinctively “white” name. The significant distinction between “black” names and “white” names: a) b) c) d) is a relatively recent phenomenon. the boy with the black name will not grow up as confident as the boy with the white name. b) Jake and DeShawn will have similar life outcomes. most people with white names get into better schools. According to the California names data. is due to each races’ “distaste” for the other. of his outcome. Correct Answer: A 7. Correct Answer: C 6. c) because of their different “race-related” names Jake and DeShawn will end up living in different neighborhoods when they grow up. Asian-American and Hispanic children. but the names are usually spelled slightly different. Correct Answer: B 12. An economic explanation for this phenomenon is that: a) as a name becomes more popular its relative scarcity. d) are usually a result of a naming trend and not a cause. the more the supply of the name decreases. In Levitt and Dubner’s discussion of “where does a name come from” it is noted that celebrities: a) have a strong effect on the naming trends of lower-income families. but not boys. and therefore its relative value. Correct Answer: D 14. A black girl named Ebony whose mother was highly educated and successful. movie stars and other “icons” have a large influence on name trends. d) the more a name is used. c) have a strong effect on the naming trends of girls. Correct Answer: A 13. not because of the name change. the higher is demand. Levitt and Dubner’s discussion of “where does a name come from” shows us that: a) b) c) d) high-income families often give their children unique names. A white girl named Misty whose mother had a high school education. b) have a strong effect on naming trends. . lower-income families will adopt names that catch on among high-income families over a short period of time. the new name can give him/her more opportunities. there is no correlation between a child’s name and the parent’s socioeconomic status.38 10. declines. he/she will feel better about himself/herself. the higher the income. Names that are initially popular among higher-income parents gradually move down the socioeconomic ladder and eventually fall out of favor all together. Correct Answer: A 11. Anyone who bothers to change his/her name in the pursuit of economic success is likely to succeed because: a) b) c) d) he/she is motivated to succeed. A black girl named Claire whose mother had a high school education. Which of the following girls is most likely to be successful when they grow up? a) b) c) d) A white girl named Molly whose mother was single and poorly educated. a person’s name is the primary determinant of his/her success or failure.” c) the demand for anything is a function of income. b) a name associated with lower income families is necessarily an economic “bad. someone named after Britney Spears may be named Brittni instead. The girl’s name Annika is currently popular among higher-income. Correct Answer: A .. Based on recent trends described in the text. lower-income parents do most of their name shopping among: a) b) c) d) celebrities. There is no way to explain the phenomenon in economic terms. c) The misdeeds of Loser Lane. All of the following are examples of “correlation but not causation” except: a) Children whose parents are better educated and earn higher incomes tend to experience greater economic success than children whose parents are poorly educated and earn less income. doctor. and Amcher landed them all in court. causing even more parents to choose it. how would we describe the name’s fate in economic terms? a) As the name is adopted more frequently. higher-income families. and hence it value. c) As more people choose it for their children. c) Lower-income parents will increasingly choose it for their baby girls. Correct Answer: A 18. Correct Answer: D 16. and it remain popular among that group for several decades. What parent in his/her right mind would name his/her daughter Annika? Correct Answer: B 17. Temptress. measured in terms of the recognition it creates. the price of using it.39 Correct Answer: A 15. high-profile professions (e. lawyer). b) Boys with “white” names tend to earn more money than boys with “black” names. but it will then slip into obscurity. d) It will quickly slip into obscurity. According to the data. d) Ice cream sales and death by drowning tend to increase during the hot summer months. but eventually slip into obscurity. declines. b) Lower-income parents will increasingly choose it for their baby girls. Referring to the previous question. its relative scarcity. d) None of the above. and hence its value are relatively low. a) It will remain popular among higher-income parents. which of the following is the most likely description of what will happen to the use of this name over time. b) Because the name is so uncommon. popular brand names.g. demand for it. leading less parents to choose it over time. better-educated parents. declines. Evaluate this statement. According to the data in Freakonomics. distinguish their child from their future peers. influence how the outside world will view their child.g. Short Answer/Essay Questions 1. After all. but this is a correlation.40 19. They do not show cause and effect. have mean parents. are dumb names. Seeing this. The data merely show a correlation between certain names and the income of the named individual. What are parents signaling when they choose a name for their child? Suggested Answer: Parents are attempting to signal their hopes and expectations regarding their child. Correct Answer: A II. Is a person’s name likely to be an indicator of that person’s success in later life? Suggested Answer: No. “The name a parent gives his or her child will have a significant effect on the child’s success. education and income. e. Correct Answer: C 20. on the child’s potential for success. when naming their child.. other parents tend to use the names of successful people in naming their . Orangejello. will not catch on as popular names. 2. In fact.” Suggested Answer: The data show that economically successful parents tend to select from a limited group of names when naming their children. Levitt and Dubner are of the opinion that Shithead. 4. use a name to: a) b) c) d) signal their own expectations of how successful the child will be. the data show that certain names are associated with increased income. remind the child of the character of the person they were named after. There is a correlation between some names and higher income. The California names data suggests that most parents. the observed correlation is picking up the influence of the parent’s background. it doesn’t not establish cause and effect. what happens over time to the names of children who grow up to be successful? Suggested Answer: Economically successful parents tend to have economically successful children. 3. and Lemonjello: a) b) c) d) will be popular names in the future. These children tend to be economically successful like their parents. economically successful parents tend to avoid it. Eventually. . even low income parents don’t use the name and it falls out of the rotation of names completely.41 children. When a name comes into common use.