Suppose an economist tests the theory that when the price of leather increases, fewer pairs of shoes are produced. He observes more shoes being produced when the price of leather increases. At the same time, a new production technology allowed for more shoes to be produced in less time. He has
A. has confused association and causation.
B. cannot test his theory because his observations violate the ceteris paribus assumption.
C. used normative economics to answer a positive question.
D. built a model with too many variables.
Answer: B
You might also like to view...
Suppose there is a $200 billion increase in government spending. We know that this increase in government spending will cause which of the following to occur?
A) equilibrium real GDP will increase by exactly $200 billion. B) an increase in equilibrium real GDP and an increase in the multiplier. C) an increase in equilibrium real GDP and a reduction in the multiplier. D) an increase in equilibrium real GDP and no change in the multiplier.
An item to which a business holds legal claim is called a(n)
A. opportunity cost. B. loan. C. asset. D. liability.