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

Economics

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The aggregate demand curve shifts to the right when the Fed:

A. increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function. B. decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function. C. decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function. D. increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.

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A production goal may be set too high by upper management because

a. they are unsure about the actual costs of production b. they under-estimate the difficulty of meeting a goal c. division managers over-state the difficulty of meeting the goal d. all of the above

Economics

It is efficient not to alter the amount of pollution produced by the market.

Answer the following statement true (T) or false (F)

Economics

The law of diminishing marginal product shows the relationship

A) between accounting and economic profits. B) between short-run and long-run outputs of a firm. C) between inputs and outputs for a firm in the short run. D) between inputs and outputs for a firm in the long run.

Economics