The Central Question In Economics Is How To

Question: The central question in economics is how to:

Answer: make the best use of scarce resources to satisfy our unlimited wants.

Question: An economic hypothesis is tested:

Answer: by comparing the hypothesis’s predictions to real-world data.

Question: An economic theory:

Answer: is an abstraction from reality

Question: A good economic theory:

Answer: explains economic behavior and predicts well

Question: Economics is different from a “hard” science like physics because:

Answer: economists cannot easily control all the variables that might influence human behavior.

Question: A hypothesis is:

Answer: a testable proposition.

Question: When economists use the term “ceteris paribus,” they mean that:

Answer: all other variables except the ones specified are assumed to be constant.

Question: In the discussion of correlation and causation, correlation means:

Answer: two sets of phenomena may be related, but one does not necessarily cause the other.

Question: Ten-year-old Josh observes that people who play football are larger than normal and tells his mom that he’s going to play football because it will make him big and strong. Josh is:

Answer: mistaking correlation for causation.

Question: The fallacy of composition is:

Answer: erroneous view that what is true for the individual will also be true for the group