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) confused association and causation.
B) misunderstood the Ceteris paribus assumption.
C) used normative economics to answer a positive question.
D) built an untestable model.

Question

Quizplus · Accepted Answer

The economist has misunderstood the Ceteris paribus assumption, which means "all other things being equal." In this scenario, the introduction of new production technology is an external factor that wasn't accounted for, affecting the outcome of the observation.

Suppose an Economist Tests the Theory That When the Price