Refer to Scenario 1

question 34

Multiple Choice

Refer to Scenario 1.1 below to answer the question(s) that follow.
SCENARIO 1.1: An economist wants to understand the relationship between minimum wages and the level of teenage unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers.
-Refer to Scenario 1.1. The statement that an increase in the minimum wage causes an increase in teenage unemployment is an example of

• A) a fallacy.
• B) an economic theory.
• C) normative economics.
• D) deductive reasoning.

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Definitions:

Capital Contributions

Financial investments made by owners or shareholders into a company, enhancing its equity.

Annual Partnership Income

The total income generated by a partnership over a one-year period, distributed among the partners according to the partnership agreement.