The Goal of an Economist Who Formulates New Theories Is

question 180

Multiple Choice

The goal of an economist who formulates new theories is to

• A)provide an interesting framework of analysis,whether or not the framework turns out to be of much use in understanding how the world works.
• B)provoke stimulating debate in scientific journals.
• C)contribute to an understanding of how the world works.
• D)demonstrate that economists,like other scientists,can formulate testable theories.

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Definitions:

Coase Theorem

A principle that suggests that if property rights are well-defined and transaction costs are negligible, parties will negotiate to correct externalities without the need for government intervention.

Externality Problems

Issues arising when the actions of individuals or firms have effects on third parties that are not reflected in market prices.

Cost-Benefit Analysis

An organized method for assessing the positives and negatives of various alternatives, aimed at finding the optimal solution that maximizes benefits and maintains savings.

Pollution Rights

Permits or allowances that authorize the holder to emit a certain amount of a pollutant, used in regulatory approaches to manage environmental impacts.