An Economist at the University of Alberta in Edmonton Has

question 128

Multiple Choice

An economist at the University of Alberta in Edmonton has been asked to explain why the price of Albertan crude oil has fallen recently. Which steps should the professor take in order to assemble a scholarly answer?

• A) Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts.
• B) Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
• C) The oil industry is controlled by a cartel and the economist should gather data from other similarly structured industries to determine a theory.
• D) Use a questionnaire to determine why residents of Alberta are not purchasing oil and create a theory based on this data.

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Definitions:

Total Revenue

The total amount of money a firm receives from sales of its goods or services, calculated as the price per unit times the number of units sold.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price over a specified period of time.

Market Period

A very short duration in economics during which the supply of a good is fixed and cannot be adjusted in response to changes in demand.

Long Run

The long run is a period of time in economics where all inputs and factors of production can be varied, allowing companies to adjust all their resources.