Economists Often Evaluate a Theory in Terms of How Consistently

question 21

Multiple Choice

Economists often evaluate a theory in terms of how consistently and accurately it predicts what happens.Implicit in this position is the belief that

• A) if the theory's predictions are consistently accurate,then there is a fairly good chance that the theory is a good explanation of how things work.
• B) if the theory's predictions are consistently accurate,then there is a fairly good chance that the theory will be accepted by others.
• C) if the theory's predictions are consistently accurate,then there is a fairly good chance that the theory's assumptions (even if they initially seem unrealistic)capture something that is essential to explaining what it is that the theory is trying to explain.
• D) all of the above

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Definitions:

Direct Material

These are the raw materials and components that are consumed directly in the manufacture of a product.

Variable Overhead

Costs that vary in total in direct proportion to changes in activity level or volume, such as utility costs or raw materials that fluctuate with production levels.

Factory Depreciation

The decrease in value of manufacturing equipment and facilities over time due to wear and tear or obsolescence.

Return on Investment

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of multiple investments.