Choose the statement that best characterizes an economic theory.An economic theory
A)is only useful if its underlying assumptions are realistic.
B)will be useful as long as it is logically consistent.
C)must be judged on its ability to explain and predict real-world phenomena.
D)will predict more accurately if it contains a greater number of mathematical equations.
E)will be useful only if all human behaviour is rational.

Question

Quizplus · Accepted Answer

Economic theories are developed to explain and predict real-world phenomena. The usefulness of an economic theory is judged based on its ability to accurately explain observed economic phenomena and predict future outcomes. The underlying assumptions may not necessarily be realistic, but as long as the theory is logically consistent and produces accurate predictions and explanations, it is considered a valid economic theory. The inclusion of mathematical equations is not necessarily indicative of the accuracy of the theory, as sometimes simpler models may be more effective at explaining real-world outcomes. Additionally, not all human behavior is assumed to be rational in economic theories.

Choose the Statement That Best Characterizes an Economic Theory