An economic hypothesis will be rejected when
A)the possibility of error has been completely eliminated.
B)a single empirical observation is encountered in which its predictions fail.
C)the probability that it is wrong, based on repeated empirical observations, is judged to be unacceptably high.
D)it is rejected by a single empirical observation.
E)one or more of the assumptions on which it is based fails to conform with reality.

Question

Quizplus · Accepted Answer

Economic hypotheses are subject to error and uncertainty, so it is unlikely that a single empirical observation will lead to total rejection of the hypothesis. Instead, hypotheses are rejected when repeated empirical observations provide evidence that the probability of error is too high, suggesting that the assumptions on which the hypothesis is based do not accurately reflect reality. Therefore, the best answer is C, as it reflects the need for multiple observations and consideration of the probability of error rather than a single observation as in A, B, and D, or assumptions alone as in E.

An Economic Hypothesis Will Be Rejected When