An economic theory requires, among other things,
A)a set of value judgments to interpret the empirical evidence.
B)a controlled laboratory setting in which the theory can be tested.
C)that the set of predictions be correct.
D)a set of definitions of the variables to be considered.
E)the use of endogenous variables only.

Question

Quizplus · Accepted Answer

An economic theory requires a set of definitions of the variables to be considered. Choice A is incorrect because economic theory should be value-free, meaning it should not contain any value judgments. Choice B is incorrect because economic theory generally cannot be tested in controlled laboratory settings. Choice C is incorrect because while accurate predictions are desirable, they are not always possible. Choice E is also incorrect because the use of exogenous variables is often necessary in economic theory.

An Economic Theory Requires, Among Other Things