Consider the statement: Giving an extra dollar to a homeless person provides more additional utility than giving an extra dollar to a corporate CEO. Economic theory:
A) doesn't allow economists to directly test this statement.
B) can test this proposition scientifically.
C) leads economists to agree with this statement.
D) can test this proposition by examining tax returns.

Question

Quizplus · Accepted Answer

Economic theory does not provide a way to directly measure or compare the utility that different individuals derive from a single dollar. Utility is a subjective feeling, and reactions to the same amount of money can vary among different individuals. Therefore, economists cannot test this statement scientifically or draw definitive conclusions about it. However, some economists may use empirical methods to estimate the impact of charitable donations on the welfare of different groups or individuals. Additionally, examining tax returns would not provide useful data for testing this statement, as income and taxes paid alone do not reflect a person's utility or preferences.

Consider the Statement: Giving an Extra Dollar to a Homeless