MyLab Microeconomics Chapter 2
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
Do economic models include all factors that impact outcomes?
No, models are a simplified representation of reality.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better.
How do economists distinguish between models that work and those that don't?
They test their models against real-world data.
Causation occurs when there is
a logical cause-and-effect relationship
An omitted variable is
a variable that may need to be added in order to understand a correlation
Negative correlation is
change in opposite directions
Positive correlation is
change in the same direction
To say that economists use the scientific method means that they are
developing models of the world and then testing and evaluating those models using data to see how closely the model matches what we actually observe
A controlled experiment
is when subjects are assigned to a control group or a treatment group
A natural experiment
is when subjects end up in the treatment group or the control group due to something that is not purposefully determined by the researcher
Correlation occurs when there is
two things that are related
Reverse causality is
when there is a cause and effect relationship but it goes in the opposite direction of what we thought
Economic models are meant to be
approximations that predict what happens in most circumstances
In order to confirm the accuracy of a model, you
test its predictions with empirical data
A control group is
the group that does not receive the experimental treatment
A treatment group is
the group that receives the treatment or the experimental manipulation