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