Question

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

	a.	Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.
	b.	Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations.
	c.	Ask people in Alaska why they are not purchasing oil.
	d.	None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Answer 1

Ans) the correct option is a) Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.