An Economist at the University of Alaska at Anchorage Has

Multiple Choice

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 in order 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.