The Ceteris Paribus Assumption Is Used in Economics

question 119

Multiple Choice

The ceteris paribus assumption is used in economics

• A)because economic theory is an accurate reflection of the real world.
• B)to isolate the important variables when formulating a theory.
• C)primarily to identify unstable equilibrium situations.
• D)to make the theory more complicated
• E)to distinguish economics from other disciplines.

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Definitions:

Expected Annual Net Income

The projection of a company's net income over a year, taking into account estimated revenues and expenses.

Average Investment

The middle amount invested over a period of time, often used in performance measurement or investment appraisal.

Unprofitable Segment

A division or part of a business that consistently operates at a loss, detracting from the overall profitability of the company.

Elimination

The process of removing a component or aspect, often used in the context of accounting to adjust consolidated financial statements.