The First Step in Economic Analysis Is to

question 52

Multiple Choice

The first step in economic analysis is to

• A) explore how the equilibrium changes if the constraints change.
• B) make explicit assumptions about the desirability and the cost of various alternatives.
• C) apply the equimarginal principle to the problem being considered.
• D) determine how agents' constraints are interrelated.

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Definitions:

Economic Profits

Total revenues minus total costs, where total costs include both explicit and implicit costs.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and products that are similar enough to be interchangeable.

Long Run

A period of time in economics during which all inputs and conditions can be varied, allowing for full adjustment to changes.

Perfectly Competitive Market

A theoretical market structure characterized by an infinite number of buyers and sellers, where no single entity has the power to influence the market price.