The Scientific Purpose of Simplifying Assumptions in an Economic Model

question 10

Multiple Choice

The scientific purpose of simplifying assumptions in an economic model is to

• A)eliminate the possibility of personal bias in the model.
• B)add necessary hypotheses to the problem.
• C)avoid confronting difficult issues.
• D)abstract from the complexities of the real world those issues that are not important for the issues under examination.
• E)eliminate the need for further testing of the implications of the model.

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Definitions:

Direct Labor Budget

A financial plan that estimates the cost of direct labor needed to meet production needs within a specific timeframe.

Direct Labor-Hour

A measure of the amount of time workers spend directly working on manufacturing a product or providing a service.

Labor Rate

The cost per hour that a company pays for labor, often used in calculating the total labor cost of a project or production.

Selling and Administrative Expense Budget

outlines predicted selling expenses and administrative costs for a future period.