An Economist Builds a Model by Beginning with Certain Self-Evident

question 4

Multiple Choice

An economist builds a model by beginning with certain self-evident principles and then derives the implications of that model. What approach is this economist taking?

• A) Inductive
• B) Deductive
• C) Apophatic
• D) Experimental

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Definitions:

Variable Costs

Expenses that change in proportion to the production or sales figures, like direct labor and raw materials.

Break-Even Point

The level of activity or sales volume at which total revenues equal total costs, resulting in no net loss or gain.

Automated Equipment

Machinery and tools that operate with minimal human intervention, often used to enhance efficiency in manufacturing or production processes.

Contribution Margin Ratio

A financial ratio that shows how much of a company's sales revenue is available to cover its fixed costs and contribute to net profit, calculated as contribution margin divided by sales revenue.