A Useful Economic Model

question 111

Multiple Choice

A useful economic model

• A)deals only with possibilities that actually occurred.
• B)makes only realistic assumptions.
• C)may make some unrealistic assumptions in order to simplify a complex reality.
• D)should avoid drawing conclusions that have public policy implications, since economics is not equipped to make value judgments.

---

Definitions:

Production Possibilities Frontier

A graphical representation that shows the combination of two goods that can be produced using all resources efficiently.

Inefficient Levels

Situations where resources are not being used in the best possible way from an economic perspective, leading to potential waste or losses.

Opportunity Cost

Foregoing the prospective advantages from various other alternatives by making a single selection.

Opportunity Cost

The expense related to overlooking the next in line preferable option in the course of decision-making.