All Economic Models Must Involve Simplifications Because

question 50

Multiple Choice

All economic models must involve simplifications because:

• A)economists would be unable to command high salaries if their models were so simple that anyone could understand them.
• B)human behavior is very erratic and unpredictable.
• C)reality is too complex to understand in its entirety,so we must reduce the complexity to a level that we can understand.
• D)they always try to duplicate all possible information and cover all possible variables that might influence decision making.
• E)we must rely on value judgments and ignore reality.

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Definitions:

Fabrication

The process of constructing or manufacturing an item from raw or semi-finished materials.

Assembly Departments

Sections within a manufacturing facility where components are assembled into final products.

Residual Income

The income that an individual or business has after all expenses and costs, including capital costs, have been subtracted.

Investment Opportunity

A potential financial venture, project, or mechanism expected to yield returns or benefits.