The Basic Purpose of Economic Models Is To

question 114

Multiple Choice

The basic purpose of economic models is to:

• A)construct simplifying assumptions about the real world.
• B)explain reality in all its complexity.
• C)collect empirical data to support the facts.
• D)construct situations where controlled experiments can be carried out.
• E)explain and predict economic events.

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Definitions:

Short Run

A period in which at least one of a firm's inputs is fixed and cannot be varied.

Variable Costs

Expenses that directly fluctuate in accordance with the amount of production or output.

Average Cost

The total cost of production divided by the number of units produced, indicating the cost per unit.

Fixed Costs

Costs that do not vary with the level of production or business activity, such as rent, salaries, and insurance.