Which Statement Is a Characteristic of Economic Models

question 136

Multiple Choice

Which statement is a characteristic of economic models?

• A) Models try to boil down an economic situation to its most basic elements.
• B) Models are always complex because the economy is complex.
• C) Models attempt to reproduce reality exactly.
• D) Models try to avoid invoking the ceteris paribus assumption.

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Definitions:

Profit-Maximizing Level

The output level at which a firm achieves the highest possible profit, where marginal cost equals marginal revenue.

Competitive Firm

A business entity in a market where it must take the prevailing market price as given, due to its inability to influence prices through its own actions.

Market Price

The present cost at which a product or service is available for purchase or sale in the market.

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.