An Economic Model

question 136

Multiple Choice

An economic model:

• A) exactly explains what happens in the real economy.
• B) discards unnecessary details to clearly demonstrate the central principles of the economic activity.
• C) approximates all facets of what happens in the real economy.
• D) does not make clear assumptions about the economic activity.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply equals demand.

Collusion

A secret or illegal cooperation or conspiracy, especially between parties to cheat or deceive others, commonly in the context of firms agreeing on prices or market shares.

Incentive To Cheat

The motivation or reason that drives individuals or organizations to break rules, norms, or agreements in order to gain an unfair advantage or benefit.

Oligopolists

Firms or entities that are part of an oligopoly, a market structure characterized by a small number of large firms dominating the market, leading to limited competition.