An Economist at the University of Alaska at Anchorage Has

question 33

Multiple Choice

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

• A) Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.
• B) Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations.
• C) Ask people in Alaska why they are not purchasing oil.
• D) None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

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Definitions:

Contribution Margin

The amount by which the sale of products or services exceeds variable costs, contributing to the coverage of fixed costs and profit generation.

Machine Hour

A unit of measure representing an hour of operation of a machine, used in calculating the cost of running machinery for manufacturing.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales.

Selling Price

The amount of money a buyer pays to purchase a product or service.