Basing Expectations on the Past and Giving More Weight to the Recent

question 68

Multiple Choice

Basing expectations on the past and giving more weight to the recent past is an example of which of the following?

• A)rational expectations
• B)adaptive expectations
• C)illusional expectations
• D)the expectations theory

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Definitions:

Profit-Maximizing

A strategy or point at which a business reaches the highest possible level of profit through the adjustment of sale prices, production costs, and output volume.

Level of Output

The total volume of goods or services produced by a firm, industry, or economy within a given period.

Perfect Competitor

A theoretical market structure in which many firms sell identical products, entry and exit are free, and no single buyer or seller can influence the market price.

Economic Profit

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