How Do Economists Begin Building an Economic Model

question 131

Multiple Choice

How do economists begin building an economic model?

• A) by writing grants for government funding
• B) by conducting controlled experiments in a lab
• C) by making assumptions
• D) by reviewing statistical forecasts

---

Definitions:

Variable Costing

An accounting method that only includes variable production costs (direct labor, direct materials, and variable manufacturing overhead) in product costs.

Unit Product Cost

The total cost (both variable and fixed) associated with producing a unit of product.

Net Operating Income

The profit realized from a business's operations after subtracting operating expenses but before taxes and interest.

Variable Selling

Refers to the costs associated with selling a product or service that fluctuate with the level of sales activity, such as commissions and shipping charges.