If Expectations Are Formed Rationally,then Individuals

question 87

Multiple Choice

If expectations are formed rationally,then individuals

• A)will have a forecast that is 100% accurate all of the time.
• B)change their forecast when faced with new information.
• C)use only the information from past data on a single variable to form their forecast.
• D)have forecast errors that are persistently low.

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Definitions:

High-Low Method

A technique used in financial analysis to estimate fixed and variable components of a cost by analyzing the highest and lowest levels of activity and their corresponding costs.

Cost Formula

An equation used to calculate the total cost of a product or service, typically incorporating both fixed and variable costs.

Manufacturing Overhead

All manufacturing costs that are not directly assignable to specific units of product, including indirect labor and materials.

Total Variable Cost

The sum of all variable costs associated with the production of goods or services, which increases or decreases based on production volume.