The Purpose of Making Assumptions in Economic Model Building Is

question 43

Multiple Choice

The purpose of making assumptions in economic model building is to

• A)force the model to yield the correct answer.
• B)minimize the amount of work an economist must do.
• C)simplify the model while keeping important details.
• D)express the relationship mathematically.

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Definitions:

Dike Unit

A geological feature consisting of a vertical or steeply inclined sheet of rock that formed from magma intruding into cracks or fissures within the earth's crust.

Mortality Table

A statistical table showing the probability of death for individuals at each age, used by insurance companies to determine premiums.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Premiums

The amounts paid regularly to an insurance company in exchange for coverage, protecting against financial losses.