Which of the Following Statements About Economic Models Is TRUE

question 223

Multiple Choice

Which of the following statements about economic models is TRUE?

• A)Economic models are not empirically testable.
• B)The predictive power of models is not important.
• C)Economic models are designed so that every detail of the real world can be analyzed.
• D)Every economic model is based on a set of assumptions.

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Definitions:

Contribution Format

A contribution format income statement categorizes costs as variable or fixed and calculates a contribution margin.

Net Operating Income

Profits from a company's core business operations, excluding deductions of interest and taxes.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, leading to the net profit or loss for that period.

Contribution Format

An income statement format that highlights the contribution margin, separating fixed costs from variable costs to provide insight into profitability.