When Forming Theories, Economists Must Be Careful to

question 18

Multiple Choice

When forming theories, economists must be careful to

• A) include all known facts and details.
• B) omit crucial factors.
• C) mirror the real world as realistically but as simply as possible.
• D) consider historical behavior and policies.
• E) limit the analysis to two variables.

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Definitions:

Labor Efficiency Variance

The difference between the actual labor hours used in production and the standard hours expected, multiplied by the standard labor rate.

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the standard or expected wage rate, multiplied by the total hours worked.

Standard Amount

A benchmark or norm set for the quantity or cost of inputs in producing a specific product or in carrying out a process.

Actual Output

The real, quantifiable production achieved within a given time period, often compared against planned or potential output.