The Importance of an Economic Model Is That It Allows

question 102

Multiple Choice

The importance of an economic model is that it allows us to:

• A)build a complex and accurate model of the economy.
• B)build an accurate mathematical model of the economy.
• C)focus on the effects of only one change at a time.
• D)avoid opportunity costs.

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Definitions:

Plant Size

The physical capacity or dimensions of a manufacturing facility.

Implicit Costs

They represent the opportunity costs of using resources that a company already owns, rather than the out-of-pocket expenses.

Economic Costs

The total cost of production, including both explicit costs like wages and materials and implicit costs such as opportunity costs.

Accounting Profit

The total revenue of a business minus the explicit costs associated with that revenue, calculated using generally accepted accounting principles (GAAP).