The Models That Economists Construct

question 58

Multiple Choice

The models that economists construct:

• A)usually make simplifying assumptions.
• B)often rely on physical constructs,such as those used by architects.
• C)rarely use mathematical equations or graphs.
• D)attempt to precisely replicate the real world.

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Definitions:

Factory Overhead

All indirect costs associated with the production process, such as salaries for supervisors and costs for utilities, not directly attributed to specific units of products.

Mixed Cost

A cost that contains both variable and fixed cost elements, making it partially dependent on the level of output or activity.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent or salaries.

Variable Cost

Expenses that change in proportion to the production level or the amount of output.