A Good Economic Theory

question 107

Multiple Choice

A good economic theory:

• A)includes every detail that affects the economic behavior of interest.
• B)relies on simplifying assumptions in order to explain economic behavior.
• C)does not rely on simplifying assumptions.
• D)is impossible to achieve because of the difficulty of conducting controlled experiments.
• E)is normative and therefore not testable.

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Definitions:

Average Fixed Costs

The constant production costs (unaffected by changes in output) divided by the production volume.

Swords

Swords are bladed weapons used historically and today for ceremonial, martial, or symbolic purposes, characterized by long blades for slashing or thrusting.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the quantity of output produced.

AFC

Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced; a measure of economies of scale.