All Economic Models Must Involve Simplifications Because

question 47

Multiple Choice

All economic models must involve simplifications because

• A)economists would be unable to command high salaries if their models were so simple that anyone could understand them
• B)human behavior is very erratic and unpredictable
• C)reality is too complex to understand in its entirety, so we must reduce it to a level that we can understand
• D)they always try to duplicate all possible information and cover all possible variables that might influence decision making
• E)we must rely on value judgments and ignore reality

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Definitions:

Technological Advances

Developments and improvements in technology that enhance productivity, efficiency, and provide new opportunities for businesses and individuals.

Group Depreciation

A method in accounting where a collection of assets that are similar in nature and have approximately the same useful lives are depreciated as a single asset.

Salvage Value

The estimated residual value of an asset at the end of its useful life, which can be recovered through disposal or sale.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation to each year of the asset's useful life, resulting in consistent annual charges.