Which of the Following Statements About Simplifying Assumptions in Simulations

question 24

Multiple Choice

Which of the following statements about simplifying assumptions in simulations is TRUE?
I. Simplifying assumptions should not be used in simulations.
II. Simplifying assumptions should lead to conservative estimates.
III. Simplifying assumptions should lead to optimistic estimates.

• A) I only
• B) II only
• C) III only
• D) I and II only
• E) II and III only

---

Definitions:

Substitute Products

Products that can serve as replacements for one another; when the price of one increases, the demand for the substitute is likely to increase.

Herfindahl Index

A measure of market concentration used to evaluate the level of competition within an industry, calculated by summing the squares of the market shares of all firms in the industry.

Four-Firm Concentration Ratio

A measure of market concentration that indicates the combined market share of the four largest firms in an industry.

Productive Efficiency

A situation where a good or service is produced at the lowest possible cost.