Economists make assumptions because
A. this is a way of incorporating value judgments into their models.
B. their use allows complex situations to be analyzed.
C. this permits imperfect information to describe reality.
D. assumptions are the final product of careful economic analysis.
E. assumptions allow economists to avoid facts that contradict their theories.
Answer: B
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Refer to Table 10-6. What is Jay's optimal consumption bundle?
A) 1 burger and 2 cans of Pepsi B) 2 burgers and 3 cans of Pepsi C) 3 burgers and 2 cans of Pepsi D) 3 burgers and 1 can of Pepsi
If the expected path of interest rates on one-year bonds over the next five years is 2%, 4%, 3%, 2%, and 1%, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity of
A) one year. B) two years. C) three years. D) five years.
The price-cost squeeze is:
A. a tactic used by a vertically integrated firm to raise rivals' costs of inputs, while maintaining final product prices. B. the act of charging a low price initially upon entering a market to gain market share. C. a strategy whereby a firm temporarily prices below its marginal costs to drive competitors out of the market. D. a strategy whereby an incumbent maintains a price below the monopoly price in order to prevent entry.
One reason that the quantity demanded of a good increases when its price falls is that the:
A. price decline shifts the supply curve to the left. B. lower price shifts the demand curve to the left. C. lower price shifts the demand curve to the right. D. lower price increases the real incomes of buyers, enabling them to buy more.