Which of the following statements about economic models is correct?
a. Economic models are built to mirror reality exactly.
b. Economic models are useful, but they should not be used for the purpose of improving public policies.
c. Because economic models omit many details, they allow us to see what is truly important.
d. Economic models seldom incorporate equations or diagrams.
c
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Marginal cost is defined as
a. the additional cost attributable to the last unit produced. b. the change in fixed costs associated with the production of one more unit of output. c. the difference between total revenue and total cost. d. price times quantity.
For a normal good, the
a. income effect is greater than 1.0 b. income effect is negative c. substitution effect is zero d. income effect and the substitution effect work in the same direction e. demand curve is horizontal
Which of the following is most important if a country is going to achieve and sustain rapid economic growth?
a. large government expenditures as a share of GDP b. institutions and policies that are supportive of competition (open markets) and freedom of exchange. c. free elections and political democracy d. monetary policy makers who are willing to expand the supply of money rapidly
Explain the difference between substitutes and complements
What will be an ideal response?