Why do economists abstract, and is it appropriate?
What will be an ideal response?
Economists (and other scientists) abstract in order to be able to focus on key variables. It is appropriate, because the economy is very complex; trying to keep track of everything is extremely difficult. Thus, economists focus on relevant variables and ignore those that are less relevant to the problem at hand. Abstraction allows focus on the forest instead of the trees.
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When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will
A) encourage new firms to enter the market. B) cause existing firms to shut down. C) cause existing firms to leave the market. D) mean that the firms' owners earn a normal return.
If the amount you owe on your house is greater than the price of the house, you have
A) negative equity in your house. B) no value to your house. C) a reverse mortgage on your house. D) a mortgage rate that is too high.
The U.S. civilian labor force does not include
a. the self-employed. b. members of Congress. c. members of the armed services. d. lawyers and doctors.
One problem with cost-plus regulation is that:
A. government ownership is often inefficient. B. consumers would be willing to pay more for higher quality goods. C. it blunts regulated firms' incentives to cut costs. D. there is no way for a regulated firm's owners to recoup their opportunity costs.