A good economic model
A) cannot be refuted.
B) describes the real world completely and in detail.
C) captures the essential relationships of the problem under consideration.
D) captures all relationships about the problem under consideration.
Answer: C
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Total reserves minus bank deposits with the Fed equals
A) vault cash. B) excess reserves. C) required reserves. D) currency in circulation.
The act of putting a new product on the market in order to make profits is called
a. invention. b. innovation. c. investment. d. development.
Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then
a. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. b. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. d. There is not enough information to answer the question.
For most producing firms:
A. marginal cost rises as output is carried to a certain level, and then begins to decline. B. total costs rise as output is carried to a certain level, and then begin to decline. C. average total costs rise as output is carried to a certain level, and then begin to decline. D. average total costs decline as output is carried to a certain level, and then begin to rise.