A good economic model
a. is as simple as possible, including only necessary details
b. is as complex as possible, including many details
c. represents reality as concretely as possible
d. tries to be as detailed as the reality it is describing
e. is very detailed regardless of its purpose
A
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If we are considering the relationship between two variables and release one of the other-things-equal assumptions, we would expect:
A. the relationship to change from direct to inverse.
B. the line representing that relationship on a graph to shift.
C. the data points to have a tighter fit to the line representing the relationship.
D. the relationship to change from inverse to direct.
Exhibit 2-18 Production possibilities curves
In Exhibit 2-18, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This economy:
A. is worse off in Year Y than in Year X. B. has stagnated production in this two year period. C. has less unemployment in Year Y than it did in Year X. D. has shown growth between these two years.
The necessary condition(s) to realize economies of scale include
A. having the financial resources for the high capital costs. B. having sufficient demand for the product. C. both financial resources for the high capital costs and sufficient demand for the product.
Answer the following questions true (T) or false (F)
1. In monopolistic competition, if a firm produces a highly desirable product relative to its competitors, the firm will be able to raise its price without losing any customers. 2. When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect. 3. If the marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.