Which of the following statements about economic models is TRUE?
A) The best economic models must be most complex.
B) A good model does not rely on any assumptions.
C) Every model is based on a set of assumptions.
D) Economic models are designed to explain what people need.
Answer: C
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Betsy's utility depending from her consumption of coffee is shown in the table above. If the price of a cup of coffee is $2, Betsy's marginal utility per dollar from the 2nd cup of coffee per day is
A) 15. B) 40. C) 20. D) 32.5.
If firms differentiate their products in different ways and charge different price because of these differentiation factors, then
A) demand must be perfectly elastic. B) the law of one price is not violated. C) transactions costs are being ignored. D) the firm must not be maximizing profit.
The Fed attempts to affect the level of borrowed reserves by
A) changing the discount rate. B) changing legal reserve requirements. C) open market sales. D) open market purchases.
Refer to Figure 10.2. Which line represents wealth?
A. b
B. h
C. f + i
D. g