Economic models are used primarily to
a. predict behavior under specific circumstances
b. make an exact reproduction of one facet of the economy
c. increase the mathematical complexity and rigor of economics
d. provide simple answers to simple questions
e. give accurate forecasts of the future
A
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The menu cost theory suggests that
A) wages and prices move freely and quickly. B) the economy is characterized only by perfect competition. C) there will be no unemployment. D) firms find frequent price changes to be costly.
The certainty equivalent approach to accounting for risk in capital budgeting involves
A) adjusting the discount rate used to calculate net present values. B) adjusting the expected cash flows. C) estimating the coefficient of variation. D) estimating the standard deviation of the net present values.
Bundling of products becomes _____, if the valuations of different customer groups are _____
a. more profitable; positively correlated b. less profitable; perfectly elastic c. less profitable; positively correlated d. more profitable; perfectly elastic
Ricky leaves his job as a high school math teacher and returns to school to study the latest developments in computer programming, after which he takes a higher paying job at a software firm. This is an example of
a. A compensating differential. b. Human capital. c. Signaling. d. Efficiency wages