Assumptions for economic theories and models should be
A)rejected if they are not totally realistic.
B)logical rather than empirically testable.
C)simple and reasonable rather than complex.
D)maintained until overwhelming evidence to the contrary occurs.

Question

Quizplus · Accepted Answer

Economic theories and models should be reasonable and simple, but not necessarily completely realistic. They are abstractions designed to help us understand complex economic reality, so they do not have to reflect it exactly. However, theories and models should not be rejected out of hand because they involve simplifications or unrealistic assumptions. Rather, they should be evaluated based on their ability to provide insights into economic phenomena and to generate testable hypotheses that can be supported or refuted by empirical or other means.

Assumptions for Economic Theories and Models Should Be