In which of the following cases is the assumption most reasonable ?
Correct answer: C. To model the benefits of trade. an economist assumes that there are two people and two goods
- A. To address the impact to taxes on income distribution an economist assumes that everyone earns the same income.
- B. To address the impact of money growth on inflation, an economist assumes that money is strictly coins.
- C. To model the benefits of trade. an economist assumes that there are two people and two goods
- D. To estimate the speed at which a beach ball falls, a physicist assumes that if falls in a vacuum.
Explanation
Assuming two people and two goods simplifies trade theory while preserving its essential mechanism, comparative advantage. The other assumptions remove the very variation or real-world conditions needed to study the stated issue.
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