Economic models are ________.

• A. exact replicas of real-world economies
• B. normative statements about what the economy should be
• C. simplified representations of reality used to analyze economic phenomena
• D. comprehensive descriptions of all market variables

Answer: (C)

Verified step by step guidance

1. Understand that economic models are tools used by economists to analyze and explain economic phenomena by focusing on key variables and relationships.
2. Recognize that economic models are not exact replicas of real-world economies because real economies are too complex to be captured fully in a single model.
3. Note that economic models are positive, not normative; they describe how the economy works rather than prescribing what it should be.
4. Acknowledge that economic models simplify reality by including only the most relevant factors to make analysis manageable and insightful.
5. Conclude that the best description of economic models is that they are simplified representations of reality used to analyze economic phenomena.