Multiple Choice
Which of the following best describes the opportunity cost of keeping cash at home?
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
In microeconomics, the phrase 'other things held constant' is often used to indicate which of the following assumptions when analyzing scarcity and choice?
A
Opportunity cost
B
Ceteris paribus
C
Marginal analysis
D
Law of diminishing returns
Verified step by step guidance1
Understand that the phrase 'other things held constant' is a way to isolate the effect of one variable by assuming that all other relevant factors remain unchanged.
Recognize that in microeconomics, this assumption is formally known as 'ceteris paribus,' which is Latin for 'all other things being equal.'
Note that 'ceteris paribus' allows economists to analyze the relationship between scarcity and choice without interference from external changes.
Distinguish 'ceteris paribus' from other concepts such as opportunity cost (which deals with trade-offs), marginal analysis (which examines incremental changes), and the law of diminishing returns (which describes decreasing output from additional input).
Conclude that when the phrase 'other things held constant' is used, it specifically refers to the assumption of ceteris paribus in economic analysis.
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