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Endogenous Variable
An endogenous variable in an economic model is one whose value is determined by the internal workings of the model itself. It is the outcome or result that the model seeks to explain. The transition from a short-run to a long-run analysis involves allowing previously fixed variables to become endogenous, meaning they can be adjusted within the model.
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Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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A small bakery has a single large oven with a fixed capacity. When one baker is working, they can produce 50 loaves of bread per day. When a second baker is hired, the total output increases to 90 loaves per day. Assuming both bakers are equally skilled, which statement best analyzes this production scenario?
A farm's production process for wheat is represented by a curve that plots the number of workers on the horizontal axis and the total wheat output on the vertical axis. The curve starts at the origin, rises, and becomes progressively flatter as more workers are added. What does the flattening shape of this curve imply about the contribution of each additional worker, assuming all other inputs like land and machinery are held constant?
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Long Run in Economics
Consider a simple economic model designed to explain a firm's daily hiring decisions. The model assumes the firm knows the market price for its product and the specific production technology it has available (e.g., its factory and machinery). The goal of the model is to determine the number of workers the firm should employ to maximize its profit. In the context of this specific model, which of the following is an endogenous variable?
A variable, such as the market price of a good, is inherently an outcome to be explained by an economic model and will be treated as such in every model that includes it.
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Consider a standard economic model designed to explain the market for new cars. The model's purpose is to determine the equilibrium price and the total quantity of cars sold annually. The model assumes that factors like the average price of steel (a key input for making cars) and the average household income are external factors that influence the market but are not explained by it. Based on this model's purpose, match each variable below to its correct classification.
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