Explain the relationship between average fixed cost and marginal cost.
What will be an ideal response?
By definition, the total fixed cost does not vary with the output level. On the other hand, the marginal cost is the change in total cost as an additional output is produced. With a fixed production facility, any change in total production cost comes from a change in total variable cost because total fixed cost does not change. Thus there is no relationship between the average fixed cost and the marginal cost.
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In the balance sheet for the FBN bank above, the entries are in millions of dollars. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of
A) $280 million. B) $200 million. C) $360 million. D) $0.
A technological breakthrough that increases the marginal productivity of capital would increase the
a. demand for loanable funds, leading to a lower equilibrium market interest rate b. supply of loanable funds, leading to a lower equilibrium market interest rate c. demand for loanable funds, leading to a higher equilibrium market interest rate d. supply of loanable funds, leading to a higher equilibrium market interest rate e. supply of loanable funds but have no impact on the equilibrium market interest rate
During and following the recession of 2008-2009, private investment was
a. strong, and this should increase the future productivity of workers. b. strong, and this will tend to weaken the future productivity of workers. c. weak, and this will tend to reduce the future productivity of workers. d. weak, and this will tend to increase the future productivity of workers.
Which of the following is true?
a. In a competitive capital market, private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. b. In a competitive environment, profitable investment projects will tend to increase the wealth of the nation. c. When investment funds are allocated by governments (rather than capital markets), political clout rather than the expected rate of return will generally determine which projects are undertaken. d. All of the above are correct.