Answer the following questions true (T) or false (F)
1. Direct finance refers to the flow of funds from savers to borrowers through financial markets.
2. The interest payment on a bond is called a face value payment.
3. The higher the default risk on a bond, the higher the interest rate will be.
1. TRUE
2. FALSE
3. TRUE
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Inflation ________ the cost of holding money and ________ the after-tax real interest rate
A) decreases; increases B) increases; decreases C) increases; increases D) decreases; decreases E) increases; does not change
Producer surplus is the price of a good minus the opportunity cost of producing it, summed over the quantity produced
Indicate whether the statement is true or false
For a theme park a two-tier tariff can include a positive admission price and a zero per-ride fee
What will be an ideal response?
Competitive pricing is efficient because
A) the price that consumers pay reflects the opportunity cost to society of producing the good. B) firms make positive economic profits in long-run equilibrium. C) average revenue equals average cost. D) firms produce above the minimum efficient scale.