Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points
What will be an ideal response?
The relationship between marginal and average values can be stated as follows: if the marginal value is below the average value for a variable, it pulls the average value down and if the marginal value is above the average value, it pulls the average value up. Applying this to cost curves, if average total cost is falling, marginal cost must lie below average total cost. If average total cost is rising, marginal cost must lie above average total cost. Therefore, the marginal cost curve must intersect the average total cost curve at its minimum point. The same principle applies to the average variable cost curve.
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A currency revaluation is a(n):
A. increase in the value of a currency relative to other currencies. B. increase in the official value of a currency in a fixed-exchange-rate system. C. decrease in the value of a currency relative to other currencies. D. reduction in the official value of a currency in a fixed-exchange-rate system.
Which of the following statements is CORRECT?
I. The exchange rate is a price. II. The exchange rate is different from other prices because it is NOT determined by supply and demand. A) only I B) only II C) I and II D) neither I nor II
If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause
A) an increase in exchange rate, E. B) a decrease in exchange rate, E. C) an increase in output, Y. D) a decrease in output, Y. E) shifting of the AA curve up and to the right.
Points on the production possibilities frontier have the property that they
A) are inherently unattainable. B) show the maximum amount of leisure that can be consumed for given amounts of goods consumed. C) show the maximum amount of goods that can be consumed for given amounts of government spending. D) show the maximum amount of leisure that can be consumed for given amounts of hours worked.