Assume a Simple Model of the Expenditure Sector with No

question 30

Multiple Choice

Assume a simple model of the expenditure sector with no income taxes.If a lump sum tax decrease of 200 leads to an increase in income of 800, what is the size of the mps?

• A)0)10
• B)0)20
• C)0)25
• D)0)40
• E)0)80

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Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the number of goods produced, essentially the per unit production cost.

Average Variable Cost

The total variable costs (like materials and labor) divided by the quantity of output produced, indicating the cost of producing each unit.

Fixed Capital

Long-term assets used in the production of goods and services, such as buildings, machinery, and equipment.

Variable Labor

Labour costs that vary directly with the level of production or output in a business.