Assuming Initially That R = 10 Percent and C =

question 70

Multiple Choice

Assuming initially that r = 10 percent and c = 40 percent, a decrease in r to 5 percent causes ________.

• A) the money multiplier to increase from 2.8 to 3.11
• B) the money multiplier to decrease from 3.11 to 2.8
• C) the money multiplier to increase from 2 to 2.22
• D) the money multiplier to decrease from 2.22 to 2

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Long-run Average Total Costs

The average cost per unit of output where all inputs, including capital, are variable and the firm has adjusted all inputs to find the lowest average cost.

Long-run Marginal Cost

The change in total cost when producing one additional unit of a product or service in the long term, where all inputs are considered variable.

Economies of Scale

Enterprises gain cost benefits from their operation size, as the cost for each unit produced typically drops when the scale enlarges because fixed expenses are distributed across a greater number of output units.