When Marginal Costs Are Increasing

question 95

Multiple Choice

When marginal costs are increasing

• A) a firm is experiencing diminishing returns.
• B) average cost is always increasing.
• C) average cost is always decreasing.
• D) marginal costs are always greater than average costs.

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Definitions:

Covered Interest Arbitrage

An investment strategy where an investor takes advantage of the interest rate differential between two countries while hedging exchange rate risk.

Nominal Risk-Free Rate

The nominal risk-free rate is the rate of return on an investment with no risk of financial loss, not adjusted for inflation.

Forward Rate

The agreed-upon interest rate for a financial transaction that will be conducted at a future date.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.