The Formation of an Optimum Currency Area Is More Likely

question 14

Multiple Choice

The formation of an optimum currency area is more likely to be beneficial:

• A) the smaller is the mobility of resource among the various nations of the optimum currency area
• B) the smaller the structural similarities of member nations are
• C) the more willing member nations to closely coordinate their fiscal, monetary, and other policies are
• D) all of the above

---

Definitions:

Efficient Scale

The level of production that minimizes long-term average total costs, resulting from economies of scale without incurring diseconomies of scale.

Marginal Cost

The supplementary cost attached to the output of an additional product or service unit.

Diminishing Marginal Product

The principle stating that as one inputs more of a factor of production while holding other inputs constant, the added output produced from each additional unit of the variable input eventually decreases.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, or loan payments.