In the Baumol Model, the Optimal Sale Amount Is _____

question 68

Multiple Choice

In the Baumol model, the optimal sale amount is _____ with higher interest rates and ______ with a higher cost of selling securities.

• A)increased; increased
• B)decreased; increased
• C)decreased; decreased
• D)increased; decreased

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Definitions:

Marginal Productivity

Marginal productivity measures the change in output resulting from altering the level of a single input while holding other inputs constant.

Marginal Costs

The added financial burden of creating one more unit of a product or service.

Average Costs

The total cost of production divided by the quantity produced, often used to evaluate production efficiency.

Fixed Costs

Costs that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance premiums.