Which of the Following Is a Reason for the Failure

question 36

Multiple Choice

Which of the following is a reason for the failure of PPP to predict exchange rates accurately?

• A)PPP takes transportation costs into consideration while predicting exchange rates.
• B)PPP assumes no barriers to international trade while predicting exchange rates.
• C)PPP considers the role of people's confidence and beliefs about a nation's economy in exchange rate predictions.
• D)PPP does not take into account the effect of the market forces of demand and supply.

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Definitions:

Average Total Cost Curve

A graphical representation showing how the average cost of production varies with the level of output.

Marginal Returns

The additional output that is produced by using one more unit of a given input, crucial in determining optimal production levels.

Total Fixed Costs

Expenses that do not change with the level of output or production in the short term, such as rent, salaries, and insurance.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output within a given period.