If There Are No Taxes or Imports and MPC =

question 172

Multiple Choice

If there are no taxes or imports and MPC = 0.75, the multiplier equals

• A) 0.25.
• B) 1.33.
• C) 4.0.
• D) 6.0.

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Definitions:

Fixed Costs

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

Average Variable Cost

The total variable cost per unit of output, obtained by dividing total variable costs by the quantity of output.

Output

The total amount of goods or services produced by a company or country.

TVC

Total Variable Cost, the sum of all variable costs (costs that vary with production volume) associated with producing a specific quantity of a good or service.