Briefly Explain One Function of Financial Instruments That Can Make

question 105

Essay

Briefly explain one function of financial instruments that can make them very different from money.

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Definitions:

Diseconomies of Scale

The situation in which the cost of producing each individual unit rises when a company's production volume grows, often resulting from inefficiencies and a rise in complexity.

Long-run Average Total Cost

The cost per unit of output in which all inputs, including capital, are variable, showing economies and diseconomies of scale over time.

Increasing Returns to Scale

A situation in which a proportional increase in all inputs results in a more than proportional increase in output, demonstrating economies of scale.