Public Goods Should Be Produced Up to the Point at Which

question 172

Multiple Choice

Public goods should be produced up to the point at which the marginal cost of production equals:

• A)the maximum price any individual is willing to pay for that unit.
• B)the sum of the individual marginal benefits from all consumers of that unit.
• C)zero,which is the marginal cost of allowing another individual to consume the good.
• D)the highest marginal benefit from any individual consumer of the good.

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Definitions:

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, modified to account for changes in cash flow schedules.

Basis Points

One basis point is equal to 1/100th of 1%, used primarily to denote the change in interest rates, equity indexes, and the yield of fixed-income securities.

Price Decline

A decrease in the market price of an asset or security.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to a change in interest rates, often expressed in years.