Which of the Following Events Could Explain a Decrease in Interest

question 195

Multiple Choice

Which of the following events could explain a decrease in interest rates together with an increase in investment?

• A)The government went from surplus to deficit.
• B)The government instituted an investment tax credit.
• C)The government reduced the tax rate on savings.
• D)None of the above is correct.

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Definitions:

MR = MC

A condition where the marginal revenue (MR) equals marginal cost (MC), which is the profit maximizing level of output for a firm under perfect competition.

Marginal Revenue

The increased income derived from the sale of one extra unit of a good or service.

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.

MC > MR

A condition where Marginal Cost (MC) is greater than Marginal Revenue (MR), suggesting that producing additional units of a good will not increase profits and may reduce them.