Identify the Correct Statement

question 24

Multiple Choice

Identify the correct statement.

• A)It is absolutely compulsory for the government to earn a profitable return on the money it earns by selling bonds.
• B)When government borrowing rises, interest rates decline, thereby driving up private investment.
• C)When interest rates rise, fewer number of corporations offer new bonds to raise investment funds.
• D)An increase in interest rate reduces the cost of borrowing by the firms.
• E)When interest rates fall, the firm's cost of raising funds through bonds increases.

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Definitions:

Marginal Cost

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

Average Variable Cost

is the cost that varies with the level of output, calculated by dividing the total variable costs by the quantity of output produced.

Diminishing Returns

A rule that asserts when one input in the production process is augmented without changes to the others, there will ultimately be a decline in output after reaching a specific level.

Average Fixed Cost

The cost per unit that remains constant regardless of the level of production or output.