Suppose the City of Des Moines Has a High Credit

question 15

Multiple Choice

Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,

• A)the city's high credit rating and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.
• B)the city's high credit rating and the tax status of municipal bonds both contribute to a higher interest rate than would otherwise apply.
• C)the city's high credit rating contributes to a lower interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply.
• D)the city's high credit rating contributes to a higher interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply.

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Definitions:

P = MC

An equation that states that the price (P) of a product is equal to its marginal cost (MC), indicating the point at which the production of one more unit of a good or service is exactly covered by the sale price, often used in the context of perfect competition markets.

MC > ATC

Denotes a situation in which the marginal cost of producing an additional unit of a good is greater than the average total cost, implying that producing more of the good will increase the per unit cost.

Positive Profits

When a company or business generates earnings that exceed its costs and expenses, resulting in a net gain.

Market Price

The prevailing rate at which a good or service is available for purchase or sale on the open market.