When the Marginal Propensity to Consume Foreign Imports (MPC_F) Rises

question 150

Multiple Choice

When the marginal propensity to consume foreign imports (MPC_F) rises, ceteris paribus, what happens to the trade balance?

• A) It increases.
• B) It decreases.
• C) It depends on what happens to the MPC of domestic goods.
• D) It will not change.

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Definitions:

Profit

The profit made when the income from a business operation surpasses the expenditures, costs, and taxes required to maintain that operation.

Zero Marginal Cost

Zero marginal cost describes a situation where producing one additional unit of a good or service does not increase the total cost of production.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, which are incurred regardless of the quantity produced.

Patent

A legal right granted by a government to an inventor, giving the holder exclusive rights to use, sell, and manufacture the invention for a certain period of time.