Does minimizing average total costs ensure that a firm is maximizing its profits?
No. To maximize profits a firm should produce the output level where MR = MC. It is possible that this
will not coincide with the minimum point on the average total cost curve.
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In the absence of technological progress, we know that the level of output per worker in the steady state will
A) increase over time. B) remain constant. C) decrease as a result of decreasing returns to scale. D) increase or decrease, depending on the rate of saving. E) increase or decrease, depending on the rate of depreciation.
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and current international transactions become more positive (or less negative). b. The real risk-free interest rate rises and current international transactions become more negative (or less positive). c. The real risk-free interest rate and current international transactions remain the same. d. The real risk-free interest rate rises and current international transactions remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.