Explain why the average total cost curve and the average variable cost curve get closer to each other as output expands
What will be an ideal response?
The reason the two curves get closer to each other as output expands has to do with the fact that average fixed costs fall with increases in output. Since the only thing separating average total costs from average variable costs is the average fixed cost it stands to reason that they two curves should become closer with output expansion.
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Explain why a change in income tax rates causes the consumption schedule to change slope
Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?
a. Your aunt puts more money in her savings account. b. Foreign citizens decide to buy fewer U.S. bonds. c. You decide to purchase a new oven for your cookie factory. d. All of the above are correct.