The president of a company is told that the fixed costs next year will be higher than anticipated. Even so he has told his operations managers that this should not affect their production levels. Comment on this statement
What will be an ideal response?
The statement is correct. Higher fixed costs won't affect the marginal or variable costs of the firm. The profit-maximizing production decision is predicated on equating marginal revenue and marginal cost. Neither of these change when fixed costs change.
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Due in part to record low interest rates on U.S. Treasury Bonds,
A) investors searching for higher yields bought corporate bonds B) interest rates on corporate bonds rose C) corporations faced higher borrowing costs D) many corporations were at greater risk of defaulting
The Keynesian economists do not believe that a cut in the marginal income tax rate will have strong effects on aggregate supply because they
a. do not believe that business investment will respond strongly to changes in the after-tax rate of return to capital. b. do not believe that labor supply will respond strongly to changes in the after-tax real wage. c. do not believe that labor demand will respond strongly to a change in the after-tax real wage. d. believe monetary policy will be too restrictive to allow strong output growth.