Author Question: Financial institutions participate in which of the following activities? A) indirect finance B) ... (Read 116 times)

fagboi · **on:** Jun 30, 2018

Financial institutions participate in which of the following activities?

A) indirect finance B) financial intermediation
C) the issuance of loans D) all of the above

Question 2

From the table below, choose the optimum option using marginal analysis.

Option Total Cost ()
1 150
2 100
3 80
4 70
5 90
6 120

What will be an ideal response?

fatboyy09 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

To arrive at an optimum decision using marginal analysis, marginal total costs are to be estimated. This is done in the following table.

Option Total Cost () Marginal Total Cost ()
1 150 -
2 100 -50
3 80 -20
4 70 -10
5 90 20
6 120 30

Option 4 is the optimum option in this case. This is because it is the only option that moving toward makes the decision maker better off and moving away from it makes the decision maker worse off. In other words, according to the Principal of Optimization at the Margin, Option 4 is the optimum choice.