An individual firm is insolvent when ________.
A) its assets exceed the value of its liabilities
B) its average costs per unit are greater than its marginal cost
C) its average costs per unit are less than its marginal cost
D) its liabilities exceed the value of its assets
Question 2
An increase in the real interest rate is an example of a
A) pure substitution effect.
B) substitution effect and a positive income effect.
C) substitution effect and a negative income effect.
D) substitution effect and an income effect whose sign depends on whether the consumer is initially a borrower or a lender.
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