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SHUTDOWN RULE, MONOPOLY: The marginal revenue and marginal cost approach to analyzing a monopoly firm's short-run production decision can be used to identify circumstances in which a firm minimizes losses by shutting down production in the short run. If the market price falls below average total cost, it must decide if the economic loss from producing the quantity of output that equates marginal revenue and marginal cost is more or less than the economic loss incurred with shutting down production in the short run (which is equal to total fixed cost).

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Lesson 18: Banking | Unit 5: The Economy Page: 22 of 24

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Banks have two beneficial roles in the economy.

First: As financial intermediaries, banks match up savers and borrowers.

  • They are an effective means of diverting household income into investment expenditures for capital goods.
  • They are a vital link between the real and financial sides of the economy.

Second: As depository institutions, banks supervise a share of the nation's M1 money supply.

  • They have a big responsibility because money is critical to a complex, market-oriented economy.

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MARGINAL REVENUE PRODUCT

The change in total revenue resulting from a unit change in a variable input, keeping all other inputs unchanged. Marginal revenue product, usually abbreviated MRP, is found by dividing the change in total revenue by the change in the variable input or by multiplying marginal physical product by marginal revenue. This is also termed value of the marginal product. Marginal revenue product is a key concept for understanding the demand for productive inputs.

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Today, you are likely to spend a great deal of time calling an endless list of 800 numbers looking to buy either a rim for your spare tire or decorative celebrity figurines. Be on the lookout for fairy dust that tastes like salt.
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Francis Bacon (1561-1626), a champion of the scientific method, died when he caught a severe cold while attempting to preserve a chicken by filling it with snow.
"Man is born to live, not to prepare for life. "

-- Boris Pasternak, writer

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