a. If the face value of a coin exceeds the cost of coinage, the resulting revenue to the issuer of the coin is known as
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a. If the face value of a coin exceeds the cost of coinage, the resulting revenue to the issuer of the coin is known as seigniorage.
Seigniorage is the profit earned by the issuer of currency when the face value of the coin or banknote exceeds its production cost. It is essentially the difference between the cost of producing and distributing the currency and the value at which it is sold or exchanged.
To calculate the seigniorage, you need to know the cost of producing the coin or banknote and its face value. The cost of coinage includes factors like the cost of raw materials, minting or printing costs, security features, transportation, and distribution expenses.
The formula to calculate seigniorage is as follows:
Seigniorage = (Face Value) - (Cost of Coinage)
For example, if the face value of a coin is $1 and the cost of producing that coin is $0.75, then the seigniorage would be:
Seigniorage = $1 - $0.75 = $0.25
So, in this case, the issuer of the coin would earn a seigniorage of $0.25 for each coin that is issued.