The Net Present Value approach to investment results in an investment being undertaken only if
A) its net present value is positive.
B) its net present value is zero.
C) it has positive cash flow.
D) its internal rate of return equals the rate of interest.
A
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Four stores have a problem with theft and security is a public good. Let S stand for the number of person-hours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula MB = 200 - 2S. Patrols cost $20 per hour. Which of the following gives the marginal social benefit function?
A. MSB = 50 - 0.5S B. MSB = 800 - 8S C. MSB = 800 - 2S D. MSB = 196 - 2S
Which of the following is an example of a carrying cost of holding an inventory?
A) the delivery charges for an order B) the cost of storage C) the cost of the paperwork necessary to pay for each order D) the managerial time spent creating an order for inventory
Markets
A) rely on voluntary exchanges of goods, services, or resources B) refer to situations where almost all exchanges take place involuntarily. C) are based on extensive price controls imposed by a ruling authority. D) promote quantity determination free from the forces of demand and supply.
Suppose the president of country A opens this economy to trade with the rest of the world in 2010. Furthermore, suppose that the investment demand is the same as in 2009. Now, instead of being provided the equilibrium level of SP, we are provided with the SP curve: r =0.025+0.000025Q, where r is still the real interest rate. We are also told that the capital inflow equals $200 billion in 2010. For this part of the problem assumed that the government has a balanced budget in the year 2010. What is the change in the level of investment spending between 2009 and 2010?
What will be an ideal response?