A firm should never undertake an investment if the present value of the
A. income stream associated with the investment is greater than the full cost of the investment project.
B. costs of the investment project are lower than the present value of the returns from the investment project.
C. income stream associated with the investment is less than the full cost of the investment project.
D. income stream associated with the investment is positive.
Answer: C
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"If Mexico is currently operating at a point inside its production possibilities frontier, then there are unemployed or misallocated resources in Mexico." Is this statement true or false? Briefly explain your answer
What will be an ideal response?
According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then
A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate. C) one cannot predict the term-structure relationship as it depends on expectations. D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.
In the area of business, rent-seeking often involves
a. the use of resources to construct high-priced rental housing. b. the use of resources to secure and maintain a grant of monopoly power from the government. c. an agreement between firms to raise prices and limit entry. d. an agreement between a firm and a customer that makes both parties better off.
The main rationale for government regulatory functions is
A. to expand the scope of the government. B. to make sure that firms are maximizing profits. C. to protect consumer interests. D. to regulate for-profit institutions.