Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can
borrow funds at an interest rate of 10 percent, the firm should:
A. not purchase the machine because the expected rate of return exceeds the interest rate.
B. not purchase the machine because the interest rate exceeds the expected rate of return.
C. purchase the machine because the expected rate of return exceeds the interest rate.
D. purchase the machine because the interest rate exceeds the expected rate of return.
C. purchase the machine because the expected rate of return exceeds the interest rate.
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Corporate managers and shareholders always have the same goals
Indicate whether the statement is true or false
As defined by economists, interest is
a. only the amount earned by productive capital as a resource b. only the amount earned by land as a resource c. only the amount earned by lending money d. both the amount earned by productive capital as a resource and the amount earned by lending money e. both the amount earned by land as a resource and the amount earned by lending money
People (and all resources):
a. tend to specialize in those activities in which their opportunity costs are minimized. b. tend to specialize in those activities in which their opportunity costs are maximized. c. never consider opportunity costs before specializing in a particular activity. d. consider only direct costs while choosing to specialize in a particular activity. e. do not act in their own self-interest but specialize in those activities which benefit others.
If the inflation rate turns out to be greater than was is expected to be, the clear losers are
A. businesses. B. people on incomes adjusted by a COLA. C. borrowers. D. lenders.