The marginal cost is an important piece of information for firms and economists to know because it
a. determines the size of the plant you should build
b. is the only cost that increases as production increases
c. helps determine precisely which production level maximizes profit
d. incorporates fixed costs into the production decision
e. is a measure of labor productivity
C
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Explain the principal-agent problem as it pertains to equity contracts
What will be an ideal response?
You are given the following risky cash flows and certainty equivalent factors for a four-year project:
Certainty Period Cash Flow Equivalent Factor 1 $2,500 .95 2 3,000 .92 3 4,000 .88 4 3,000 .84 The initial investment for this project is $8,000, and the risk-free interest rate is 6%. Calculate the net present value of the project.
Suppose Bank X is holding total cash reserves of $32,000 on deposits of $90,000 . If the reserve requirement is 15 percent, then the excess reserves held by this bank is:
a. $27,200. b. $58,000. c. $4,800. d. $13,200. e. $18,500.
A bond with a face value of $10,000 (and no coupon payments) is always worth
a. $10,000 b. less than $10,000 before the maturity date c. more than $10,000 if the interest rate is high enough d. $10,000 on the date of purchase e. $9,090.91 two years before the maturity date