You have just purchased a new DVD player to show videos to your customers. The DVD player cost $500, and you depreciate the machine at a rate of 25% each year. You can borrow money from the bank at 10%, or receive 6% for depositing money at the bank. The expected inflation rate in the coming year is 5%. You used the company's own funds to purchase the DVD player. The firm's user cost of capital for the first year is
A. $130.
B. $150.
C. $155.
D. $175.
Answer: A
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What will be an ideal response?
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Raising taxes on gasoline __________ the price of gasoline and __________ the number of gallons purchased.
Fill in the blank(s) with the appropriate word(s).
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