A firm invests in a new machine that costs $2,000 a year but is expected to produce an increase in total revenue of $2,200 a year. The current real rate of interest is 8%. The firm should
A. undertake the investment, because the expected rate of return of 9% is greater than the real rate of interest.
B. not undertake the investment, because the expected rate of return of 7% is less than the real rate of interest.
C. undertake the investment, because the expected rate of return of 12% is greater than the real rate of interest.
D. undertake the investment, because the expected rate of return of 10% is greater than the real rate of interest.
Answer: D
You might also like to view...
Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. Bobby currently buys 6 pizzas and 2 CDs. To maximize his utility, he should
A) buy more pizza and fewer CDs. B) buy more CDs and fewer pizza. C) buy more of both goods. D) stay with the current combination of goods.
Define what is meant to be risk-neutral
What will be an ideal response?
By selecting a bundle where MRS = MRT, the consumer is
A) achieving a corner solution. B) reaching the highest possible indifference curve she can afford. C) not behaving in an optimal way. D) All of the above.
According to Romer
A. ideas drive economic growth. B. capital drives economic growth. C. invention drives economic growth. D. government drives economic growth.