A firm invests in a new machine that costs $5,000 a year but which is expected to produce an increase in total revenue of $5,200 a year. The current real rate of interest is 7 percent. The firm should:
A. Undertake the investment because the expected rate of return of 10 percent is greater than
the real rate of interest
B. Undertake the investment because the expected rate of return of 8 percent is greater than
the real rate of interest
C. Not undertake the investment because the expected rate of return of 6 percent is less than
the real rate of interest
D. Not undertake the investment because the expected rate of return of 4 percent is less than
the real rate of interest
D. Not undertake the investment because the expected rate of return of 4 percent is less than
the real rate of interest
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Suppose you decide to attend summer school and that this is considered a rational choice. When making this choice,
A) you considered the marginal cost and marginal benefit of your choice. B) you must ignore the problem of scarcity. C) you must have considered the social interest. D) you have made a positive statement. E) you have used the ceteris paribus assumption.
If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 110, and at the expiration date the price is 114, your ________ is ________
A) profit; $4000 B) loss; $4000 C) profit; $3000 D) loss; $3000
An increase in a country's rate of inflation is apt to
A) reduce its imports and improve its trade balance. B) lower its nominal rate of interest and encourage an inflow of capital. C) worsen its balance of trade and balance of payments. D) decrease demand for the country's currency.
If the market for a good is initially in equilibrium and there is a rightward shift of the demand curve, then
a. the equilibrium price will fall b. there will be a rightward movement along the supply curve c. the supply curve will also shift to the right d. the supply curve will shift to the left e. the demand curve will shift back as consumers react to the higher equilibrium price