Explain why a firm may rationally make an investment when its cash flow from the investment is not positive each year
What will be an ideal response?
A firm will examine the net present value of the investment to determine if the investment should be made. The net present value of the cash flow for an investment may be negative for some years, but when all the years of the investment are considered, if the net present value of the investment is positive, the investment should be made.
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If the case study on U.S. / China trade is correct in its analysis of factor abundance,
A) Chinese capital owners should see their income rise as trade increases. B) U.S. skilled labor inputs should see their incomes fall as trade increases. C) U.S. capital owners should see their income fall as trade increases. D) Chinese unskilled labor should see their income rise as trade increases.
All of the following are examples of borrowings by a bank EXCEPT
A) federal funds. B) repurchase agreements. C) discount loans. D) commercial loans.
The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because
A) the market price is determined (through regulation) by the government B) the firm supplies a different good than its rivals C) the firm's output is a small fraction of the entire industry's output D) the short run market price is determined solely by the firm's technology E) the demand curve for the industry's output is downward sloping
Suppose a 10-mile taxi ride costs £6.50 in London and $10.00 in Los Angeles. If the exchange rate is £1 = $1.70 purchasing power parity holds
a. True b. False Indicate whether the statement is true or false