A computer you are considering for your business would add $4,000 per year to your profit. It would cost $400 a year to buy a complete maintenance contract so that you would never have repair and upkeep expense. The obsolescence depreciation is 25% a year. The going market interest rate is 5%. Assume all costs and revenue occur at the end of the year. If the machine cost $12,000 to purchase, should you buy it?
What will be an ideal response?
Yes. Assuming the machine is worthless after the four years, the present value of it's cost = $13,417. This is the present payment for the machine plus the present value of the $400 each year in maintenance. Since the present value of the income flow of the machine is $14,183.80, the firm is ahead by buying it.
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If the cross price elasticity between Goods A and B equals -1.3, then a reduction in the price of Good B will:
a. increase the demand for Good A and increase Good A's price as a result. b. increase the demand for Good A and decrease Good A's price as a result. c. decrease the demand for Good A and increase Good A's price as a result. d. decrease the demand for Good A and decrease Good A's price as a result.
If the U-shaped ATC curve is flattened out at its lowest point(s), we would have
A. diminishing returns. B. increasing returns. C. negative returns. D. proportional returns to scale.
Under which of the following policies does the government enter the foreign exchange market and buy or sell foreign currency to influence the exchange rate of the domestic currency?
A. Devaluation or revaluation B. Capital controls C. Official intervention D. Exchange controls
Diminishing returns occurs because
A) consumers don't buy enough of the products produced. B) one of the inputs in the production process is fixed. C) not enough people have jobs. D) two people have not satisfied their self-interests.