An entrepreneur is considering how many limousines to purchase when he starts up a limousine service. Below are his estimates of the number of limousine rentals the service will make during a year, depending on the number of limousines available.Number oflimousinesTotal numberof rentals13502650390041,10051,250After paying all non-interest expenses, the owner expects to net $10 per rental. Each limousine costs $50,000. How many limousines should he purchase if the real interest rate is 4.5%?
A. 4.
B. 2.
C. 3.
D. 1.
Answer: C
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Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?
A) a drought that sharply reduces cotton output B) an increase in consumer income C) a decrease in consumer income D) unusually good weather that results in a bumper crop of cotton
Quantity discrimination makes sense if
A) buyers of smaller quantities are more price sensitive than buyers of larger quantities. B) buyers of smaller quantities are less price sensitive than buyers of larger quantities. C) demand for the good is perfectly elastic. D) the lower price for larger quantities encourages all consumers to purchase the larger quantity.
When a monopsony coal mining firm has control over employment in the rich coal fields of Harlan County, Kentucky,
a. it will pay its workers the market equilibrium wage b. workers will work for the firm that pays the higher wage rate c. coal buyers will continue to buy coal from other counties d. coal miners will only have one employment option e. wages will be determined only by the demand for labor
Assume the exchange rate of the domestic currency is overvalued. What does the central bank need to do in order to keep the exchange rate fixed?
a. There is no need to intervene since the domestic currency is not undervalued. b. It needs to increase the money supply by raising the discount rate. c. It needs to sell the excess demand for foreign currency. d. It needs to buy the excess supply of foreign currency. e. It needs to decrease the money supply by lowering the discount rate.