A government wants to build a hydroelectric dam to reduce flooding in a region and provide electricity to its people

What type of investment is this? In order to make a decision about whether or not to make the investment, how should the government evaluate this project?


A dam is an infrastructure or social investment. The government should estimate the expected returns from the dam over its lifetime and compare them to the expected construction costs by calculating a return on investment. If the return is greater than the opportunity cost, the government should build the dam.

Economics

You might also like to view...

Which of these financial intermediaries is most likely to invest in new companies that are just starting up and have no track record?

A) Asset management companies B) Hedge funds C) Private equity funds D) Venture capital funds

Economics

The following is an example of risk aversion

a. those applying for a well-paid job tend to be the most qualified b. more reckless drivers opt for cars with fewer safety devices c. the contractor with the lowest bid for a is under-qualified d. Initial Public Offerings (IPOs) seek investors when prospects look good

Economics

To be effective, pure bundling requires firms to be able to separate consumers into separate markets

Indicate whether the statement is true or false

Economics

Inventories — goods produced but not sold — are included in GDP because we want to measure total production, not just what is purchased

a. True b. False

Economics