The authors note that an appropriate discount rate for most U.S. households is near 5%. However, suppose you are considering the decision to attend graduate school, and you already have large credit card balances from your undergraduate years
If you decide to use a higher discount rate (e.g., 10%) to reflect your higher opportunity cost of money, what impact does this change in the discount rate have on the net present value of a graduate degree? A) Increases NPV
B) Decreases NPV
C) NPV would not change as long as we use nominal costs and returns.
D) NPV may increase or decrease, and we cannot determine the direction of change without more information.
B
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Figure 1-1
The slope of the line in Figure 1-1 is
A. 0.5. B. 2.0. C. ?0.5. D. ?2.0.
Answer the following statements true (T) or false (F)
1) In general, if two stages in a supply chain are making an economic profit by setting prices that exceed their marginal cost of production, managers can increase profit through vertical integration. 2) Because vertical integration is a yes or no decision, managers cannot use marginal analysis. 3) If a firm has a monopoly in both the production and distribution, managers of the two divisions should be encouraged to maximize profits in their separate divisions. 4) If a firm has a monopoly in both the production and distribution, to maximize the overall economic profit of the firm, managers of either the production or distribution center should be instructed to maximize profit and the managers of the other center should be instructed to operate as a competitive market. 5) Vertical integration can eliminate double marginalization.
A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda. This means that
a. root beer and orange soda are substitutes b. root beer and orange soda are complements c. the cross-price elasticity of demand is elastic d. the cross-price elasticity of demand is equal to 2 e. the cross-price elasticity of demand is equal to -2
In essence, which of the following groups "creates" money?
A. Banks' loan officers when they grant loans B. Consumers when they go shopping C. Depositors when they deposit or withdraw money from their banks D. Firms when they pay workers their wages and salaries