Why are present value calculations used in real options?
Real options involve decisions that are irreversible once they have been made. Generalizations
of present value calculations can determine the value of postponing such irreversible decisions.
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The difference between Gross National Product and Net National Product is the
A. rate of inflation. B. statistical discrepancy encountered in calculating GDP. C. difference between real versus nominal GDP. D. depreciation of the economy’s capital stock.
At full employment, the expected inflation rate is
A) higher than the inflation rate. B) unrelated to the inflation rate. C) equal to the inflation rate. D) lower than the inflation rate. E) unknown.
In the macroeconomic long run
A) real GDP is always below potential GDP. B) there is full employment with no unemployment. C) output always is above potential GDP. D) there is full employment and real GDP is equal to potential GDP.
When an average cost pricing rule is imposed on a natural monopoly, ________
A) total surplus is maximized and the monopoly incurs an economic loss B) the monopoly makes zero economic profit C) the monopoly makes an economic profit D) total surplus is maximized and the monopoly makes an economic profit