Explain how a firm makes an investment decision. What will be ...

[NguyenJ]

Explain how a firm makes an investment decision.
 
  What will be an ideal response?

Question 2

Which of the following policies would not help promote economic growth?
 
  A) a law restricting elected officials from accepting expensive gifts and trips from private individuals
  B) a law that subsidizes research in nanotechnology
  C) a law that funds prenatal care for all expectant mothers
  D) a law requiring that the funds in an individual retirement account be taxed

[emilymalinowski12]

Answer to Question 1

A firm will decide whether or not to invest on the basis of expected rates of return. If the expected rate of return is greater than the interest rate, the firm should make the investment. Another way to consider investment is that the firm should invest up to the point where the marginal revenue product of capital equals the price of capital.

Answer to Question 2

D

[NguyenJ]

Wow, this really help

[ricroger]

Thanks for the timely response, appreciate it