A firm's level of investment depends on the market interest rate:
a. only when the firm has to borrow funds to invest in new equipment.
b. only when the firm has to borrow funds to buy stocks and bonds.
c. only when the firm already has sufficient funds and could lend them.
d. because the interest rate represents the opportunity cost of investing in capital.
e. because investments are always made with borrowed funds.
Question 2
Which of the following is not an obstacle to achieving environmental efficiency through markets?
a. Transactions costs.
b. Income effects.
c. Free-rider problems.
d. Private negotiations.
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