« previous next »

Author Question: A firm should make an investment if the expected return is greater than A) the marginal cost of ... (Read 99 times)

Jkov05

  • Hero Member
  • *****
  • Posts: 556
on: Jul 1, 2018
A firm should make an investment if the expected return is greater than
 
  A) the marginal cost of the investment.
  B) the fixed cost of the investment.
  C) the opportunity cost of the investment.
  D) the expected rate of inflation.

Question 2

You sign a contract to pay 1000 next year for the refrigerator you bought today. The rate of inflation is 10 and the real interest rate is 7. Alternatively, you could pay 875 today. What should you do to save the most money?
 
  What will be an ideal response?
Microeconomics ¦ Perloff ¦ 8th Edition
Buy Test-Bank


Swizqar

  • Sr. Member
  • ****
  • Posts: 357
Reply #1 on: Jul 1, 2018
Answer to Question 1

C

Answer to Question 2

1000/(1 + .1 )  (1 + .07) = 849.60. This is the real present value of the 1000 payment next year. Thus, you should pay next year and not today in order to save the most money.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

The first documented use of surgical anesthesia in the United States was in Connecticut in 1844.

Did you know?

In 2006, a generic antinausea drug named ondansetron was approved. It is used to stop nausea and vomiting associated with surgery, chemotherapy, and radiation therapy.

Did you know?

In the United States, an estimated 50 million unnecessary antibiotics are prescribed for viral respiratory infections.

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

Did you know?

Human neurons are so small that they require a microscope in order to be seen. However, some neurons can be up to 3 feet long, such as those that extend from the spinal cord to the toes.

To make an ice pack, place crushed ice in a plastic bag, bleed the air out of it, and seal it. Wrap To make an ice pack, place crushed ice in a plastic bag, bleed the air out of it, and seal it. Wrap
Steel-toed shoes are a worthwhile investment to help prevent foot injury due to falling objects. ... Steel-toed shoes are a worthwhile investment to help prevent foot injury due to falling objects. ...
Fuel should be heard returning to the fuel tank at the fuel return line if the fuel-pump and ... Fuel should be heard returning to the fuel tank at the fuel return line if the fuel-pump and ...
A Listing of the Expected Electron Configurations for Some of the Common Elementsa A Listing of the Expected Electron Configurations for Some of the Common Elementsa
If we make the substitution z=sqrt(x) to ∫sqrt(1-sqrt(x)) dx, the resulting integral is If we make the substitution z=sqrt(x) to ∫sqrt(1-sqrt(x)) dx, the resulting integral is
When operating your own business, it is wise to know your cost of capital and that of the ... When operating your own business, it is wise to know your cost of capital and that of the ...
Video: Osmosis - Isotonic, Hypotonic, and Hypertonic​ Solutions

For a complete list of videos, visit our video library