Author Question: Capital rationing refers to A) setting a minimum acceptable rate of return for a capital outlay. ... (Read 89 times)

APUS57 · **on:** Jul 1, 2018

Capital rationing refers to

A) setting a minimum acceptable rate of return for a capital outlay.
B) selecting among profitable capital outlays when there are constraints on the funds available.
C) determining the maximum price to pay for a capital product.
D) None of the above

Question 2

Suppose 100 citizens each derive marginal benefit from submarines according to the function MB = 10 - Q. If subs cost 100 each to produce, what is the efficient quantity of submarines?

What will be an ideal response?

Athena23 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

B

Answer to Question 2

The market demand is SMB = 1000 - 100Q. Setting this equal to the MC of 100 yields a quantity of 9. If the cost is shared equally, each citizen pays 1 for the ninth submarine, which they each value at 1.