In the case of a good that has no exclusion and no rivalry, private markets fail because A) of free-ridership. B) this is a natural monopoly. C) profit is driven down to zero. D) the quantity produced will exceed the social optimum. ANSWER A
Date: September 9th, 2020
Your U.S.-based company is selling parts to a company in Bangladesh. If the Bangladeshi company purchases a futures contract A) the Bangladeshi company bears the exchange rate risk. B) your company bears the exchange rate risk. C) the companies share in the exchange rate risk. D) there is no exchange rate risk. ANSWER D […]
Date: September 9th, 2020
The imposition of a quota on an imported good A) shifts the demand curve down for the good. B) shifts the supply curve up for the good. C) Both A and B. D) Not enough information to determine. ANSWER B
Date: September 9th, 2020
If a risky cash flow of $10,000 is equivalent to a riskless cash flow of $9,300, the certainty equivalent factor is A) 0.93. B) 0.07. C) 1.07. D) 1.93. ANSWER A
Date: September 9th, 2020
If a firm used a combination of inputs that was to the left of its isocost line, it would indicate that A) it is exceeding its budget. B) it is not spending all of its budget. C) it is operating at its optimal point because it is saving money. D) None of the above […]
Date: September 9th, 2020
If, at the end of the project life, a piece of equipment having a book value of $4,000 is expected to bring $3,000 upon resale, and the income tax rate is 40%, how much will be the cash flow? A) $2,800 B) $3,000 C) $3,400 D) $4,000 ANSWER C
Date: September 9th, 2020
Marginal rates of technical substitution (MRTS) represent A) the optimum combinations of inputs. B) cost-minimizing combinations of inputs. C) the degree to which one input can replace another without output changing. D) All of the above ANSWER C
Date: September 9th, 2020
When two mutually exclusive projects are considered, the NPV calculations and the IRR calculations may, under certain circumstances, give conflicting recommendations as to which project to accept. The reason for this result is that in the NPV calculation, cash inflows are assumed to be reinvested at the cost of capital, while in the IRR solution, […]
Date: September 9th, 2020
If MRP > MLC, it means that a firm should A) use less labor. B) use more labor. C) increase its fixed capacity. D) decrease its fixed capacity. ANSWER B
Date: September 9th, 2020
When analyzing a capital budgeting project, the analyst must include in his calculation all of the following except A) all revenues and costs in terms of cash flows. B) only those cash flows that will change if the proposal is accepted (i.e., incremental cash flows). C) interest payments on debt financing connected with the project. […]
Date: September 9th, 2020
