Question :
41) The law of diminishing marginal returns tells us that : 1384299
41) The law of diminishing marginal returns tells us that the more capital the firm uses, the
A) lower is the firm’s interest rate.
B) lower is the MRP of the firm’s capital.
C) higher is the MRP of the firm’s capital.
D) higher is capital’s purchase price.
E) lower is capital’s rental price.
42) A decrease in market interest rates will
A) increase the amount a firm is willing to pay for a machine that generates future returns.
B) decrease the amount a firm is willing to pay for a machine that generates future returns.
C) not affect the price a firm is willing to pay for a machine that generates future returns.
D) be good for all firms.
E) be bad for all firms.
43) An increase in market interest rates will
A) increase the amount a firm is willing to pay for a machine that generates future returns.
B) decrease the amount a firm is willing to pay for a machine that generates future returns.
C) not affect the price a firm is willing to pay for a machine that generates future returns.
D) be good for all firms.
E) be bad for all firms.
44) The present value of a piece of capital equipment that generates future MRPs will increase if
A) the interest rate increases.
B) the interest rate decreases.
C) the MRP values are received farther in the future.
D) the purchase price of the capital asset decreases.
E) the productivity of the capital asset falls.
45) A firm’s downward-sloping investment demand curve is usually plotted with ________ on the vertical axis.
A) the price of capital equipment
B) MRP
C) the interest rate
D) the capital stock
E) the general price level
46) Under which of the following circumstances will a competitive firm choose to own more capital, assuming that the purchase price of the capital and the interest rate remain unchanged?
A) the stock of capital in the entire economy increases
B) other firms are increasing their stock of capital
C) the lifespan of the capital is reduced
D) technological improvement has made the capital more productive
E) the price of the product the firm produces declines
47) In any given period, a firm’s flow of investment demand is determined by
A) the change in the firm’s optimal flow of investment.
B) the change in the firm’s optimal capital stock.
C) the rate of change of the firm’s investment demand.
D) the rate of change of the capital stock in the entire economy.
E) Any of the above, as they are all the same.
48) Suppose a dairy farmer is considering the purchase of an additional milking machine at a price of $4000. She expects the discounted MRP of the machine in Year 1 to be $1700, in Year 2 to be $1500 and in Year 3 to be $1200, after which the machine has no value. The farmer should
A) buy the machine because its present value is $400 more than its purchase price.
B) buy the machine because its marginal revenue is $400 more than its marginal cost.
C) be indifferent about the purchase because its present value is approximately equal to its purchase price.
D) not buy the machine because its marginal revenue is $400 less than its marginal cost.
E) not buy the machine because its present value is $400 less than its purchase price.
49) Suppose a roofing contractor is considering the purchase of an additional truck at a price of $35 000. He expects the discounted MRP of the truck in Year 1 to be $7000, in Year 2 to be $6000, in Year 3 to be $5000, after which he can sell the truck at a present value of $14 000. This contractor should
A) not buy the truck because its marginal cost is greater than its marginal revenue.
B) be indifferent about the purchase because its present value is approximately equal to its purchase price.
C) buy the truck because its present value is more than its purchase price.
D) not buy the truck because its present value is less than its purchase price.
E) buy the truck because its marginal cost is less than its marginal revenue.
50) Suppose a firm producing aircraft engines is considering the purchase of a robotic assembly machine at a price of $4 million. The firm expects the discounted MRP of the machine to be $1 million over each of the first 3 years, and $0.5 million each in years 4 and 5, after which the machine has no value. This firm should
A) not buy the machine because its present value is less than its purchase price.
B) buy the machine because its present value is more than its purchase price.
C) be indifferent about the purchase because its present value is equal to its purchase price.
D) not buy the machine because its marginal cost is greater than its marginal revenue.
E) buy the machine because its marginal cost is less than its marginal revenue.
