An Investment Should Be Undertaken

question 146

Multiple Choice

An investment should be undertaken

• A) if the present value of the expected income stream associated with the investment is greater than the full cost of the investment project.
• B) if the present value of the expected income stream associated with the investment is less than the full cost of the investment project.
• C) any time the present value of the expected income stream associated with the investment is positive.
• D) if the present value of the costs of the investment project exceed the present value of the expected returns from the investment project.

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Definitions:

Increasing Returns

A situation in economics where an increase in the scale of production leads to a greater than proportional increase in output, often resulting in economies of scale.

Fixed Factor Prices

A condition where the prices of inputs used in production, such as labor or raw materials, remain constant regardless of the output level.

Long-Run Supply Curve

A curve showing the relationship between price and quantity supplied over time, assuming all factors of production can be varied.

Productive Efficiency

A state where goods or services are produced at the lowest possible cost, utilizing all resources efficiently.