A Firm Will Increase Its Production When

question 19

Multiple Choice

A firm will increase its production when

• A) its marginal revenue rises.
• B) its marginal cost rises.
• C) its fixed costs fall.
• D) the demand for its product falls.

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Definitions:

Net Present Value

A method used in capital budgeting to calculate the value of an investment by discounting future cash flows back to their present value, to assess its profitability.

Discount Rate

The rate of interest that’s applied in discounted cash flow analysis to establish the present day value of cash flows expected later.

Internal Rate Of Return

A financial metric used to evaluate the profitability of potential investments, representing the interest rate at which the net present value of all the cash flows from a project or investment equals zero.

Labor Savings

A reduction in the amount of labor required or a decrease in labor costs, often as a result of improved efficiency or automation.