The Diagram Below Shows a Firm's Demand for Its Units

question 48

Multiple Choice

The diagram below shows a firm's demand for its units of capital-coin- operated coffee machines.The firm places its machines in universities and colleges across Canada.
FIGURE 15- 1
-Refer to Figure 15- 1.The downward slope of the firm's investment demand curve can be explained by

• A)the downward slope of the marginal cost of capital curve.
• B)the negative relationship between the interest rate and the purchase price of the coffee machines.
• C)the downward slope of the demand curve for the firm's product-cups of coffee.
• D)the negative relationship between the interest rate and the present value of a future stream of MRPs generated by each coffee machine.
• E)the relationship between the MRP of the coffee machine and technology improvements to the coffee machines.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept in the business after dividends have been paid to shareholders, used for reinvestment.

Undistributed Profits

Earnings that a company has made that are not paid out as dividends to shareholders and are instead reinvested in the business or kept as reserves.

Expected Rate of Return

The anticipated amount of profit or loss an investment is projected to generate, expressed as a percentage of the initial investment.

R&D Project

Research and Development project, which involves investigative activities that a business or organization undertakes with the intention of making a discovery that can either lead to the development of new products or procedures, or to improvement of existing products or procedures.