If the Price of Crude Oil (An Input to the Production

question 69

Multiple Choice

If the price of crude oil (an input to the production of gasoline) decreases, then we will expect to see:

• A) a shift in the supply of gasoline to the left.
• B) a movement along the supply curve for gasoline downwards.
• C) a movement along the supply curve for gasoline upwards.
• D) a shift in the supply of gasoline to the right.

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Definitions:

Capital Budgeting Decision

The process by which a business determines whether projects such as investments in equipment or new products are worth pursuing.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Bond's Yield

The return an investor realizes on a bond, calculated as the interest or dividends received divided by the price of the bond.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and satisfy its shareholders and creditors.