If We Use Future Value Rather Than Present Value to Decide

question 36

Multiple Choice

If we use future value rather than present value to decide whether to make an investment:

• A)we will make a bad decision,since the future value will always be higher if the discount rate is positive.
• B)we will make a bad decision,since the future value will always be lower if the discount rate is positive.
• C)we will make the same decision using either future value or present value.
• D)There is not enough information given to answer the question.

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Definitions:

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual amount they receive due to market price.

Good X

An unspecified product or commodity in economics, used in theoretical models and discussions.

Producer Surplus

The difference between the actual price producers receive for a product and the minimum price they would accept.

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied by producers.