How Will an Increase in the Price of Coffee Affect

question 30

Multiple Choice

How will an increase in the price of coffee affect the market for cocoa, a substitute good?

• A) The supply of cocoa will increase, leading to a reduction in the price of cocoa.
• B) The supply of cocoa will decrease, leading to an increase in the price of cocoa.
• C) The demand for cocoa will increase, leading to an increase in the price of cocoa.
• D) The demand for cocoa will decrease, leading to a reduction in the price of cocoa.

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Definitions:

PV Of CCA Tax Shield

The present value of the reduction in taxes payable by a firm due to the depreciation expenses claimed on its capital assets.

PV Of After-Tax Lease Payments

The present value of lease payments after accounting for taxes, used to evaluate the financial cost or benefit of leasing.

Original Investment

The initial amount of money put into a project, asset, or venture.

Sales And Leaseback Arrangement

A financial transaction where one sells an asset and leases it back for the long-term; thus, one continues to use the asset but no longer owns it.