Which One of the Following Is an Example of a "Flexibility

question 4

Multiple Choice

Which one of the following is an example of a "flexibility" option?

• A) A company has an option to invest in a project today or to wait a year.
• B) A company has an option to close down an operation if it turns out to be unprofitable.
• C) A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
• D) A company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
• E) A company invests in a jet aircraft so that its CEO, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.

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Definitions:

Effectiveness Lag

The delay between the time a policy measure is implemented and the time the measure has its intended effect on the economy.

Activity Lag

The delay between the time a particular economic policy is enacted and the time when its full effects are observed in the economy.

Passive Policy

An economic policy approach that involves minimal intervention by the government in the economy, allowing market forces to operate without active guidance or stimulus.

Short-run Aggregate Supply

The total production of goods and services in an economy at various price levels in a short-term period, before all production factors can be varied.