In Computing the Present Value of the Minimum Lease Payments

question 5

Multiple Choice

In computing the present value of the minimum lease payments, the lessee should

• A)use its incremental borrowing rate in all cases.
• B)use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee.
• C)use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that the implicit rate is known to the lessee.
• D)none of these.

Explain the significance of the equality between marginal cost (MC) and marginal revenue (MR) for profit maximization in both monopoly and perfect competition.

Understand how a monopolist determines profit-maximizing output and price using demand and cost data.

Describe the economic implications of producing in the elastic vs inelastic portions of the demand curve for a monopolist.

Explain how monopolist's profits, losses, and break-even points are determined.

---

Definitions:

Random Variable

A numerical description of the outcome of an experiment.

Mean

A measure of central location computed by summing the data values and dividing by the number of observations.

Multiple Regression Model

The mathematical equation that describes how the dependent variable y is related to the independent variables x1, x2, . . . , xp and an error term e.

Independent Variable

The variable that is doing the predicting or explaining. It is denoted by x.