Any Cash Flows That Can Be Classified as Incremental to a Particular

question 34

True/False

Any cash flows that can be classified as incremental to a particular project⎯i.e., results directly from the decision to undertake the project⎯should be reflected in the capital budgeting analysis.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, usually represented as the area above the supply curve and below the market price.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that suppliers are willing to offer for sale, holding all other factors constant.

Demand Curve

A visual chart that shows how the quantity of a product demanded by buyers varies with its price.

Producer Surplus

The variance between the acceptable selling price for producers of a good or service and the real earnings they secure.