If the Return on Capital Is 12 Percent and the Price

question 134

Multiple Choice

If the return on capital is 12 percent and the price for loanable funds is 9 percent, then

• A)firms will not be willing to borrow loanable funds until either the return on capital decreases or the price for loanable funds increases, because the market for loanable funds is not in equilibrium and businesses will be wary of further investment.
• B)firms will realize that if they borrow loanable funds and invest in capital goods, it will cause the return on capital to decrease, so they won't want to borrow the funds.
• C)savers will realize that they can earn more if they invest their savings in capital, so they will withdraw their savings and supply them to firms at 14 percent.
• D)none of the above

Calculate total variable costs based on unit variable costs and production level.

Understand the concept of sunk costs, marginal costs, and their implications for decision-making.

Identify examples of fixed, variable, and sunk costs in various business scenarios.

Compute fixed costs from total costs and variable costs.

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Definitions:

Net Assets

The total value of a company’s assets minus its liabilities, indicating the actual worth of the company’s equity.

Fair Value Adjustment

An accounting process of updating the book value of an asset or liability to reflect its current market value.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Cost Method

A method of accounting that records the investment at its original cost and recognizes income when dividends are received.