Reference: Ref 7-2 (Figure: Demand Curve Sections) Refer to the Figure

question 17

Multiple Choice

Reference: Ref 7-2 (Figure: Demand Curve Sections) Refer to the figure. The section of the demand curve labeled B represents the:

• A) value of the good in its next highest use.
• B) satisfied wants.
• C) unsatisfied wants.
• D) All of the answers are correct.

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Definitions:

Cost of Equity

The return a company theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk of investing in the stock.

Marginal Cost of Capital

The cost of obtaining an additional dollar of new capital, which increases as more capital is raised due to increasing risk and/or decreasing attractiveness to investors.

Investment Opportunity Schedule

A graph or listing that shows the relationship between the rates of return on investment and the amount of investment.

MCC

Marginal Cost of Capital is an economic term representing the cost of obtaining one additional unit of capital.