(Figure: Marginal Benefit I) Which of the Following Statements Is

question 84

Multiple Choice

(Figure: Marginal Benefit I) Which of the following statements is (are) TRUE? I. The external marginal benefit is $7.
II) The socially optimal price is $5.
III) At an output level of 5 units, the deadweight loss is $6.
IV) At 8 units of output, there is no private marginal benefit and social marginal benefit is $4.

• A) III
• B) II, III, and IV
• C) I, II, and III
• D) IV

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Definitions:

Net Present Value

Net Present Value (NPV) is a financial metric that calculates the value of a series of cash flows over time, discounted back to their present value to assess an investment's profitability.

Desired Rate of Return

The minimum return a company or investor expects to achieve on an investment, often used in capital budgeting to evaluate potential projects.

Future Cash Flows

The projected inflows and outflows of cash over a specific future period, vital for financial planning and valuing investments.

Capital Investment Analysis

Capital investment analysis is the process of evaluating the potential returns of an investment in fixed assets, considering factors such as cost, life expectancy, and the benefits it will provide.