The Purpose of Sensitivity Analysis Is to Show

question 3

Multiple Choice

The purpose of sensitivity analysis is to show:

• A) the optimal level of the capital budget.
• B) how price changes affect break-even volume.
• C) seasonal variation in product demand.
• D) how variables in a project affect profitability.

Understand the concept of externalities and how they affect social cost and social benefit.

Compare and contrast the efficiency of different levels of provision of public goods and common resources.

Understand the role and mechanisms of government intervention in preventing overuse of common resources.

Comprehend the concept of socially optimal use of common resources and the factors leading to its deviation.

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Definitions:

Quoted Price

The ongoing price tag attached to buying or selling a service or asset.

Selling Price

The amount of money a customer pays to purchase a product or service.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.

Contractual Interest Rate

The interest rate stated on the face of a loan or bond agreement, which represents the percentage of interest that the borrower must pay to the lender.