In January the Price of Widgets Was $1

question 12

Multiple Choice

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was about

• A)0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
• B)1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
• C)0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
• D)1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

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Definitions:

Independent Projects

Projects within a financial or business context that do not affect each other's outcomes or viability.

Multiple IRR Projects

Investment projects that, due to their cash flow structure, yield more than one internal rate of return, complicating the investment decision.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity, by calculating the present value of expected future cash flows.

Discounted Payback

A capital budgeting method that calculates the amount of time needed to recoup an investment based on its discounted cash flows.