Figure 14-7 -Refer to Figure 14-7.Suppose a Firm in a Competitive Market,like

question 69

Multiple Choice

Figure 14-7

-Refer to Figure 14-7.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P₁ to P₂.Which of the following could explain this observation?

• A)The entry of new firms into the market.
• B)The exit of existing consumers from the market.
• C)An increase in market supply from Supply₀ to Supply₁.
• D)An increase in market demand from Demand₀ to Demand₁.

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Definitions:

PI

Profitability Index (PI) is a ratio that calculates the relationship between the benefits of a project or investment and its costs, helping to determine its attractiveness.

IRR

Internal Rate of Return, a financial metric used to estimate the profitability of potential investments, calculating the interest rate at which the net present value of all cash flows (both positive and negative) from a project or investment equals zero.

Required Rate of Return

The minimum annual percentage return that an investor expects to achieve when investing in a particular asset or project.

NPV

Net Present Value, a financial metric used to assess the profitability of an investment, calculated as the difference between the present value of cash inflows and outflows.