Use the Following Information to Answer the Next Four Questions

question 48

Multiple Choice

Use the following information to answer the next four questions:
A clothing manufacturing firm is deciding whether to invest in a new technology that needs an initial investment of $45,000.This will increase cash flows in the first year by $25,000 and $30,000 in the second year.The firm's current fixed costs are $9,000 and marginal cost is $15.The firm currently charges $18 per unit.
-If the interest rate is 5% then the net present value of these cash flows is

• A)$6,020.41
• B)$7,380.95
• C)-$7,380.95
• D)$10,000

Explain the inverted-U theory related to research and development (R&D) expenditures and its implications.

Understand the concept of the fast-second strategy in innovation and its strategic implications.

Examine how technological advances contribute to economic efficiency, including both productive and allocative efficiency.

Understand the nature and consequences of oligopolies including mutual interdependence.

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Definitions:

Revealed Preferred

Another term for revealed preference, emphasizing the process of deducing preferences by observing actual choices under constraints.

Violates WARP

Deviating from the Weak Axiom of Revealed Preference, indicating inconsistencies in consumer choice under the assumption of rational behavior.

Bundle

A combination of goods or services sold together as a single package, often for a price lower than the sum of their individual costs.

Initial Endowment

An economic term for the total amount of resources an individual, entity, or economy has available at the start.