A Firm Should Make an Investment If the Expected Return

question 29

Multiple Choice

A firm should make an investment if the expected return is greater than

• A) the marginal cost of the investment.
• B) the fixed cost of the investment.
• C) the opportunity cost of the investment.
• D) the expected rate of inflation.

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Definitions:

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 (impossible) and 1 (certain).

Foreclosed

The legal process by which an owner's right to a property is terminated, usually due to failure to meet mortgage payment obligations.

Vickrey Auction

A sealed-bid auction where the highest bidder wins but pays the second-highest bid price.

Willingness To Pay

The maximum amount an individual is ready to spend for a good or service.