Workland Has a Population of 10,000, of Whom 7,000 Work

question 37

Multiple Choice

Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000 final goods.

• A)Workland has higher productivity and higher real GDP per person than Laborland.
• B)Workland has higher productivity but lower real GDP per person than Laborland.
• C)Workland has lower productivity but higher real GDP per person than Laborland.
• D)Workland has lower productivity and lower real GDP per person than Laborland.

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Definitions:

Cost of Capital

The rate of return a company must offer investors to finance its assets, essentially a benchmark that a project must meet or exceed for it to be considered viable.

NPV Profiles

NPV profiles graphically represent the relationship between the net present value of investments and various discount rates, helping to visualize investment risk and potential returns.

Mutually Exclusive

Projects that cannot be performed at the same time. A company could choose either Project 1 or Project 2, or it can reject both, but it cannot accept both projects.

IRR

Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It is used to evaluate the attractiveness of an investment or project.