Students, and Managers Alike, Are Continually Reminded to Avoid Negative-NPV

question 88

Multiple Choice

Students, and managers alike, are continually reminded to avoid negative-NPV projects.Which of the following projects may be acceptable even at a loss?

• A)a capacity expansion project
• B)a cost-reduction project
• C)a pollution-control project
• D)a machine replacement project

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Definitions:

Long-Run

A period in which all factors of production and costs are variable, allowing for full adjustment to any changes.

Market Demand

The total quantity of a good or service that all consumers are willing and able to purchase at various price levels within a given market, at a specific time.

Short Run

A time period during which at least one input, such as plant size or capital, is fixed and cannot be changed.

Identical Firms

Identical firms refer to businesses within the same industry that have no significant differences in their products, production methods, or operational efficiency.