The Opportunity Cost of Capital Is Equal To

question 102

Multiple Choice

The opportunity cost of capital is equal to:

• A)The discount rate that makes project NPV equal zero
• B)The return offered by other projects of equal risk
• C)A Project's internal rate of return
• D)The average rate of return for a firm's projects

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Definitions:

MRP

Marginal Revenue Product; the additional revenue generated by employing one more unit of a resource or factor of production.

Resources

Assets, materials, and inputs needed for the production of goods and services, including natural resources, labor, and capital.

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogenous products, and the absence of barriers to entry or exit, leading to optimal pricing and output.

Producing Level

The quantity of goods or services that a firm decides to produce and offer to the market at a given time.