Which of the Following Statements Is Most Correct

question 148

Multiple Choice

Which of the following statements is most correct?

• A) Sensitivity analysis is incomplete because it fails to consider the range of likely values of key variables as reflected in their probability distributions.
• B) In comparing two projects using sensitivity analysis,the one with the steeper lines would be considered less risky,because a small error in estimating a variable,such as unit sales,would produce only a small error in the project's NPV.
• C) The primary advantage of simulation is that it provides a very accurate point estimate of a project's NPV.
• D) One important benefit of simulation analysis as compared to scenario analysis,is that once the analysis is complete,it provides a clear accept/reject decision rule.
• E) Answers c and d are both correct.

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Definitions:

Aggregate-Supply Curve

A curve that shows the quantity of goods and services that firms choose to produce and sell at each price level

Trade-Off

An exchange where getting something of value requires giving up something else of value, typically used in the context of making decisions with limited resources.

Short Run

A period during which at least one of a firm's inputs is fixed and cannot be changed.

Fed's Policy

The set of monetary policy guidelines and actions taken by the Federal Reserve, the central banking system of the United States, to control the money supply and achieve macroeconomic goals.