A Company May Not Accept a New Project with a Positive

question 31

Multiple Choice

A company may not accept a new project with a positive net present value because of difficulties with hiring new staff and training them.Such limitation to investments is referred to as:

• A)internal capital rationing.
• B)capital rationing.
• C)external capital rationing.
• D)duration of resource constraints.

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Definitions:

Substitution Effect

Reflects changes in consumption patterns due to changes in relative prices of goods, where consumers replace more expensive items with less expensive alternatives.

Output Effect

The impact on total production that occurs when a firm modifies the price of its good, influencing the quantity sold and altering the firm's output level.

Purely Competitive

A market structure characterized by a large number of small firms producing identical products, with easy entry and exit from the market, leading to no single firm having control over market price.

Wage Rate

The compensation paid to employees for their labor, typically expressed as an hourly, daily, or piece rate.