Ian Is Going to Receive $20,000 Six Years from Now

question 18

Multiple Choice

Ian is going to receive $20,000 six years from now.Sunny is going to receive $20,000 nine years from now.Which one of the following statements is correct if both Ian and Sunny apply a 7 percent discount rate to these amounts?

• A) The present values of Ian and Sunny's monies are equal.
• B) In future dollars, Sunny's money is worth more than Ian's money.
• C) In today's dollars, Ian's money is worth more than Sunny's.
• D) Twenty years from now, the value of Ian's money will be equal to the value of Sunny's money.
• E) Sunny's money is worth more than Ian's money given the 7 percent discount rate.
• F) None of the above.

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Definitions:

Long Run

A period in economics in which all factors of production and costs are variable, and firms can adjust all inputs.

Nuclear Power Plants

Facilities that use nuclear fission to generate electricity, typically by heating water to produce steam that turns turbines.

Average Total Cost Curve

A graph that shows the average total cost of producing different quantities of output, typically U-shaped, reflecting economies and diseconomies of scale.

Average Variable Cost Curve

The Average Variable Cost Curve graphically represents how a firm's variable costs (costs that change with the level of output) per unit of output change as the firm alters its level of production.