The Diagram Below Shows a Firm's Demand for Its Units

question 9

Multiple Choice

The diagram below shows a firm's demand for its units of capital-coin-operated coffee machines.The firm places its machines in universities and colleges across Canada. FIGURE 15-1
-Refer to Figure 15-1.The downward slope of the firm's investment demand curve can be explained by

• A)the negative relationship between the interest rate and the present value of a future stream of MRPs generated by each coffee machine.
• B)the negative relationship between the interest rate and the purchase price of the coffee machines.
• C)the downward slope of the demand curve for the firm's product-cups of coffee.
• D)the relationship between the MRP of the coffee machine and technology improvements to the coffee machines.
• E)the downward slope of the marginal cost of capital curve.

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Definitions:

Isocost

A line representing all combinations of a firm’s inputs that have the same total cost.

Total Cost

The total of constant and fluctuating expenses involved in the creation of products or services.

Isocost Line

a graphical representation in economics showing all possible combinations of inputs that cost the same amount for a firm.

Price Of Capital

The cost of utilizing capital or funds in the production of goods or services, often expressed as an interest rate.