In Order to Divide a Given Production Quota Between Two

question 53

Multiple Choice

In order to divide a given production quota between two production processes in such a way as to produce the quota at the lowest possible cost, one should produce the output where

• A)Average costs are equal for both processes
• B)Average cost is equal to marginal cost for both processes
• C)Marginal costs are equal in both processes
• D)Marginal costs are at least equal to ATC in each process

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Definitions:

Net Present Value

A financial metric that calculates the present value of all future cash flows (both inflows and outflows) of an investment, discounted back at a specific rate.

Rate of Return

The profit or deficit achieved from an investment during a certain timeframe, represented as a proportion of the investment's initial outlay.

Present Value Factors

Numerical factors used to calculate the present value of future cash flows by accounting for the time value of money.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments by calculating the rate of return at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.