Which of the Following Conditions Must Hold to Ensure That

question 34

Multiple Choice

Which of the following conditions must hold to ensure that profits are,in fact,at a maximum?

• A) d(MC(Q))/dQ > 0
• B) d(MC(Q))/dQ < 0
• C) d²  (Q)/dQ² < 0
• D) d(MC(Q))/dQ > 0 and d²  (Q)/dQ² < 0

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments compatible with the firm's goal of wealth maximization.

NPV

Short for Net Present Value, which is a financial metric used to evaluate the profitability of an investment or project, considering the time value of money.

IRR

Internal Rate of Return - a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations and asset disposal decisions.