A Firm's Net Investment Will Be Negative If

question 18

Multiple Choice

A firm's net investment will be negative if

• A) the actual capital stock is less than the optimal capital stock
• B) the rate of return on capital exceeds the market interest rate
• C) the depreciation rate is less than the gross investment rate
• D) gross investment is zero
• E) its workforce is growing faster than its capital stock

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Definitions:

Annual Earnings Ratio

The comparison of earnings over a year often used to analyze profitability or compare salaries.

Average Variable Cost

The total variable cost divided by the number of units produced, showing the variable cost per unit of output.

Average Total Cost

The expense for each unit produced, derived by dividing the total production expenses by the quantity of output.

Total Fixed Cost

The sum of the costs that do not vary with output. They will be incurred as long as a firm continues in business and the assets have alternative uses.