I301 Motors Has Several Investment Projects Under Consideration,all with Positive

question 53

Essay

I301 Motors has several investment projects under consideration,all with positive net present values.However,due to a shortage of trained personnel,a limit of $1,250,000 has been placed on the capital budget for this year.Which of the projects listed below should be included in this year's capital budget? Explain your answer.

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Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable, typically resulting from taxes or price controls.

Rent Ceiling

A form of price control where a maximum limit is placed on the rent that can be charged for housing.

Equilibrium Rent

The rental price at which the quantity of properties landlords are willing to lease equals the quantity that tenants are willing to rent.

Quota

A type of trade restriction that limits the quantity of a good that can be imported or exported during a specific time period.