Replace the Old Machine with a New Machine If

question 48

Multiple Choice

Replace the old machine with a new machine if:

• A) the cash flows of the old machine are greater than the cash flows of the new machine.
• B) the cash flows of the new machine are greater than the cash flows of the old machine.
• C) the NPV of replacement is negative.
• D) none of the above.

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Definitions:

Marginal Utility

The extra pleasure or advantage gained by using an additional unit of a product or service.

Total Utility

The total satisfaction or benefit received by consuming a product or service.

Budget Line

A graphical representation showing all possible combinations of two goods or services that a consumer can afford with their income, given the prices of the goods.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, indicating the same level of satisfaction.