The Net Present Value Rule States That You Should Accept

question 38

Multiple Choice

The net present value rule states that you should accept a project if the NPV:

• A)is equal to zero or negative
• B)exceeds the required rate
• C)is less than 1.0
• D)is positive
• E)exceeds the initial cost

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Definitions:

Deadweight Loss

A loss in total surplus that occurs when a market is not in equilibrium, often due to taxes, subsidies, or market controls suppressing the market's ability to reach an efficient allocation of resources.

Marginal Cost Curve

A curve showing how the cost of producing one additional unit of a good varies as the quantity of the good produced changes.

Competitive Price

The price point in a market where supply meets demand, often driven by competition among firms and considered the equilibrium price.

Monopoly Power

The ability of a single supplier to control market prices and exclude competition in a particular market.