Fixed Resource Prices Help Explain Why Firms

question 15

Multiple Choice

Fixed resource prices help explain why firms

• A)increase output in the short run when the price level increases
• B)keep production levels constant in the short run when the price level decreases
• C)sell output in the short run at fixed prices
• D)increase output in the long run when the price level increases
• E)decrease production when nominal wages fall in the long run

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Definitions:

NPV

Net Present Value is a financial metric that calculates the present value of an investment's expected cash flows minus the initial investment.

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

WACC

Short for Weighted Average Cost of Capital, it measures a firm's cost of capital, considering the weighted costs of equity and debt financing.

NPV

Net Present Value; a calculation used to determine the value of an investment by assessing the present value of its cash flows minus the initial investment.