You Are Considering the Purchase of a New Machine

question 41

Multiple Choice

You are considering the purchase of a new machine.Your analysis includes the evaluation of two machines which have differing initial and ongoing costs and differing lives.Whichever machine is purchased will be replaced at the end of its useful life.You should select the machine which has the:

• A)longest life.
• B)highest annual operating cost.
• C)lowest annual operating cost.
• D)highest equivalent annual cost.
• E)lowest equivalent annual cost.

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Definitions:

Price Elasticity of Supply

The measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price.

Demand-Side

Pertaining to the aspects of the economy influenced by consumer spending and preferences, impacting overall demand for goods and services.

Market Failure

The inability of a market to bring about the allocation of resources that best satisfies the wants of society; in particular, the overallocation or underallocation of resources to the production of a particular good or service because of externalities or asymmetric information, or because markets fail to provide desired public goods.

Producer

An individual, company, or entity that creates goods or services to satisfy consumer demands.