One Implication of the Fact That Profit Functions Are Convex

question 17

Multiple Choice

One implication of the fact that profit functions are convex in prices is that firms will always prefer:

• A)stable input and output prices.
• B)input and output prices that fluctuate about a given level.
• C)stable input prices and fluctuating output prices.
• D)fluctuating input prices and stable output prices.

Calculate and interpret the average rate of return for investment projects.

Understand and apply the concept of the time value of money in investment decisions.

Identify and calculate the net present value (NPV) of investment proposals.

Calculate and understand the importance of the cash payback period in investment decisions.

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Definitions:

Commercial Reasonableness

A principle requiring a party to act in a fair, honest, and reasonable manner in business transactions.

Statutory Irrevocability

Statutory irrevocability refers to a condition or status where certain rights, decisions, or agreements are made non-reversible by statute or law.

Counteroffer

A response to an initial offer, modifying its terms, which effectively rejects the original offer and presents a new one for consideration.

Rejection

In contract law, rejection refers to the refusal to accept an offer or a performance that does not conform to the terms of the contract, effectively terminating the offer.