A Firm Invests in a New Machine That Costs $2,000

question 34

Multiple Choice

A firm invests in a new machine that costs $2,000 a year but which is expected to produce an increase in total revenue of $2,200 a year. The current real rate of interest is 8 percent. The firm should:

• A) Undertake the investment because the expected rate of return of 12 percent is greater than the real rate of interest
• B) Undertake the investment because the expected rate of return of 10 percent is greater than the real rate of interest
• C) Undertake the investment because the expected rate of return of 9 percent is greater than the real rate of interest
• D) Not undertake the investment because the expected rate of return of 7 percent is less than the real rate of interest

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Definitions:

Genital Arousal

The physiological response of the genital organs to sexual stimulation, which may include increased blood flow and erection in males and lubrication and swelling in females.

Sleeping Pills

Medications used to aid in falling or staying asleep, typically prescribed for individuals with sleep disorders.

N3 Sleep

The deepest stage of non-REM sleep, characterized by slow brain waves called delta waves, where the body repairs and regrows tissues, builds bone and muscle, and strengthens the immune system.

Alpha Waves

Brainwave patterns associated with a state of wakeful relaxation, typically observed in the brain's electrical activity during calmness.