The Annual Cost of Producing the Entire Output of Final

question 31

Multiple Choice

The annual cost of producing the entire output of final goods and services in an economy is

• A) equal to the quantity of total output produced.
• B) greater than the total income of households in the economy.
• C) equal to total income.
• D) equal to the total income of households in the economy only if profits are zero.

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Definitions:

Modified Internal Rate Of Return

An adjustment of the Internal Rate of Return formula that rectifies its limitations by incorporating different reinvestment rates for cash flows received over the investment's lifetime.

Payback Period Method

A capital budgeting method that calculates the time required to recoup the cost of an investment, identifying the point where cash inflows equal cash outflows.

Profitability Index

A calculation used to assess the attractiveness of an investment or project, equal to the present value of future cash flows divided by the initial investment cost.