A Company That Produces Computer Peripherals Is Considering Buying Some

question 179

Multiple Choice

A company that produces computer peripherals is considering buying some new equipment that it expects will increase future profits. If the interest rate rises, the present value of these future earnings

• A)rises. The company is more likely to buy the equipment.
• B)rises. The company is less likely to buy the equipment.
• C)falls. The company is more likely to buy the equipment.
• D)falls. The company is less likely to buy the equipment.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a good or service, used in decision-making on production levels.

Average Total Cost

The average cost per unit of output expressed as the total production cost divided by the number of units produced.

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Efficient Scale

The level of production at which a firm operates with the lowest average total costs, achieving economies of scale without incurring diseconomies of scale.