Suppose the Interest Rate Is 10 Percent

question 75

Multiple Choice

Suppose the interest rate is 10 percent.Which of the following payments has the largest present value?

• A)You receive $90.91 two years from today.
• B)You receive $82.64 one year from today.
• C)You receive $75.13 today.
• D)All of these payments have the same present value to the nearest cent.

Understand the concept of marginal revenue product (MRP) and how it is calculated.

Analyze the relationship between marginal product, labor input, and the derived demand for labor.

Identify how firms determine optimal levels of employment and the wages they are willing to pay.

Recognize the role of productivity in determining wages and employment levels.

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Definitions:

Profit-Maximizing Rule

A principle that states a firm reaches its highest profit when its marginal cost equals its marginal revenue.

Marginal Revenue

The revenue increase from the sale of one more unit of a product or service.

Marginal Cost

is the increase in total cost that arises from producing one additional unit of a product or service.

Total Fixed Cost

The total fixed cost refers to the sum of all costs that do not change with the level of output produced by a company or during a specific period.