Suppose That Output in an Economy Is 1,000 Units and the Number

question 167

Multiple Choice

Suppose that output in an economy is 1,000 units and the number of hours worked in the economy is 40. What is the value of labor productivity?

• A) 0.04 units per worker hour.
• B) 25 units per worker hour.
• C) 125 units per worker hour.
• D) 1,000 units per worker hour.

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Definitions:

NPV

Net Present Value; a calculation used to determine the value of an investment by subtracting the present values of cash outflows (including initial cost) from the present values of cash inflows over a period of time.

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Capital Rationing

In capital budgeting, the process of allocating available capital among projects to maximize total NPV.