Investment Decisions Are Based on the Trade-Off Between The

question 13

Multiple Choice

Investment decisions are based on the trade-off between the:

• A) potential profit that could be generated by investment and the cost of borrowing money to finance the investment.
• B) interest rate that savers will earn and the interest rate that the borrowers will have to pay.
• C) future value of the loan and the present value of the loan.
• D) potential profit that could be generated and the willingness of a lender to make the loan.

---

Definitions:

Marginal Cost

The financial outlay for manufacturing an extra unit of a product or service.

Total Revenue

The total amount of money received by a company for goods or services sold, calculated as the quantity sold multiplied by the price per unit.

Total Cost

Total cost is the complete cost of all factors of production used in producing goods or services, including both fixed and variable costs.

Fixed Factors

Inputs in the production process that remain constant and cannot be easily increased or decreased in the short term, such as machinery or land.