What is the internal rate of return on a new $2,000 heater that would reduce your heating costs by $200 a year forever? Under what conditions would you make the purchase?
What will be an ideal response?
The internal rate of return is 200/2,000 = 10%. The purchase should be made as long as the interest rate is less than 10%.
You might also like to view...
Why would a firm continue to pollute even when it is fined (taxed) for doing so?
What will be an ideal response?
Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 30,000 units
A) the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently high. B) producers should raise the price to $3 in order to sell the quantity demanded of 30,000. C) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high. D) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low.