A firm has four different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $5 million at the end of one year, $10 million at the end of two years, and $15 million at the end of three years. Option C will give the firm $15 million at the end of one year,
$10 million at the end of two years, and $5 million at the end of three years. Option D will give the firm $21 million at the end of one year, nothing at the end of two years, and $9 million at the end of three years. Which of these options has the highest present value if the rate of interest is 5 percent?
a. Option A
b. Option B
c. Option C
d. Option D
d
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The key assumption that distinguishes a constant cost industry from other types of industries is that
a. firms can earn only a normal profit in the long run b. each firm's ATC curve is unaffected by changes in industry output c. each firm has a horizontal long-run average total cost curve d. there are no economies of scale available to the firms in the industry e. each firm faces a horizontal demand curve for its output
If the marginal propensity to consume is 0.55, the simple spending multiplier is 3.65
a. True b. False Indicate whether the statement is true or false