The firm in the table below produces denim jeans and each unit of capital represents one sewing machine. The MRP for each of machines 10 through 14 is provided. Each sewing machine delivers a stream of MRPs beginning one year from now, for a total of 2 years. Suppose that after 2 years each sewing machine is worth nothing.
-Refer to Table 15- 2. What principle will this firm follow to determine the optimal number of sewing machines to own and operate?
A) the annual MRP on the last unit of capital should be equal to (or greater than) its purchase price
B) the marginal products of each machine should be equal
C) the marginal revenue products of all the machines should be equal
D) the present value of the future MRPs should be increasing over time
E) the present value of the future MRPs on the last unit of capital is equal to (or greater than) its purchase price
Correct Answer:
Verified
Q15: The table below shows the payments
Q56: The firm in the table below
Q57: Suppose a piece of capital equipment offers
Q58: Economists use the concept of present value
Q59: If the annual interest rate is 10
Q61: If the annual interest rate is 6
Q62: Suppose a piece of capital equipment will
Q63: If the annual interest rate is 7
Q64: Consider a firm making a decision to
Q65: If the annual interest rate is currently
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents