If a firm needs one machine to produce a product,and must replace the machine when it wears out,then the firm should pick a durability level of the machine that
A) minimizes the expense today.
B) minimizes the present discounted cost of having the machine forever.
C) maximizes the future value of the machine.
D) minimizes the future value of the machine.

Question

Quizplus · Accepted Answer

The firm should choose a durability level that minimizes the present discounted cost of having the machine forever. This takes into account both the initial expense and the future value of the machine, as well as the time value of money. By minimizing the present discounted cost, the firm can ensure that it is making the most economically efficient decision for the long-term.

If a Firm Needs One Machine to Produce a Product,and