Profit-maximizing businesses will buy more new machinery only if

Question

Quizplus · Accepted Answer

Profit-maximizing businesses will only buy more new machinery if the expected rate of return of the new machinery is greater than the interest rate. This means that the investment will generate enough profit to cover the cost of borrowing the money to purchase the machinery. A higher interest rate may increase the cost of borrowing, making a new machinery purchase less attractive, but it is not the only determining factor. Labor costs and present value are also important, but the expected rate of return is the most important consideration for businesses.

Profit-Maximizing Businesses Will Buy More New Machinery Only If