Question

#1

A retiree is ready to claim his pension benefits and is faced with several payment alternatives. Given an annual rate of return of 15%, which among the options below yields the greatest present value (PV) and what is its difference from the alternative?

Alternative 1: Receive $2,500.00 at the end of year for 10 years.

alternative 2: Receive $2,300.00 at the start of each year for 10 years, the first will be receivable immediately.

a. The retiree should choose Alternative 2 because its PV exceeds Alternative 1's by $727.72.

b. The retiree should choose Alternative 1 because its PV exceeds Alternative 2's by $2,000.00.

c. The retiree should choose Alternative 2 because its PV exceeds Alternative 1's by $1,003.75.

#2

Which of the following statements is true?

a. Monopoly, oligopoly, and monopolistic competition have high barriers to entry.

b. Perfect competition and monopolistic competition have low long-run profits.

c. None of the statements is true.

Answer 1

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