Question

All else equal, when a manager is choosing between two payment plans, a profit-maximizing manager should chose the plan with the lowest present value. In order to analyze costs and benefits that are paid and received at different times, they must be valued at ________ in time as funds received or paid in the future are worth ________ than the same amount received or paid today. Select one: A. different points; less B. a single point; more C. a single point; less D. different points; more

New firms have incentive to enter an industry when there is(are): Select one: A. new production technologies. B. positive economic profits. C. high capital costs. D. an abundance of labor.

The longer the period of time until receiving a future amount of money, the more interest that can be earned, so the larger the discount factor. Select one: True False

Answer 1

Question 1

Costs and benefits of a project generally accrue at the different time periods but they must be analyzed at a single point of time so that their values can be compared without time bias and decisions can be made.

Secondly, the value of an amount of money received today is always greater than the same amount of money received in future time period.

So,

In order to analyze costs and benefits that are paid and received at different times, they must be valued at a single point in the time as funds received or paid in the future are worth less.

Hence, the correct answer is the option (C).

Question 2

When existing firms in an industry are earning the positive economic profit then new firms enter into the industry.

Hence, the correct answer is the option (B).