(1) If the annual interest rate remains unchanged over the next two years, and t
ID: 1165098 • Letter: #
Question
(1) If the annual interest rate remains unchanged over the next two years, and the present value of $120 to be received one year from now is $100, what will $100 be worth two years from now?
A) Uncertain. We need to know the interest rate. B) $120 C) $144 D) $140
(2) If the death of an owner causes the firm to dissolve, the firm must have been:
A) a corporation only. B) either a proprietorship or a partnership. C) a partnership only. D) a proprietorship only.
(3) When total product is decreasing, marginal product is:
A) negative. B) positive and increasing. C) constant. D) positive and decreasing.
(4) Refer to the below figure. If demand curve D1 is the relevant demand curve, rent is:
A) zero. B) OG. C) area KHG. D) area FHGO.
Price D3 D2 0 Output/Month D1Explanation / Answer
1. The correct answer is: C) $ 144
Reason: the rate of interest is 20% per annum as $100 becomes 120 over one year. So, $100 will be 100*(1.20)^2 = 144 at the end of 2 years.
2. The correct answer is: D)
Reason: in case of a proprietorship, all the business is named after the owner and the death of the owner may actually dissolve the firm.
3. The correct answer is: A)
Reason: marginal product is actually the slope of total product and when total product is declining, the marginal product will be negative.
4. The correct answer is: a).
Reason: rent is actually the excess of what a factor earns over its intrinsic value which is zero if D1 is the demand curve.
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