Chapter 11 Self-test questions

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Non-renewable resources can also be called ____________

Exhaustible resources correct incorrect

Inexhaustible resources correct incorrect

Intermediate products correct incorrect

Merit goods correct incorrect

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Rounding to two decimal places, what is the present value today of £1,000 in two year's time, when the appropriate discount rate is 5 per cent per annum?

£1,100.00 correct incorrect

£907.03 correct incorrect

£952.38 correct incorrect

£950.25 correct incorrect

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Rounding to two decimal places, what is the present value today of £1,000 in three year's time, when the appropriate discount rate is 7 per cent per annum?

£816.30 correct incorrect

£1225.04 correct incorrect

£825.50 correct incorrect

£1070 correct incorrect

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Rounding to two decimal places, what will be the value in three year's time of £1,000 today, when the appropriate interest rate is 8 per cent per annum?

£1080.00 correct incorrect

£1166.40 correct incorrect

£1259.71 correct incorrect

£793.83 correct incorrect

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When a firm utilises a capital good it owns, the rental price is ____________

What it could have earned if it rented out the good to another firm. correct incorrect

Zero since it owns the capital good correct incorrect

Low since it owns the capital good correct incorrect

Explicit correct incorrect

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Profit maximizing firms undertake investment as long as the net present value is ____________

high correct incorrect

Negative correct incorrect

Positive correct incorrect

Zero correct incorrect

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Rounding to two decimal places, what is the present value today of £1,000 in two year's time, when the appropriate discount rate is 5 per cent per annum?

£1,100.00 correct incorrect

£907.03 correct incorrect

£952.38 correct incorrect

£950.25 correct incorrect

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Which of the following best describes what the role of sunk costs in future investment decisions should be?

Decisions concerning new investments should only be affected by the extra (marginal) cost and the extra (marginal) revenue generated, and sunk costs do not affect either of these so sunk costs should not affect the decision. correct incorrect

Sunk costs are important in investment decisions as it is important not to waste money that has already been spent. correct incorrect

Sunk costs are important because they influence the morale of managers. correct incorrect

Investment decisions should be affected by all of the firm's costs including those already committed correct incorrect

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Which of the following best describes general purpose technologies?

They are machines that can be used by a firm for different purposes correct incorrect

They can start as basic technologies but gradually become sophisticated over time correct incorrect

Their economic value tends to be low because they are abundant correct incorrect

None of the above correct incorrect

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A knowledge based economy suggests ____________

ICT is the most important sector in the economy correct incorrect

Human capital affects productivity of firms more than physical capital correct incorrect

Everybody in the economy is educated correct incorrect

People are well informed about events in the country correct incorrect