2. The market for capital The following graph shows the supply of and demand for capital in a market over the last year. You can see that the demand for capital has increased over the last year (the demand curve shifted to the right). Place the black X at the equilibrium interest rate and the quantity of capital. (?) INTEREST RATE, r (Percent) 20 18 16 14 12 2 0 S Do D2 D1 0 2 10 12 14 16 18 20 CAPITAL (Billions of dollars) The market interest rate increased by 2.0%, and the amount of capital borrowed increased Weakened +*+ Equilibrium Does it appear that the economy has strengthened or weakened over the past year? Strengthened by $2.0 billion.

2. The market for capital The following graph shows the supply of and demand for capital in a market over the last year. You can see that the demand for capital has increased over the last year (the demand curve shifted to the right). Place the black X at the equilibrium interest rate and the quantity of capital. (?) INTEREST RATE, r (Percent) 20 18 16 14 12 2 0 S Do D2 D1 0 2 10 12 14 16 18 20 CAPITAL (Billions of dollars) The market interest rate increased by 2.0%, and the amount of capital borrowed increased Weakened +*+ Equilibrium Does it appear that the economy has strengthened or weakened over the past year? Strengthened by $2.0 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Macmillan Learning Figure: Investment Projects Project F G H J K L M Rate of return on investment 20% 18 16 14 12 10 8 6 Cost of investment $ 500 300 1,000 200 2,000 1,500 1,200 800 Use Table: Investment Projects. If the market interest rate is 17%, the amount of investment demanded is: O $2,000. O $1,000. O $800. O $200.
Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $60,000 a year, and he pays workers $100,000 in wages In return, he produces 300.000 baskets of peaches per year, which sell for $3.00 each. Suppose the interest rate on savings is 4 percent and that the farmer could otherwise have eamed $45,000 as a shoe salesman What is the farmer's economic prof? The peach farmer cams economic profit of $ (Enter your response as an integer) What is the farmer's accounting profit? The peach farmer eams accounting profit of $(Enter your response sanger)
Suppose that the demand for loanable funds for car loans in the Milwaukee area is $12 million per month at an interest rate of 1O percent per year, $13 million at an interest rate of 9 percent per year, $14 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $18 million, what will be the equilibrium interest rate? Instructions: Enter your answer as a whole number. percent per year
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You are considering the purchase of a business that is currently earning $25,000 per year in after-tax profit. If these conditions are expected to continue year after year into the future, and the interest rate is currently 10 percent, the current market value of this business is a.$2,500. b.$25,000. c.$2,500,000. d.$250,000.
Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $50,000 a year, and he pays workers $100,000 in wages. In return, he produces 250,000 baskets of peaches per year, which sell for $4.00 each. Suppose the interest rate on savings is 3 percent and that the farmer could otherwise have earned $45,000 as a shoe salesman. What is the farmer's economic profit? The peach farmer earns economic profit of $. (Enter your response as an integer.) What is the farmer's accounting profit? The peach farmer earns accounting profit of $ (Enter your response as an integer.)
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be Question 2: Should a firm invest? (show all your work. Points will be deducted for no work) (20 points) A firm learns a firm has an investment opportunity that will earn future revenue 4 years from now by $160,000. The marginal cost of the physical capital today is $125,000. The firm makes this investment at an interest rate of 5%. Using this information answer the questions below 1. Should this frim make this investment? 2. What is the discounted percentage for this investment? 3. Other things being equal, could this investment be made a higher interest rate? Lower? Why, Show with numbers 4. Other things being equal, could this investment be made for longer term? Shorter term? Why?, Show with numbers
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