Right bought its airplane for $500,000, while Fly by Night rents The services are alike in every respect except that Fly Copyright © 2009 Pearson Education, Inc.ġ) Two small airlines provide shuttle service between Las VegasĪnd Reno.
What should he do? A) Sell to ABC Corporation. Farmer Jones could earn net profit of $15,000 (over and above all of his expenses) if he farms the land this year. ABC Corporation has offered to buy the farm today for $500,000 and XYZ Corporation has offered to buy the farm for $530,000 one year from now. Today the farm is worth $500,000, and the interest rate is 10 percent. Answer: A Diff: 2 Section: 7.1 3) Farmer Jones bought his farm for $75,000 in 1975. D) It depends on what the rate of interest was. C) It depends on what the rate of inflation was between 19. Should Alice exercise the option and pay $100,000 for the land? A) Yes.
When she acquired the option in 1985, the land was worth $120,000. By paying the $20,000, she bought the right to buy the land for $100,000 in 1992. Answer: C Diff: 1 Section: 7.1 2) In 1985, Alice paid $20,000 for an option to purchase ten acres of land. D) Neither, Fly by Night has lower costs at small output levels and Fly Right has lower costs at high output levels. Which airline has the lower costs? A) Fly Right. If Fly Right were to go out of business, it would be able to rent its plane to another airline for $30,000. The services are alike in every respect except that Fly Right bought its airplane for $500,000, while Fly by Night rents its plane for $30,000 a year. Microeconomics, 7e (Pindyck/Rubinfeld) Chapter 7 The Cost of Production 1) Two small airlines provide shuttle service between Las Vegas and Reno.
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