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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's demand for financial capital for research and development of these gadgets, based on expected rates of return from sales. Now, say that every investment would have an additional Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  1 social benefit—that is, an investment that pays at least a Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  2 return to the Gizmo Company will pay at least an Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  3 return for society as a whole; an investment that pays at least Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  4 for the Gizmo Company will pay at least Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  5 for society as a whole, and so on. Answer the questions that follow based on this information.

Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  6

a. If the going interest rate is Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  7 how much will Gizmo invest in R&D if it receives only the private benefits of this investment?

b. Assume that the interest rate is still Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  8 How much will the firm invest if it also receives the social benefits of its investment? (Add an additional Chapter 13, Problem 3SCQ, The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company's , example  9 return on all levels of investment.)

a)

To determine

The amount that gizmo should invest in R&D if it receives only private benefits, if the going interest rate is 9% is to be determined.

Explanation

Given:

    Private Rate of ReturnValue of R&D

      10%

      $100

      9%

      $102

      8%

      $108

      7%

      $118

      6%

      $133

b)

To determine

The amount that gizmo should invest in R&D if it receives private benefits and social benefits both, if the going interest rate is 9% and if there is 5% in addition to the private return is to be determined.

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