generates MRPs of $9000 per year for each of those three years.
At each of the following annual interest rates, determine the
maximum price this firm should be willing to pay for a copy
machine.
a. 2 percent
b. 3 percent
c. 6 percent
d. 10 percent
13. For each interest rate below, compute the opportunity cost (in
terms of forgone spending next year) to a household of spending
$1000 this year:
a. The interest rate is 5 percent per year.
b. The interest rate is 7 percent per year.
c. The interest rate is 9 percent per year.
d. Explain why, other things being equal, households save
more when the interest rate is higher.
14. The diagram below shows the economy’s capital market, with the
initial equilibrium at point E, with an interest rate of and
investment (and saving) equal to
i∗
I∗.