Explain in detail why NPV is the best criterion for making rational decisions? | Homework.Study.com (2024)

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• Explain the decision-making process and the principle of rational choice.
• Even though NPV, breakeven analysis, Schiller's P/E, shut down can be used to make decisions, why are they not used to make decisions? Explain each technique. What are the limitations of these techniques?
• What decision would benefit from the use of NPV calculations (other than car purchasing) and why?
• a) Describe the rational decision making model. b) Describe the difference between programmed and non programmed decisions by explaining what they are, who typically makes the decision, and the impli
• Explain the importance of taking into account the opportunity costs (implicit costs) in investment decisions.
• Explain the economist's perspective on individual decision-making, and how it manifests for the consumer and for the firm.
• Describe 3 ways in which human decision making differs from the rational individual conventional economic theory with explanations.
• Identify the main reasons that favor "make" decisions
• Based on the data below, what is the NPV of the project if the discount rate is 3%? Would you undertake the project from an economic standpoint? Explain.
• Explain how economic insights are useful in decision-making from a personal and business perspective.
• Explain the rational expectations theory and how it influences decision-making. What are some criticisms of it?
• Explain the study of how firms' decisions about prices and quantities depend on the market conditions they face.
• Explain how firms' decisions about prices and quantities depend on the market conditions they face.
• Explain the principle of rational choice and bounded rationality.
• Explain the decision-making process.
• Explain how the financial strength of an organization influences decision making and outcomes.
• Explain how real price is more important than nominal price in economic decision making such as consumption or investment decision.
• Explain how you would use the decision rule to determine how to spend $5 million.
• Explain how decision making, interaction and the workings of the economy influences the marginal benefits and marginal costs associated with the decision to purchase a house?
• 1. Why is it necessary to understand the concept of present value to analyze the schooling decision? 2. Provide an intuitive explanation of the concept of present value.
• Explain the mental accounting and the affect on consumption decisions of an individual.
• Explain opportunity costs and their importance to decision making at both the individual and organizational level in the economy.
• How can a company decide the depreciation method and why?
• Provide a specific example on HOW marginal analysis is used to make a real life decision.
• Briefly explain the difference between sunk costs and opportunity costs. How do these concepts influence economic analyses and decision making?
• Explain the steps to be followed during the capital budgeting decision-making process.
• Explain how market structures determine pricing and output decisions of businesses.
• Explain why might a firm delegate decision making.
• Explain the importance of decision making for managers at each of the three primary organizational levels (strategic, managerial, and operational) along with the associated decision characteristics.
• Explain when the investment's NPV will be positive.
• Explain how cost and extent decisions affect the allocation of assets to higher value uses.
• Why do people make decisions under uncertainty, not matching expected values? Please provide examples of decisions not matching expected values.
• Explain whether rent-seeking can be rational from the individual's perspective.
• Describe the study of how firms' decisions about prices and quantities depend on the market conditions they face.
• Briefly explain the limitations of the assumptions of cost-value-profit (CVP) analysis.
• Explain how the concepts of marginal benefits and marginal costs are used to make choices.
• Economics examines issues "at the margin." Explain how this applies to a firm's decision to make or buy.
• Explain why if two mutually exclusive projects are being compared, the short-term project might have the higher ranking under the NPV criterion if the cost of capital is high, but the long-term project might be deemed better if the cost of capital is low.
• Explain how people make choices in terms of marginal benefits and marginal costs.
• Explain the importance of differentiating between the business cycle and structural stagnation for making policy decisions.
• Explain cash management and its implications for economic analysis.
• Without understanding the opportunity cost of a decision, how do we know whether an optimal decision was made?
• Explain the underlying reasoning for a firm to adopt intertemporal price discrimination as compared to peak-load pricing. Provide an example of each.
• Explain the following concepts 1. Know-how 2. Patent 3. The feasibility study 4. LSLP 5. Franchising 6. NPV
• What are some concerns about rational decision making, ethics, and economics and the role of human behavior on rational thinking? How does this approach apply to decisions on business strategy, pricing, investment, and uncertainty?
• Discuss the impact of rational self-interest on the following decision: Whether to buy a new textbook or a used one.
• Explain how people make choices using marginal benefits and marginal costs.
• Explain why decision making is integral to the management functions.
• a. Explain the decision process for a firm trying to determine the optimal quantity of a factor of production to employ. b. Explain the determination of the optimal level of pollution from the perspective of society. c. What do these two decision proces
• Explain the difference between being a risk-taker and being risk-averse. How does this impact a person's economic decisions?
• Describe the various factors that investors take into account when operating in the context of an open economy and discuss, in detail, how each of these factors affects their decisions to invest domestically or abroad. Give examples to illustrate your ans
• Explain the following statement: "Rational people decide at the margin."
• Explain how individual characteristics and economic factors influence personal financial planning and how to find qualified financial planning professionals.
• It is noted that economics examines issues "at the margin". Explain how this would apply to the decision to make or buy?
• Discuss why a firm may decide to continue producing a good even if its price may be less than the average total cost. Provide a real-world example.
• Identify which of the following are discrete decisions and which are extent decisions and provide explanation. What discount should be given on products during the upcoming holiday sale? How should
• Explain how implicit costs and opportunity costs differentiate financial profits from economic profits.
• Explain at least two key factors policymakers use when evaluating and using the information provided to them in policy reports. Explain why it is important for an analyst to know how policymakers evaluate and use information.
• Describe heuristic models of risky decision making.
• Define performance-based incentives and explain how they relate to managerial economics.
• Short-run decisions are frequently referred to as "constrained" decisions, while long-run decisions are frequently referred to as "planning" decisions. Why is this the case? Explain.
• Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities (the effects on other areas of the firm) should be included.
• Explain how beliefs and strategic interaction shape optimal decisions in oligopoly environments.
• Why is the GAAP concept of objective measurement paramount in understanding asset valuation?
• Explain the concept of long-lived assets and its implications for economic analysis.
• Explain how non-monetary factors will influence the outcome of the partial budget.
• Explain the importance of thinking margin to make a good decision.
• What is the difference between risk and uncertainty and how you would consider them in evaluating an investment decision?
• Discuss the major factors that determine investment, and what impact does each have on aggregate demand.
• The CEO of a business bases its pricing decisions solely on the fact that inflation last year was 2%. Is this an example of rational expectations? Explain.
• Describe a decision your company has made when facing uncertainty. Compute the expected costs and benefits of the decision. Offer advice on how to proceed. Compute the profit consequences of the advic
• 1. Provide a definition of Managerial economics and explain how managers can benefit by studing this subject? 2. An entrepreneur says his business is worth $2 million because it has assets worth that
• Explain the difference between operating decisions and planning decisions.
• How do mental maps help us better understand market selection decision-making in small firms?
• Explain how state policies can distort a firm's profit maximization decisions.
• Define Decision Utility.
• Describe the concept of relevant costs and how they relate to decision making.
• List 3 ways in which human decisions making differs from the rational individual.
• Explain the benefits to a company of decentralizing its decision-making. (List at least 3) Also, explain the benefits to a company of centralizing its decision-making. (List at least 3)
• 1. Discuss the different roles played by the qualitative and quantitative approaches to managerial decision making. Why is it important for a manager or decision maker to have a good understanding of
• 1. Discuss the different roles played by the qualitative and quantitative approaches to managerial decision making. 2. Why is it important for a manager or decision maker to have a good understanding
• In what sense do the following properties of consumer preferences capture rationality? Define each in your own words and describe how they relate to the assumption of rationality as best you can. (a)
• Explain how the concept of elasticity guides decisions in price discrimination by a monopolist.
• Explain the limitations of physical capital in long-run economic growth explain why it has the least impact on the growth of the factors. Include what physical capital is.
• Explain whether the concept of cost benefit analysis applies to public goods and the reason for it.
• Provide an example of how the Theory of Consumer Choice can be applied in decision making.
• Explain how the level of risk aversion affects consumers' decisions.
• Identify a personal economic decision that was driven by a behavioral bias rather than by pure rational behavior. How would your decision differ today?
• Explain the conflict that can occur between rational choice and passion when making decisions.
• List the 3 assumptions about preferences, and for each, briefly explain why they are logical.
• How do you take individual perception in decisions under uncertainty into account?
• How does one take individual perception in decisions under uncertainty into account?
• Explain the significance of resource pricing in terms of money-income determination.
• Explain why it is important to distinguish between normative and positive statements in understanding economic information or arguments.
• Explain why, aside from the shut-down decision (i.e., assuming that the firm plans to produce some positive amount), a firm should not use its average cost of production to determine the quantity of o
• Explain how standardizing accounting principles help financial markets work more efficiently.
• How does marginal analysis work to help make better decisions?
• Briefly explain the three major decisions every Manager has to take while performing the finance function.
• Explain how the state policies can distort the firms' profit maximization decisions.
• In at least 200 words, explain what part does an individual's worldview play on the calculation of opportunity costs associated with certain decisions.