[Simone B]

I have been trying really hard to underdstand this material in Econ but I am having trouble with 3 questions and I really need help with if someone would be kind enough...

1) Diseconomies of scale can be caused by which of the following:

a) the law of diminishing returns.
b) bureaucratic inefficiencies.
c) increasing advertising and promotional costs.
d) all of the above.

2) The certainty equivalent approach to accounting for risk in capital budgeting involves which of the following:
a) adjusting the discount rate used to calculate net present values.
b) adjusting the expected cash flows.
c) estimating the coefficient of variation.
d) estimating the standard deviation of the net present values.

3) If a risky cash flow of $10,000 is equivalent to a riskless cash flow of $9,300, the certainty equivalent factor is
a) 0.93
b) 0.07
c) 1.07
d) 1.93