Question

Please define and describe an investment in economics

Please define mrp, mrc, Vp ( use equation, graph, words )

How does rate of return on capital and cost of capital relate to mrp and mrc?

What is the time preference?   How does the element of time ( or term ) relate to investments?

Answer 1

1) Economic investment refers to making of new additions to the capital stock of the nation. It refers to capital accumulation because the purchase of goods would not be consumed today however used in the future to create wealth.

2) Marginal revenue product: Marginal revenue is the increase in sales proceeds that results from selling one additional unit of product. It is different from the price of the product because it takes into account the effect of changes in price. It is important in economics because a firm's optimal output (i.e. the most profitable) is where its marginal revenue = marginal cost, which means that as long as the extra revenue from selling one more unit is greater than the extra cost of making it, the firm is profitable to do so.

Marginal revenue cost: Marginal cost refers to an additional cost that will be generated by increasing the production of product by one unit. The firm will increase production when marginal revenue > the marginal cost; and decrease production when marginal revenue < the marginal cost

Variable price: These price refer to those costs that change in direct proportion to the production level. The total variable cost increase when more units are produced and reduces when fewer units are produced. Although these costs are variable in total, but costs are constant per unit