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The following table shows the investment and output options for an individual bu...

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The following table shows the investment and output options for an individual business.  Employment of labour and technology is assumed to be constant.

The business operates in competitive product and factor markets.  Its output sells for $5 per unit.  The price of a new machine is $200. Machines depreciate at a rate of 3 percent and the real interest rate is 2 percent. How many machines will the business choose to invest in? 

 

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