[OPE-L:4158] Re: New Quiz and New New Quiz!

aramos@aramos.b (aramos@aramos.bo)
Thu, 6 Feb 1997 05:34:11 -0800 (PST)

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In ope-l 4152, Allin wrote:

> My own question would be this: Suppose we have two
> investment opportunities A and B, and let the expected rate
> of profit (= expected gross income at the end of the period
> minus cost incurred now, divided by cost incurred now) be
> the same for both. But also suppose that the price of the
> means of production used in A is expected to fall, while the
> price of the means of production employed in B is expected
> to remain constant. Does this give a capitalist any reason
> to prefer investment in A over B or vice versa?
> My thinking is that A will be preferred, if the capitalist
> is thinking of investment in each of the possible ventures
> as a "going concern", since A offers a prospective gain in
> the form of a "release of fixed capital" while B does not.
> The capitalist investing in A can use the "saving" -- owing
> to his ability to replace the means of production more
> cheaply -- either for consumption, or to extend the scale of
> his operations.

That is another "quiz" (situation). Let us develop it.

What would be the cause(s) of the falling price of the
"machines" used in A?

Alejandro Ramos M.