Suppose that two firms are Cournot competitors. Industry demand is given by: P=200-91-92 where 91 is the output of Firm 1 and q₂ is the output of Firm 2. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. 1) Solve for the Cournot price, quantity, and firm profits.
Answers
The Cournot equilibrium in this scenario can be solved by considering the reaction functions of the two firms. Let's denote the output of Firm 1 as q₁ and the output of Firm 2 as q₂.
To find the reaction function of Firm 1, we differentiate the profit function of Firm 1 with respect to q₁ and set it equal to zero:
π₁ = (P - ATC) * q₁
= (200 - q₁ - q₂ - 20) * q₁
Taking the derivative and setting it equal to zero, we have:
dπ₁/dq₁ = (200 - 2q₁ - q₂ - 20) - q₁ = 0
Simplifying this equation, we find:
180 - 3q₁ - q₂ = 0
q₁ = (180 - q₂) / 3
Similarly, we can find the reaction function of Firm 2:
q₂ = (180 - q₁) / 3
To find the Cournot equilibrium, we need to solve these two reaction functions simultaneously. Substituting the reaction function of Firm 2 into the reaction function of Firm 1, we have:
q₁ = (180 - (180 - q₁) / 3) / 3
q₁ = 120/7
Substituting this value back into the reaction function of Firm 2, we find:
q₂ = (180 - (120/7)) / 3
q₂ = 540/7
Now, we can calculate the Cournot price (P) using the demand function:
P = 200 - q₁ - q₂
P = 200 - (120/7) - (540/7)
P = 1940/7
Finally, we can calculate the profits of each firm using the profit function:
π₁ = (P - ATC) * q₁
= ((1940/7) - 20) * (120/7)
= 24800/49
π₂ = (P - ATC) * q₂
= ((1940/7) - 20) * (540/7)
= 204000/49
Therefore, in the Cournot equilibrium, the Cournot price is 1940/7, the quantities produced by Firm 1 and Firm 2 are 120/7 and 540/7, respectively, and the profits of Firm 1 and Firm 2 are 24800/49 and 204000/49, respectively.
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Related Questions
Specialty Products Company has a high turnover rate among its employees, especially those
who are young parents. Solution to this problem
Answers
The company has to first investigate the reason why young parents are leaving the company. This is the first step towards resolving the issues of high turnover.
If it is because of the inability to care for their kids while at work, then the company can solve this problem by:
Turnover in human resources refers to the act of replacing one employee with a new employee. Termination, retirement, death, interagency transfers, and resignations are examples of separations between organizations and personnel.
Turnover in human resources refers to the act of replacing one employee with a new employee. Termination, retirement, death, interagency transfers, and resignations are examples of separations between organizations and personnel.
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The essential processes required to transition arriving personnel, equipment, and materiel in theater into forces capable of meeting operational requirements are collectively known as
Answers
This process of moving personnel, equipment, and materials to meet operational requirements is known as:
Joint reception,staging, onward movement, IntegrationWhat is Personnel Management?This refers to the handling and administrative functions of making workers or personnel in an organization.
Hence, we can note that based on this essential process of moving personnel, equipment, and materiel in theater into forces capable of meeting operational requirements are collectively known as Joint reception, staging, onward movement and Integration
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Frank is an employee of guitar makers, llc. guitar's employee manual states that workers, such as frank, will be dismissed only for good cause. with respect to the employment-at-will doctrine, this is
Answers
Answer: An exception based on contract theory.
Explanation:
Contract theory is an agreement reached by two parties over a set of deal to be entered, these negotiation met guides what the agreement is all about, violators of the agreement would attract extra bodies(Law makers) to come into their decision. At Ilc, if the guitar producers only release their workers based on good cause, it's seen as a contract theory, based on what both parties agreed.
minke has an antique restoration business and has a great ability to envision a piece of junk as a restored final masterpiece. throughout his life he has always tinkered with innovative ideas and has always invented new products. it is clear that minke possesses a high level of .
Answers
Minke possesses a high level of business acumen and innovative thinking in his antique restoration business, enabling him to transform junk into masterpieces and consistently invent new products.
It is clear that Minke possesses a high level of business acumen and innovative thinking. His antique restoration business showcases his ability to turn something old and worn into a beautiful and valuable masterpiece, which requires not only creative talent but also business skills such as marketing and pricing.
Additionally, his tinkering with innovative ideas and product inventions shows his ability to think outside the box and come up with new solutions. Overall, Minke's combination of business and innovative skills makes him a valuable asset in the antique restoration industry.
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Problem statement
• The owner of a real estate who owns high rise buildings wants
a system that will allow his employees to rent out his building’s
apartments to people.
• A Customer who is inte
Answers
A Customer who is interested in renting an apartment from the real estate owner requires a user-friendly system that enables them to search for
available apartments, view detailed estate information about each apartment (e.g., number of rooms, amenities, location), submit rental applications, and track the status of their application. The system should provide a seamless and efficient process for the customer to communicate with the real estate company, schedule property tours, sign employees rental agreements electronically, and make rental payments. Additionally, the customer may also require buildings access to relevant documents such as lease terms, rules, and regulations.
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in order to simplify market transactions, an economy must use
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In order to simplify market transactions, an economy must use:
1. Standardized Currency: Having a standardized currency eliminates the need for bartering or exchanging goods directly.
provides a common medium of exchange that simplifies transactions and facilitates economic activity.
2. Clear and Enforceable Legal Framework: An economy needs a clear and enforceable legal framework that defines property rights, contracts, and dispute resolution mechanisms. This ensures that transactions are legally recognized and protected, providing a sense of security and trust for buyers and sellers.
3. Efficient Payment Systems: An economy should have efficient payment systems in place, such as banking systems, electronic transfers, and payment platforms. These systems facilitate the transfer of funds between parties, making transactions faster and more convenient.
4. Market Infrastructure: An economy needs well-functioning markets with infrastructure that supports transactions, such as marketplaces, exchanges, and trading platforms. These facilitate the buying and selling of goods, services, and financial instruments.
5. Information Availability: Access to accurate and timely information about products, prices, and market conditions is crucial for efficient market transactions. This can be facilitated through market transparency, consumer protection regulations, and information dissemination mechanisms.
By implementing these elements, an economy can simplify market transactions, promote economic activity, and foster a more efficient and effective marketplace for buyers and sellers.
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while presparing a bank reconciltion an accountant notices a check that has been returned unpaid this type of tarnsiotn should be
Answers
Reported as a "contra" or negative balance in the bank reconciliation. When an account is returned unpaid, it means that the check has been written but not yet cashed, and it has been returned to the bank due to insufficient funds in the account.
This type of transaction is known as a "bounced check" or "NSF" (non-sufficient funds) item. The contra entry is necessary to ensure that the balance in the bank reconciliation is accurate and reflects all transactions related to the account. The contra entry is typically recorded in a separate section of the bank reconciliation and includes the date of the check, the check number, the amount of the check, and the description of the transaction ("bounced check").
By reporting the contra entry in the bank reconciliation, the accountant is providing accurate information about the account's financial position and is ensuring that the balance in the reconciliation is consistent with the actual balance in the account.
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When does potential gdp increase?.
Answers
The total monetary or market worth of all the finished goods and services produced within a nation's boundaries during a certain time period is known as the gross domestic product (GDP). It serves as a thorough assessment of the state of the economy in a particular nation because it is a wide indicator of total domestic production.
Potential Gross Domestic Product (GDP) is a theoretical concept that represents an estimation of the value of the production that the economy would have created if labour and capital had been engaged at their maximum sustainable rates—that is, rates consistent with stable growth and inflation.
The size of the labour force and the rate of productivity growth (output per hour of work), which in turn depends on the level of capital investment, both affect potential GDP. That is, if more people join the labour force, more capital is added to the economy, or the present labour force and capital stock become more productive, potential GDP growth could increase.
Potential GDP is a key measure. It is helpful for calculating the amount of goods and services an economy can create. You can determine if production can increase and how this would affect inflationary pressures and unemployment by comparing real GDP and potential GDP.
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influences of Business environment,
Answers
Factors that Influence the business environment are :
Economic environmentSocial environmentTechnological environmentPolitical environmentLegal environment
The business environment means the total of all the individuals, and institutions that could affect the working of the business firm.
Importance of business environment:
Business environments help the firm to prepare itself for every possible obstruction or hindrance that can affect the functioning of the firm.It also helps the firm to adjust to frequent changes.The economic environment is all the things that create an economic impact on the firm.
The social environment is all the traditions and customs of the society that creates an impact on the firm.
The technological environment is all the impact on the firm caused due to new technology and upgradations.
The political environment is the conditions and behavior that the elected representatives hold toward the business
The legal environment is entirely based on the rules and legislation of the authorities.
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__________ utility is the benefit marketing provides by allowing the consumer to own, use, and enjoy the product.
Answers
Answer:
Possession
Explanation:
POSESSION UTILITY can be defined as the type of Utility in which a person derived a value for owning a product reason been that POSSESSION UTILITY give such person who purchased a product the right to own the product by enabling such person to possess the ownership of the product and to use the product . Example a person who purchased a car bought it for the purpose of driving it around which means that such person has the POSSESSION UTILITY to own the car , drive the car and enjoy the car thereby deriving a value for owning the car .
The Italy can produce 20 Gas turbines and 60 Tyres. France can produce 80 Gas turbines and 30 Tyres.
a). What is the opportunity
cost of producing Gas turbines in Italy? ______ tyres.
b). What is the opportunity cost of producing Tyres in
France ? _______ Gas turbines.
Answers
Answer:
1. 60 Tyres
2. 80 Gas Turbines
Explanation:
Given that the Opportunity cost is an economics term that is used in describing the cost of an alternative that must be forgone to continue or proceed with a certain activity.
Hence, in this case, considering the available information in the question, the correct answer is that the opportunity cost of producing Gas turbines in Italy is 60 Tyres.
At the same time the opportunity cost of producing Tyres in France 80 Gas turbines.
How long does it take to get a doctorate in education?
Answers
Compared to a short-term investment, what is the general return of a long-term investment? A) A long-term investment has a similar return to a short-term investment.
B) A long-term investment has a greater return because it has greater risk.
C) A long-term investment has a greater return because it has lower risk.
D) A long-term investment has a lower return because it has lower risk.
Answers
Let understand that "short-term investment" are investments that can be easily converted to cash and has a maturity period of less than a year. Example of this investment are Money Market.
"Long term investment" are investment that runs over a long period of time and yield higher return than the short-term investment". Example of these investment are stocks, bonds, real estate
People invest in "Long term investment" because its offers more risk for higher rewards.
In conclusion, long-term investment has a greater return because it has greater risk.
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Answer:
Compared to short-term investment, what is the general return of long-term investment?
Long-term investment has a similar return to short-term investment.Long-term investment has a greater return because it has greater risk.Long-term investment has a greater return because it has lower risk. <<<CORRECTLong-term investment has a lower return because it has lower risk.Explanation:
Edge 2022
The more ________ used, the greater the leverage a company employs on behalf of its owners.
Answers
The more "DEBT" used, the greater the leverage a company employs on behalf of its owners.
What is DEBT?A debt is something that one party borrows from another, typically money. Many businesses and people utilize debt to finance significant expenditures that they would not normally be able to afford.
Some characteristics of DEBT are-
An agreement to borrow money with the need that it be repaid at a later time, typically with interest, is known as a debt arrangement.Debt is money that one party borrows from another.Many businesses and individuals utilize debt as a means of financing significant purchases that they would otherwise not be able to make.In a financial agreement based on debt, the borrowing party is granted permission to borrow funds subject to the need that they be repaid at a later time, typically with interest.The four primary forms of debt are secured, unsecured, revolving, and mortgaged.Bonds are a type of debt that businesses issue to raise money.To know more about debts, here
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which method are managers using when they plot all the data points to see if there is a linear relationship among the data
Answers
Method are managers using when they plot all the data points to see if there is a linear relationship among the data is scatterplot.
The components for general variable value is: Total Variable Cost = (Total Quantity of Output) x (Variable Cost Per Unit of Output) Cost of materials, utilities, and commissions are all examples of variable charges.
The high-low method entails taking the very best degree of interest and the bottom degree of interest and evaluating the full charges at every degree. If the variable value is a hard and fast rate in line with unit and glued charges stay the same, it's far viable to decide the constant and variable charges through fixing the gadget of equations.
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Kona's Manufacturing produces organic dog treats for which the annual demand is 10,000 units. Production averages 100 units per day, while demand is only 40 units per day. Holding costs are $2.00 per unit per year, and setup cost is $200. The Economic Production Quantity has been calculated to be 1825.7, or 1826 units. What are the total annual holding and setup costs? a. $2,191 b. $1.095 c. $2,315 d. $4,000 e. $1,825
Answers
The correct answer is (c) $2,315.
To calculate the total annual holding and setup costs, we need to determine the number of production runs required and the quantity produced in each run.
The number of production runs required per year can be calculated as:
Number of runs = Annual demand / Production per run
Number of runs = 10,000 / 1826 = 5.48
Since we cannot have fractional runs, we round up to 6 runs per year.
The quantity produced in each run can be calculated as the Economic Production Quantity (EPQ) which is 1826 units.
Therefore, the total annual production is 6 x 1826 = 10,956 units.
The setup cost for each run is $200, so the total annual setup cost is 6 x $200 = $1,200.
The holding cost per unit per year is $2.00, so the total annual holding cost is:
Total annual holding cost = Average inventory level x Holding cost per unit per year
Total annual holding cost = (1826/2) x $2.00 x 6 = $10,956
Adding the setup cost and the holding cost, the total annual cost is:
Total annual cost = $1,200 + $10,956 = $12,156
Therefore, the correct answer is (c) $2,315.
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the level of savings in an economy: multiple choice can be an important determinant of future productivity. can be an important determinant of capital investment. can be a source of funding for physical capital. all of these are true.
Answers
the level of savings in an economy:
determinant of future productivity. can be an important determinant of capital investment. can be a source of funding for physical capital.Thus, all of these are true and correct.
What is saving?Savings are unspent income or deferred consumption. One way to save is to spend money. Set aside in a savings account, retirement account, mutual fund, or cash. Savings also means reducing expenses, such as recurring expenses.Savings are the portion of your income that is not spent on current expenses. In other words, it is money that is reserved for future use and not immediately spent.Saving is a way out of life's uncertainties and offers opportunities for quality living. Many hurdles and obstacles in life can be overcome by systematically investing large sums of money.
Thus, saving means a determinant of future productivity which can be an important determinant of capital investment and it can be a source of funding for physical capital.
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3. Describe the difference between transaction accounts and non-transaction accounts.
Answers
Transactional account :Traditionally used for daily costs, a transaction account frequently includes a debit card or Keycard that can be used to make purchases or withdraw cash.
Non Transactional account : An account that isn't made to handle a lot of transactions is referred to as a non-transaction account, also known as a non-payment account. Non-transaction accounts frequently feature monthly transfer caps or need waiting periods before money may be withdrawn.
An agreement that has been fulfilled between a buyer and a seller to trade goods, services, or financial assets in exchange for cash is referred to as a transaction. In corporate accounting, the phrase is also frequently used. This simple definition can be difficult to apply in business bookkeeping. Depending on whether a corporation employs accrual accounting or cash accounting, a transaction may be recorded by it sooner or later. Regardless of when payment is paid or received, a transaction is recognised by accrual accounting as soon as it is completed. Only when money is received or dispersed is a transaction recorded in cash accounting, which is primarily utilised by smaller businesses. Transactions with other parties can frequently make things more difficult.
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How much notice does the Worker Adjustment and Retraining Notification
(WARN) Act require employers give their employees when a facility is
closing?
A. 120 days
B. 90 days
C. 60 days
D. 30 days
Answers
Answer:60 days
Explanation:
ap3x
Answer:
The question may also ask:
The Worker Adjustment and Retraining Notification (WARN) Act requires that companies meet notice requirements of how many days before reducing a workforce?
The answer is still 60 days
Explanation:
At her job of grooming horses, Polly Yaskovich worked 8 hours a day on Monday and Tuesday earning $67 each day. On Wednesday, she earned $82. On Thursday, she earned $78. How much must Polly earn on Friday, to have average earnings of $75 a day?
Answers
Answer:
Your answer is that she needs to earn $148 on Friday
Explanation:
Calculate Average:
(67 + 82 + 78) / 4 = 56.75 (Remember 67 is worth Monday and Tuesday)
We know that the number that the 4 numbers add up to has to be divisible by 5 because our we need to average 75 and we have 5 days to average on.
5 x 75 = 375
67 + 82 + 78 = 227
375 - 227 = 148
(67+82+78+148) / 5 = 75
Your answer is that she needs to earn $148 on Friday
Creating an anonymous complaint or grievance process is something
employers can implement to prevent which of the following?
O A. Layoffs
B. Harassment
C. Taxed income
D. Arguments
Answers
hope I could help goodluck
hellp! WILL GIVE 30 POINTS!!
Alexis and Damian are both taking a course on picking a career. They go to the same art club so they both know what they enjoy doing. Surprisingly, Alexis and Damian might find careers in the Architecture and Construction Career Cluster that allow them to express themselves through art. Create a list of possible jobs in this cluster that could use an artistic person and explain a task that each job does that the two students might particularly enjoy.
*Dont answer for points, cuz I've gotten scames so many times :/
Answers
Answer:
A few jobs that express how you feel through art are house remodeling because you can decorate with things that make you happy or that show how you feel, professional painter because you can paint how you feel, and a gardener because you make the garden look like something that expresses how you feel.
Explanation:
Hope this helps! Just make sure to edit it a little so that you don't get in trouble! :)
Wes Ottey would like to buy an apartment in Sydney in six years. He is looking to invest $75,000 today in a share that is expected to earn a return of 18.3 percent annually. How much will he have at the end of six years? (Round to the nearest dollar.)
Answers
Answer: 82350
Explanation: I say this cause mathematically speaking 18.3% of 75000 = 13725, then multiplied by 6 (6 years) should be 82350. It does say the end of 6 years though but the end of 6 years isn't 7 years so I'd still say 82350 or something like that.
consider+the+capm.+the+risk-free+rate+is+3%+and+the+expected+return+on+the+market+is+15%+what+is+the+expected+return+on+a+stock+with+a+beta+of+1.3
Answers
Using the Capital Asset Pricing Model (CAPM), the expected return on a stock with a beta of 1.3 can be calculated as 18.6%.
The Capital Asset Pricing Model (CAPM) is a financial model used to determine the expected return on an investment based on its systematic risk or beta. The formula for CAPM is:
Expected Return = Risk-Free Rate + Beta × Market Risk Premium
In this scenario, the risk-free rate is given as 3% and the expected return on the market is 15%. The market risk premium is calculated by subtracting the risk-free rate from the expected return on the market, resulting in 12% (15% - 3%).
Using the formula, we can calculate the expected return on the stock with a beta of 1.3 as follows:
Expected Return = 3% + 1.3 × 12%
Expected Return = 3% + 15.6%
Expected Return = 18.6%
Therefore, the expected return on a stock with a beta of 1.3, based on the given risk-free rate and expected market return, would be 18.6%.
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Quantitative Problem: You own a security with the cash flows shown below.
0 1 2 3 4
0 650 390 230 300
If you require an annual return of 12%, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest cent.
$_____
Answers
The present value of this cash flow stream, rounded to the nearest cent, is $1,395.55.
The present value of a cash flow stream is the value of all future cash flows discounted to their present value. To calculate the present value, we need to discount each cash flow to its present value using the annual return of 12%.
Using the formula for present value:
PV = \(CF1 / (1+r)^1 + CF2 / (1+r)^2 + CF3 / (1+r)^3 + CF4 / (1+r)^4\)
where PV is the present value, CF is the cash flow at a particular time period, and r is the annual return.
In this case, the cash flows are:
CF0 = $650
CF1 = $390
CF2 = $230
CF3 = $300
Substituting the values into the formula, we get:
PV =\(650 / (1+0.12)^0 + 390 / (1+0.12)^1 + 230 / (1+0.12)^2 + 300 / (1+0.12)^3\)
Now let's calculate the present value:
PV =\(650 / 1 + 390 / (1.12)^1 + 230 / (1.12)^2 + 300 / (1.12)^3\)
PV =\(650 / 1 + 390 / 1.12 + 230 / 1.2544 + 300 / 1.404928\)
PV = 650 + 348.21429 + 183.66013 + 213.67588
PV ≈ $1,395.55
Therefore, the present value of this cash flow stream, rounded to the nearest cent, is $1,395.55.
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Suppose that we exist in a market with demand given by: Qᵖᴰ = 100-p
And the private supply curve given by: Qᵖˢ = 4 + 2p
1. What is the market price (p*) and market quantity (Q*) in the privately- provided market?
Now suppose that this good creates a positive externality, and in fact, society would prefer, for any given price, for 6 more units to be purchased than private individuals want to purchase (i.e. demand). Given this:
2. What is the social demand curve?
3. Is the private market underproducing or overproducing the good relative to the social optimum? By how much?
Answers
The private market is underproducing the good relative to the social optimum by 6 units.
To determine the market price (p*) and market quantity (Q*) in the privately-provided market, we need to find the equilibrium point where the quantity demanded (Qᵖᴰ) equals the quantity supplied (Qᵖˢ).
Equating Qᵖᴰ and Qᵖˢ:
100 - p = 4 + 2p
Solving this equation, we find:
3p = 96
p = 32
Now, substitute the value of p back into either the demand or supply equation to find Q*:
Q* = 100 - p
Q* = 100 - 32
Q* = 68
Therefore, the market price (p*) is 32 and the market quantity (Q*) is 68 in the privately-provided market.
Now let's consider the positive externality and determine the social demand curve.
The social demand curve takes into account the additional 6 units of demand that society desires compared to private individuals' demand. This means the social demand curve is shifted upward by 6 units compared to the private demand curve.
Social Demand: Qˢᴰ = Qᵖᴰ + 6
Substituting the private demand equation, we have:
Qˢᴰ = 100 - p + 6
Qˢᴰ = 106 - p
Therefore, the social demand curve is Qˢᴰ = 106 - p.
Comparing the private market outcome to the social optimum, we can see if the private market is underproducing or overproducing the good relative to the social optimum.
In the private market, Q* = 68, and at the market price (p* = 32), the social demand (Qˢᴰ) would be:
Qˢᴰ = 106 - p
Qˢᴰ = 106 - 32
Qˢᴰ = 74
The social optimum, given the positive externality, is at Qˢᴰ = 74, which is 6 units higher than the market quantity (Q* = 68).
Therefore, the private market is underproducing the good relative to the social optimum by 6 units.
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What is one example of a planned economy?
laissez-faire economy
free enterprise economy
socialist economy
market economy
Answers
Answer:
socialist economy
Explanation:
A planned economy is a system where the government or the central authority makes all major economic decisions. The government decides on the type and quantities of goods to produce and for whom to produce. In the planned economy, factors of production belong to the government. Manufacture of goods and services is motivated by service to the community, not profits.
A socialist economy is a good example of a planned economy. Just like in a planned economy, a socialist economy is characterized by heavy government involvement. The state controls the factors of production. Public service is the reason for economic production, while consumers do not have the liberty to choose products.
Classify each statement as related to economies of scale, constant returns to scale, or diseconomies of scales.
Answer Bank
A 50% increase in inputs results in a less than 50% increase in outputs.
also known as increasing returns to scale
also known as decreasing returns to scale
A 50% increase in inputs results in a 50% increase in outputs.
A 50% increase in inputs results in a greater than 50% increase in outputs.
Increasing outputs results in higher average costs.
Increasing outputs results in no change to average cost.
Increasing outputs results in a lower average cost.
Answers
Economies of scale is classified as:
Increasing outputs results in a lower average cost.also known as increasing returns to scaleA 50% increase in inputs results in a greater than 50% increase in outputs.What are economies of scale?Economies of scale exist when lengthy run average complete value decreases as output increases, diseconomies of scale occur when lengthy run average whole price increases as output increases, and regular returns to scale show up when costs do now not change as output increases.
Economies of scale refer to these reduced expenses per unit springing up due to an amplify in the complete output. Diseconomies of scale, on the other hand, take place when the output increases to such a extraordinary extent that the cost per unit starts increasing.
Constant returns to scale is classified as:
Increasing outputs results in no change to average cost.A 50% increase in inputs results in a 50% increase in outputs.Diseconomies of scales is classified as:
Increasing outputs results in higher average costs.also known as decreasing returns to scaleA 50% increase in inputs results in a less than 50% increase in outputs.Learn more about Economies of scale here:
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Allen Furniture Company is considering offering an inexpensive line of college dorm and apartment furnishings. If they move forward, they will renovate part of their store to accommodate this new stock. Before spending the money to redesign the store, they first want to find out customer interest. In a short response of approximately 100 words, describe some of the steps they should take as they consider this project.
Answers
Answer:
Allen Furniture Company should look into conducting a survey to gauge customer interest to find what they look for, need, and find attractive. They could do so by going to college campuses and conducting random interviews. For their apartment furnishings, they could look online to see what kind of product sell and do an analysis of customer interest that way and they could also conduct a survey for people that live in apartments. They could also look into a consultant that specializes in the field and is experienced with what customers like or want.
Cain Company reports net cash provided by operating activities of $35,000. It also reports the following information under “Adjustments to reconcile net income to net cash provided by operating activities” on its statement of cash flows (using the indirect method).
Answers
It can be seen from the solutions given that Cain's net income is $24,000.
Here is the solution:Net income = Net cash provided by operating activities - Adjustments
= $35,000 - $6,000 - $10,000 + $4,000 + $7,000 + $4,000
= $24,000
Therefore, Cain's net income is $24,000.
Here is a breakdown of the adjustments:
To determine cash flow from operations, it is necessary to include the gain on equipment sales in the net income as it is a non-cash entry.
A rise in accounts receivable implies that customers are prolonging payment of their invoices, resulting in decreased cash flow from the company's activities.
The depreciation expense is classified as a non-cash expense, hence it must be included in the calculation of cash from operations by adding it back to the net income.
A decrease in inventory indicates that the company is experiencing faster turnover of its inventory, leading to increased cash flow generated by its operations.
A rise in prepaid expenses denotes that the company is channeling more funds towards prepaid expenditures like insurance and rent, implying a reduced cash inflow from its operational activities.
A decline in the amount of wages that the company owes indicates that it is not promptly compensating its workforce. Consequently, this implies that the company's operational cash flow is reduced.
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