If a firm in a competitive market is currently producing a quantity where price exceeds the marginal cost, the firm should lower its price. Indicate whether the statement is true or false ANSWER False. A competitive firm does not vary price. Rather, if p > MC, the firm should increase output until p = […]
Date: September 9th, 2020
Life insurance companies often give applicants a physical examination to prevent A) the person from dying before obtaining the policy. B) signaling. C) adverse selection. D) profit maximization. ANSWER C
Date: September 9th, 2020
The cost of capital is best described as the A) opportunity cost of financing a capital outlay. B) funds that must be acquired to finance a capital outlay. C) decrease in stockholder equity due to a capital outlay. D) All of the above ANSWER A
Date: September 9th, 2020
Some companies subject their applicants to extensive tests. Why? A) to reduce the informational asymmetry between the firm and the applicant B) to screen the applicant to avoid the problem of adverse selection C) to gather more information about the applicant D) All of the above. ANSWER D
Date: September 9th, 2020
Capital rationing refers to A) setting a minimum acceptable rate of return for a capital outlay. B) selecting among profitable capital outlays when there are constraints on the funds available. C) determining the maximum price to pay for a capital product. D) None of the above ANSWER B
Date: September 9th, 2020
Q = K1/2L1/2 w = $2, r = $2 The firm would like to know the minimum cost of producing 2000 units of output. Find the combination of inputs that minimizes the cost of producing 2000 units, the total cost, and identify the expansion path. What will be an ideal response? ANSWER MPL = […]
Date: September 9th, 2020
The requirement that all drivers must carry auto insurance reduces A) moral hazard. B) the effectiveness of signaling. C) adverse selection. D) the chance of auto accidents. ANSWER C
Date: September 9th, 2020
Q = K1/2L1/2 w = $2, r = $2 The firm would like to know the maximum output that can be produced for $8,000. Find the combination of inputs that maximizes output for a cost of $8,000, the amount of output that can be produced, and identify the expansion path. ANSWER MPL = 1/2 […]
Date: September 9th, 2020
The risk adjusted discount rate A) is the sum of the risk-free rate and the risk premium. B) includes risk in the denominator of the present value calculation. C) includes risk in the numerator of the present value calculation. D) All of the above ANSWER D
Date: September 9th, 2020
What are the major issues that must be considered in measuring inputs for regression analysis of production functions? What will be an ideal response? ANSWER How is labor to be measured? Can it be measured in hours, and if not, how can the labor actually used in production be expressed? How are materials to […]
Date: September 9th, 2020
