Identify the accounting concept relevant to each situation below:
1 answer:
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Answer:
B
Explanation:
First, a monopoly produce less than the socially efficient quantity because as the figure shows, the quantity produced is determined by the intersection between the marginal cost curve (MC) and the marginal revenue curve (MR) and not by the intersection between the MC and the demand. For instance, there is a deadweight loss (shown by the figure).
Second, equilibrium price is always higher than in a competitive market because is always higher than the MC. The price is determined by the equilibrium quantity (found before) and the demand. Also, there are barries to entry and so monopolist have always price control.
Answer:
Jacobs will earn $1,080,000
Explanation:
The earnings of the work factor are made up of two factors: Transfer Earnings + Economic Rents.
Transfer earnings are defined as the minimum required amount that a company must pay its workers to keep them in the workplace. Below this amount, the worker will leave his job. In this case, the Transfer Earnings are $ 80,000, which is the base salary of every designer.
On the other hand, the Economic Rents are the additional income that the worker receives and that is above the minimum level they need to supply his work (In this case, the additional income is given by Jacobs' special ability). In numerical terms, the Economics Rents amount is equivalent to the difference between the earnings obtained by the Jacobs company and the earnings obtained by the other companies.
That is: 1,500,000 - 500,000 = 1,000,000.
Therefore Jacobs salary is equivalent to 80,000 + 1,000,000 = 1,080,000.
From this, it can be deduced that approximately 92% of Jacobs' salary is equivalent to Economic Rents. From the theoretical point of view, this makes sense, because the demand for designers (which is a highly qualified profession) is very inelastic, and the more inelastic the greater the proportion of Economic Rents as part of the salary. In the annexes, I show it graphically.
