The best explanation for the relatively horizontal area of the short run aggregate supply curve is that, "with an economy operating below potential output, an increase in aggregate demand causes real output to increase."
The short-run aggregate supply curve is horizontal. This happens because in the short-run production can be increased without any real effect on the average costs of production.
The horizontal short-run aggregate supply curve shows that even if the output increases, the price remains the same. So here the aggregate demand curve can shift to the right and can meet the aggregate supply curve at a new point.
Hence, here the price level will remain unchanged.
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Answer:
790,000, i.e. $79 x 10,000= 790,000
. Yes, the manufacturer should change the design. 666,667 (when it goes from 1/10,000 to 1/15,000). It is 500,000 (when it goes from 1/10,000 but 1/20,000)
. No, the benevolent social planner would not agree with the manufacturer's decision.
Explanation:
In the estimates provided by the manufacturer, the total cost of the design is equivalent to $79 x 10,000= 790,000. There should be an alteration in the design to remove the necessary precautions. If the probability is different from the estimate provided by the manufacturer, the planner will disagree with the decision made by the manufacturer. For example, a change to 1/15000 will make the total cost to be approximately $666,667.
Answer:
The question is: "What is the maximum initial cost the company would be willing to pay for the project?"
The maximum initial investment cost the company would be willing to pay for the project is $18,817,204.
Explanation:
We have D/E = 0.8 => D/ (D+E) = 4/9; E/(D+E) = 5/9.
WACC of the firm = 4/9 x 4.3% + 5/9 x 11.5% = 8.3%.
Adjustment for cost capital due to higher risk of the project: 8.3% + 3% = 11.3%.
=> Maximum initial investment cost is equal to the net present value of the cash saving the project brings about discounting at project's cost of capital, calculated as:
1,750,000/ (11.3% - 2%) = $18,817,204.
Thus, the Maximum initial investment cost is $18,817,204.
Answer:
Implied warranty of trade usage
Explanation:
An implied warranty for a good is defined as the assumption on the part of the buyer that a product that is purchased should perform at a minimum acceptable level.
For example when a television is purchased it is assumed that it will come on.
An implied warranty of trade usage requires a seller to disclose any traits or conditions that will result in a product being defective.
In the given instance the delivery to Salma did not have packaging in a bubble wrap within a carton box that has the signs for "fragile," "this way up," and "caution" on it.
This is a breach of implied warranty of trade usage.
Answer:
The correct answer is "32.076%".
Explanation:
Given:
Initial investment,
= $500,000
Cash inflows,
= $500,000
The floatation cost will be:
=
= ($)
The total cost will be:
=
=
=
hence,
The rate of return will be:
=
=
=
=
= (%)