Answer: B - Companies are price-takers when they have little or no control over the prices of their products or services.
Explanation:
Price takers are firms that do not have control or do not set the prices for their goods or services. They take the price set by the market.
Price takers operate in perfectly competitive markets. Price takers have close substitutes for their goods and services.
Price makers are firms that have the ability to influence the price of their goods or services.
They are usually monopoly firms with no close substitutes for their goods or services.
Answer:
TR decreases if Demand is Elastic, TR increases if Demand is Inelastic
Explanation:
Price Elasticity of Demand is the responsive change in price, due to change in price. Elastic demand means demand responds more to price change, Inelastic demand means demand responds less to price change. Total Revenue is the total receipt value from sales = Price x Quantity
- If demand is elastic : price & total revenue are inversely related - price increase, demand decrease & price decrease, demand increase.
- If demand is inelastic : price & total revenue are directly related - price increase, demand increase & price decrease, demand increase
So, If a company increases its sale price per unit of a product :
- Total Revenue would increase as a result of price rise, if demand is Inelastic
- Total Revenue would decrease as a result of price rise, if demand is Elastic
Answer:
False.
Explanation:
Elasticity of demand is a measure of the responsiveness of changes in demand to change in price.
The value of elasticity shows type of good. Negative elasticity indicates that a good is inferior, and people will buy it when their income is low. But once income rises they will buy more luxurious goods. That is not the case here as elasticity is positive.
When elasticity is positive the good is a normal good and increase in income will result in increase in amount demanded of the good.
In the scenario give a positive elasticity of 0.45 should result in higher consumption among higher income people than lower income people.
Answer:
B. A decrease in the number of wool producers
Explanation:
As number of wool producers decreases the quantity supplied of wool will also decreased. There will be less quantity of wool in the market and quantity of wool will also reduce relatively. All the other options does not effect the supply quantity of wool. So, the correct answer is B. A decrease in the number of wool producers
Answer: $315 million
Explanation:
First find the cost of capital as a required rate of return using CAPM:
= Risk free rate + Beta * (Market return - Risk free rate)
= 6% + 1.25 *(14% - 6%)
= 16%
Value of Luther with leverage:
= (Cash flows with debt / required return) + (Debt * Tax)
= (44 million / 16%) + (100 million * 40%)
= $315 million
<em>Options do not represent value. </em>
