De Beers is worried that people might resell their previously owned diamonds <u>because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers' market power</u>.
<u>Explanation</u>:
A single company selling the unique product with no competition is known as monopoly. The company is sole seller of the product. The company is free of competition and decides the price of the product with full freedom.
De Beers Company is a monopoly company dealing with diamonds. They were monopoly for long time. In recent days they are facing increasing competition due to resale of diamonds by the previously owned customers. The company’s market power is reduced as the previously owned diamond is close to newly mined diamond.
Answer:
a. ZTech will have a higher operating leverage because it has a higher fixed cost.
b. ZTech will have a higher profit since it has a higher operating leverage if the economy strengthens.
Explanation:
Operating leverage measures the the extent to which a firm uses fixed cost to finance its operations. The higher the fixed cost, the higher the degree of operating leverage
If the economy strengthens, the firm with a higher degree of operating leverage earns a higher profit.
Answer:
1.
Required rate = risk free rate + beta (market rate – risk free rate)
.12 = 0.0525 + 1.25(X – 0.0525)
1.25X – 0.065625 = .12 – 0.0525
1.25X = 0.0675 + 0.065625
X = .1333125/1.25
= 0.1065
Marker risk premium = market rate – risk free rate
= .1065 – 0.0525
= 0.054 (A)
2.
Beta of portfolio = (5000000/5500000)* 1.25 + (500000/5500000)* 1
= 0.90909* 1.25 + 0.090909* 1
= 1.136 + 0.090909
= 1.2273
3.
Required rate = risk free rate + beta (market rate – risk free rate)
= 0.0525 + 1.2273* 0.054
= 0.0525 + 0.06627
= .11877 or 11.88%
Answer:
its cost is least in terms of alternative goods that might otherwise be produced
Explanation:
Comparative Advantage
This is simply explained as when an individual has an opportunity cost of performing a task is lower than the other individuals opportunity cost that is it is more efficient. It is the usual fundamental basis for international trade. Its principle includes production at a maximum peak to be achieved if each individual focus on the job or activities for which his or her opportunity cost is lowest.
Opportunity Cost
This is simply known as the highest valued of an alternative that must be given up so as to be involved or engage in an activity/job or task. There are several sources of a comparative advantage. They includes;
1. Climate and natural resources
2. Relative abundance of labor and capital
3. Technology
4. External economies etc.