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Crazy boy [7]
3 years ago
9

Suppose a perfectly competitive firm faces the following situation: P = $6, output = 2,000, ATC = $7, MC = $6, and AVC = $6.50.

Which statement is an accurate description of the firm's situation?
A) The firm incurs losses, but is not minimizing its losses.
B) The firm incurs profits but is not maximizing its profits.
C) The firm incurs losses and is minimizing its losses.
D) The firm is maximizing profits.
Business
1 answer:
goldenfox [79]3 years ago
5 0

Answer:

The answer is A.

Explanation:

The most important variables in this question are:

Price(P) =$6

Average Total Cost(ATC)=$7

Average Variable Cost(AVC)=$6.5

The firm in this question is not covering both its AVC and ATC.

The firm is incurring losses since it is unable to match up its price with its AVC. AVC is higher than the price for the good. So the firm should exit in the short run.

Also, the price the firm is charging is also less than ATC. At this point, profit is zero and the firm is not minimizing its losses.

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<span>consumer to share liability with a company.</span>
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How physical assets valuation and development and research pose risk.<br>​
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Answer:

The differences between US GAAP and IFRS pose an extra cost because international corporations must prepare two separate accounting statements. But besides that, other potential risks include paying higher taxes than what the companies should pay int their home countries and the uncertainty generated by changing rules.

Not only do current tax rates affect potential investments, e.g. currently companies in the US pay relatively low corporate taxes (Tax Cuts and Jobs Act of 2017) but these benefits end on 2025. But also different methods for valuating physical assets and R&D costs can represent higher than expected taxes. E.g. depending on a company's needs, it may be beneficial to expense all R&D costs right away, or maybe it would be better to capitalize some of them after technical feasibility is achieved (IFRS).

The main advantage of having uniform rules (e.g. UCC) is that all the companies know exactly what to expect and how to act. Certainty decreases risk, and less risk reduces costs.

Explanation:

In the US, the vast majority of firms use US GAAP as their accounting method, but around the world the IFRS method is used.

Physical asset valuation is the process of determining the value of your physical assets including P, P & E, and also inventories.

  • When valuing inventories IFRS uses FIFO, while US GAAP allows FIFO, LIFO or weighted average costing methods. US GAAP also values inventory at lesser of cost or market value, while IFRS values inventory at lesser of cost or net realizable value.
  • US GAAP uses the cost method to determine the historic cost of an asset, while IFRS uses basically the same method but does not include all the costs of location of the assets (e.g. cost of removing or clearing a facility).
  • US GAAP recognizes non-monetary exchanges while IFRS doesn't.
  • IFRS also allows the cost of asset to be revalued, which can result in unrealized gains or losses. The US GAAP only considers historic costs.
  • There are also other minor differences regarding depreciation, disposals and impairment rules.

Research and development must be expensed right away under US GAAP, while IFRS basically requires the same, it allows some capitalization of development expenditures if certain criteria is met (technical feasibility is achieved).

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will, real economic growth is positive in the long run.

Lower; creditors to debtors.

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