The law of diminishing marginal utility states that as more units of a good are consumed, the marginal utility from the consumption of the next unit becomes lesser. John's total utility from the consumption of two ice creams is 10, and his total utility from the consumption of three ice creams is 9.7.
<h3>What does the law of diminishing marginal utility State?</h3>
- According to the law of declining marginal utility, when consumption rises, the marginal utility gained from each extra unit decreases, all other things being equal.
- The incremental improvement in utility brought on by consuming one more unit is known as marginal utility.
<h3>Which law does the law of diminishing marginal utility affect?</h3>
- According to the law of diminishing marginal utility, a good or service's marginal utility decreases the more of it is used by a person.
- Consuming increasing quantities of a good gives economic actors less and less pleasure.
<h3>What is law of diminishing marginal returns?</h3>
- According to the law of declining marginal returns, increasing the number of production factors leads to lesser increases in output.
- The addition of any more of a production element after a certain level of capacity utilization would unavoidably result in lower per-unit incremental returns.
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Answer:
a) Taylor Industries can successfully cut back its labor cost in inventory stockrooms by counting only high-value items. These items are determined by reference to their Annual Usage values. The items' annual usage values should be used as the activity cost pool for accumulating and allocating labor cost in inventory stockrooms. Taylor Industries can establish a benchmark or cutoff point so that only the items meeting this benchmark are counted. For example, the items with annual usage value above $5,000 should be included in the items to be counted. This strategy will reduce the number of items to be counted and therefore the labor cost.
b) Since item 15 is critical to Taylor Industries' continued operations, it should be classified as a direct materials cost and not an overhead cost.
Explanation:
a) Data and Calculations:
a random sample of 20 of Taylor's items:
ITEM NUMBER ANNUAL USAGE ITEM NUMBER ANNUAL USAGE
1 $ 1,500 11 $ 13,000
2 12,000 12 600
3 2,200 13 42,000
4 50,000 14 9,900
5 9,600 15 1,200
6 750 16 10,200
7 2,000 17 4,000
8 11,000 18 61,000
9 800 19 3,500
10 15,000 20 2,900
Average annual usage value = $12,657.50
Answer:
1.4
Explanation:
Given that
Q1 = 200
P1 = $200
Q2 = 300
P2 = $ 150
Recall that
Midpoint formula = Q2 - Q1/(Q2 + Q1)/2 ÷ P2 - P1/(P2 + P1)/2
= 300 - 200/(300 + 200)/2 ÷ 150 - 200/(150 + 200)/2
= 100/250 ÷ -50/175
= 0.4 ÷ 0.285
= 1.4
Answer:
To hedge the preferred stock position, the manager should: Buy tyx calls
Explanation:
When market interest rate rise preferred stock drop. To hedge using interest rate index option, <em>the contract must offer an offsetting profit during a period of rising interest rates. Therefore buy TYX calls. </em>These will continue to give ever increasing profit as market interest rate continue to rise. And it will offset the ever increasing loss that would be incurred on the XYZ preferred stock position as the market interest rate continues rising.
The hedge is that Any loss on preferred stock position would be offset by corresponding gain on the long interest rate index call position.
