Answer:
The firm's cost of equity is C. 14.05 percent
Explanation:
Hi, we need to use the following formula in order to find the cost of equity of this firm.
Where:
r(e) = Cost of equity
rf = risk free rate
rm = Market rate of return
Everything should look like this.
So, this firm´s cost of equity is 14.05%
Best of luck
The answer is explained in detail below
Explanation:
Labor, L = 2000; Capital, K = 3000
Labour constraint,
Capital constraint ,
Solving the equation further, we get
- The range for the relative price of cloth such that the economy produces both cloth and food is 2/3 and 2
- Low cloth production → economy will use relatively more labor to produce cloth → opportunity cost of cloth is 2/3rd units of food.
- High cloth production → economy dips on labor → taking capital away from food production → raising opportunity cost of cloth to 2 units of food.
- If relative price of cloth lies between 2/3 and 2 units of food, the economy produces both goods.
- If the price of cloth decreases below 2/3 → complete specialization in food production → low compensation for producing cloth
- If the price of cloth rises above 2 → complete specialization in cloth production → low compensation for producing food
True, but may also be false depending on what "tight budget" that company wants.
Hope this helps!
The scenario you described suggests that the Law of Demand is correct.
Increase in price will always lead to loss of demand, while replacements for that product will grow in demand.
