Answer:
1. Relevant costs are also known as unavoidable costs - False.
Relevant costs are in fact, avoidable cost that only emerge in specific business decisions.
2. Incremental costs are also known as differential costs - False
Incremental costs are costs that are incurred when an additional unit of output is produced. Differential costs ocurr when a particular product is made instead of another.
3. An out-of-pocket cost requires a current and/or future outlay of cash. - True
An out-of-pocket cost or expense is a direct payment of money, in other words, an outlay of cash.
4. An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available - True
An opportunity cost can also be defined as what is given up to obtain something.
5. A sunk cost will change with a future course of action. - False
Sunk costs are costs incurred in the past, that cannot be recovered, or modified.
Answer:
The correct answer is option B.
Explanation:
In a competitive industry there is no restriction on entry or exit of firms in the market. So, when in the short run the firms are enjoying super normal profits or positive economic profits, this would attract potential firms to join the industry in the long run.
As a result the industry supply will increase in the long run. The increase in supply would cause the price to fall. This would further contribute in reducing revenue and profit.
This process will continue till the profit is reduced to zero. If profit falls below zero, then firms incurring loss will exit the industry. Then again zero profits will be restored by reduction in supply and increase in price.
So, we can say that perfectly competitive firms will have zero economic profits or only normal profits in the long run.
Answer:
$114,193.55
Explanation:
The calculation of value of the firm is shown below:-
Value of the firm = (((EBIT × (1 - Tax)) ÷ Cost of capital) + (Debt × Tax)
=((($17,100 × (1 - 21%)) ÷ 12.4%) + ($25,000 × 21%)
= ((($17,100 × (0.79)) ÷ 12.4%) + ($25,000 × 21%)
= ($13,509 ÷ 12.4%) + ($25,000 × 21%)
= $108,943.55 + $5,250
= $114,193.55
So, for computing the value of the firm we simply applied the above formula.
Answer:
1.
c. Many
d. Differential
c. Monopolistic Competition
2
b. Few
c. Identical
a. Oligopoly
3
a. One
a. Unique
d. Monopoly
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.
An example of monopolistic competition are restaurants
A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms.
An example of a monopoly is a utility company
It is only the drug company that is permitted to sell the drug. So, it is the only firm in the industry. Also, it is the only firm that offers experimental AIDS drug, so its product is unique.
An Oligopoly is when there are few large firms operating in an industry. In the cab industry, it is a duopoly that exists. This is a type of oligopoly where there are only two firms in the industry. Consumers do not care about the cabs they enter or the different services offered by the companies, so, the product is identical