Answer: Incorrect; Correct; Incorrect
Explanation:
A. This is incorrect. Increasing returns to scale refers to the situation whereby the long-run average cost curve of a firm slopes downward and this leads to an increase in the scale of production of the firm and this also leads to lower average costs.
B. This is correct. The constant returns to scale refers is a situation whereby an increase in the firm's scale of production will have no impact on the costs per unit produced.
C. This is incorrect. Decreasing returns to scale is a situation that occurs when the long-run average cost curve of a firm slopes upward and this results into a situation whereby an increase in the scale of production of the firm will lead to higher average costs.
Answer:
To capitalize, we must consider the following aspects:
1. Assets that meet the qualifications
To qualify as capitalization of interest, the asset must have a period of time to prepare it for use.
2. Capitalization Period
The capitalization period is the period of time in which interest must be capitalized which starts when the following three conditions occur.
- Expenditures for assets have been issued.
- Activities needed to prepare assets for use are ongoing.
- Interest costs have been incurred.
3. Amount to be capitalized.
The amount of interest to be capitalized is limited to the lowest actual cost of interest incurred during the period or avoidable interest. Avoidable interest is the number of interest costs during the period which theoretically can be avoided if the expenditure to buy assets is not carried out.
Answer:
Equilibrium quantity will increase; the effect on price is ambiguous.
Explanation:
An add in the newspaper claims that the price of milk will increase next week . At the same time, a new and improved pasteurization process makes milk production more efficient. Given these two effects, we can say about the current equilibrium price and quantity of milk that Equilibrium quantity will increase; the effect on price is ambiguous.
The conclusion that equilibrium quantity will increase is dependent on the fact that expectation on future prices is a major factor that leads to changes in demand
People’s expectations about the future can have a significant impact on demand. Or, more specifically, their expectations of future prices can change demand.
If consumers expect prices to increase shortly, current demand often increases, i.e., the demand curve shifts to the right.
Based on the information given, the loss for the perfectly competitive market will be $210.
From the information given, the average total cost of 70 units is $8. Therefore, the total cost will be:
= 70 × $8 = $560.
The revenue will be:
= Price × Quantity
= $5 × $70
= $350
Therefore, the loss will be;
= Total revenue - Total cost
= $350 - $560
= -$210
Therefore, the loss is $210.
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Answer:
$13,200 per year
Explanation:
Amount incurred to improve the office space = $
Improvement expected to yield benefit = 10 years
Remaining life on it's lease = 8 years
Since the office space is not going to remain with Phoenix after the lease period, it means that the improvement expenses will be expensed over the remaining lease period I.e 8 years.
Therefore, the amount of expense that should be recorded the first year related to improvements can be calculated as;
= Amount incurred to improve the office space ÷ remaining life on its lease
= $105,600 ÷ 8
= $13,200 per year