The CEO of Always Round Tires has decided to open a battery division. He thinks that batteries would sell well with tires at their outlets and that Always Round's quality reputation will be transferred to the batteries. Should he set up the new division as a Revenue Center, as a Profit Center, or as an Investment Center? Why?
What will be an ideal response?
The new division should be set up as a profit center. Batteries are a separate product from tires and therefore the division's profitability can be easily measured and rewarded. A revenue center with pricing authority would set a price lower than the profit-maximizing price which would reduce the value of the firm. The CEO should be aware that incentives at the retail level will need to support both tire sales and battery sales. In addition, he should take steps to guard against double markups in transfer pricing from the battery division to the retail outlets.
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An international agreement from 1947 designed to lower tariffs was
A) the General Agreement on Tariffs and Trade. B) the World Trade Organization. C) the World Agreement on Tariffs and Trade. D) the Trade and Tariff Agreement.
Assume there are only two goods in the economy, apples and bananas. In 2018, 2,000 apples were sold at $1 each and 8,000 bananas at $0.60 each. In 2019, the price of apples rose to $1.5 and the quantity rose to 2,200; the price of bananas rose to $0.80 and the quantity sold rose to 8,500. Calculate real GDP in 2019 using 2018 as the base year.
What will be an ideal response?
An increase in output would result in no change in long-run average costs when there are
A. economies of scale. B. diminishing marginal product. C. diseconomies to scale. D. constant returns to scale.
Relating to the Economics in Practice on page 360: Which of the following is an example of an advertisement in which the fact that something is not mentioned indicates that the product is unlikely to be desirable?
A. an advertisement for ice cream that describes the variety of flavors available and the way it tastes but makes no mention of the ice cream's nutritional content B. an advertisement for a 30-year old lawn tractor that mentions the color of its paint and the number of cup holders it has but makes no mention of the condition of its engine C. an advertisement for hot dogs that mentions that it meets certain religious dietary requirements but fails to explain those requirements in a way that would be understood by most people D. an advertisement for a sneaker that mentions the endorsement of one sports star but fails to mention the sports stars that have endorsed competing products