In general, the cost of an input:
A. decreases when you've reached the point of diminishing marginal product in your firm.
B. is minimized when you've reached the point of diminishing marginal product in your firm.
C. stays the same when you've reached the point of diminishing marginal product in your firm.
D. increases when you've reached the point of diminishing marginal product in your firm.
Answer: C
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If a partnership raised funds by recruiting additional owners to invest in the firm, what would happen to the firm's financial capital?
What will be an ideal response?
MVA (Market Value Added)
A) will always be a positive number. B) may be a negative number. C) measures the market value of the firm. D) None of the above
The Coase Theorem works best in places that transaction costs for contracts among people is low. Often in the world of torts and externalities both parties can claim that they have rights to impose on others. One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train. What does the
Coase say would happen? a. The train should have property right to be safe from wandering cattle, and the rancher should be liable for train damage of rampaging cattle. b. The rancher should have the property right to be safe from noisy trains, and the railroad should be liable for weight loss of cattle from train whistles and rumbling noise. c. If transaction costs are low, the efficient activity will occur, either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees, or if it is cheaper, fewer train trips per day. The cheapest or most efficient solution will happen, regardless of who is assigned the original property right.
Assume Brandon's benefit function for water is S(W) = ?W and he consumes water both in droughts, WD, or in the rainy season, WR. Assume his current consumption bundle is WD = 36 and WR = 25 and the probability of drought is 0.75. Brandon's risk premium is:
A. 66.31 units of water. B. 0.19 units of water. C. 33.16 units of water. D. 3.20 units of water.