Often single-owner proprietorships seem more profitable than they really are. The reason for this is that
A) they receive special tax benefits compared to corporations.
B) they use different accounting procedures.
C) they often fail to consider the opportunity cost of the labor provided by the owner.
D) they are not allowed to deduct depreciation expense.
C
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Consider the following two scenarios:
i) The marginal product of a worker in a firm is 10 units. When an additional worker is employed, his marginal product is less than 10 units. ii) The average total cost of a firm producing 10 units of output is $200. When it produces an additional unit, the average total cost increases to $300. What is the difference between these scenarios? What could be the reason behind both phenomena occurring? Does specialization explain any of the above situations?
The portion of the money supply controlled by a central bank is
a. currency. b. deposits. c. reserves. d. the monetary base. e. the money multiplier.
Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains and losses (in thousands of dollars) for the three parties are listed below. WithFilterWithoutFilterGains to Erie$200$400Fisherman$180$50Bird Watchers$130$25Suppose you observe that Erie has not added a filter. You could conclude that the Coase theorem failed to solve the externality problem because:
A. regulators prevent application of the Coase theorem when the environment is at stake. B. negotiation with many individual fishermen and bird watchers was too costly. C. Erie's benefits to operating without a filter are greater than the benefits of a filter to the fishermen and bird watchers. D. Erie has a property right to the river.
The presence of minimal specialized investments relative to contracting costs suggests that the optimal input procurement method is:
A. contract. B. vertical integration or contract. C. spot exchange. D. vertical integration.