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1 Which of the following can be thought of as an adjustment for the

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1.Which of the following can be thought of as an
adjustment for the risks involved with respect to the cost of
a firm acquiring financial capital?
a.Cost of financial capital paid from firm
b.Higher retained earnings from past profits
c.Tax credits for physical capital investments
d.Imposition of hurdle rates of interest
2.If a firm is producing so that the point chosen along the
production possibility frontier is socially preferred, then
that firm is said to have reached its
a)minimum price efficiency
b)utility-maximizing efficiency
c)allocative efficiency
d)productive efficiency
3.When a firm uses retained profits to invest in more
energy efficient equipment, an economist would calculate
the _______________ of investing in physical capital.
a.Typical hurdle rate
b.Hurdle rate premium
c.Degree of risk
d.Opportunity cost
4.Deregulation occurs when a government eliminates or
scales back rules relating to all but one of the following.
Which one is it?
a.Conditions of entry in a certain industry
b.Natural monopoly
c.Prices that can be charged
d.Quantities that can be produced
5.A natural monopoly occurs when the quantity demanded
is the minimum quantity it takes to be at the bottom of the
long-run average cost curve
a.Greater than
b.Less than
c.Equal to
d. a or c above

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6. The demand curve perceived by a perfectly competitive
firm
a.Shows that such a firm is a price-maker
b.Shows economies of scale over a large range of output
c.Is horizontal
d. All of the above
Solution
1. Higher retained earnings from past profits: There could
be cases when the firm suffers losses due to costs
involved in acquiring financial capital, so higher retained
earnings is made as an adjustment for the future risks
involved.
2 Allocative efficiency: Production possibility is that curve
which shows the maximum quantity of two goods that can
be produced with the available resources, thus it is the
maximum that can be allocated to a particular good at a
particular point of the production possibility curve.
3.When a firm uses retained profits to invest in more
energy efficient equipment, an economist would calculate
the _______________ of investing in physical capital.
3.Opportunity cost:The benefit expected to be generated
out of that energy efficient equipment is weighed against

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1.Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital? a.Cost of financial capital paid from firm b.Higher retained earnings from past profits c.Tax credits for physical capital investments d.Imposition of hurdle rates of interest 2.If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its a)minimum price efficiency b)utility-maximizing efficiency c)allocative efficiency d)productive efficiency 3.When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _______________ of investing in physical capital. a.Typical hurdle rate b.Hurdle rate premium c.Degree of risk d.Opportunity cost 4.Deregulation occurs when a government eliminates or scales back r ...
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