Define the price elasticity of demand and show how it is calculated. Answer: The units-free measure of the responsiveness of the quantity demanded of a good to a change in it s price when all other influences on buying plans remain the same. 3. What is the total revenue test? Explain how it works.
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The production possibilities frontier illustrates the A) amount of each good that people want to buy. B) resources the economy possess, but not its level of technology. C) limits to people's wants.
It also shows some other possible objectives for the firm. Sales revenue maximisation, for example, occurs when marginal revenue is equal to zero, as the next unit produced would carry a negative marginal revenue and hence reduce total revenue. The point where the volume of sales of the good are maximised subject to making at least normal profit is also shown (at the point where AR=AC). An Diagram Possible objectives of the firm I Profit maximisation may become
D. use of policy to refute facts and hypotheses. 2. In economics, the pleasure, happiness, or satisfaction received from a product is called: A. marginal cost. B. rational outcome. C. status fulfillment.
By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle).
The reward/need satisfaction theory of relationship proposed by Byrne & Clore (1970) asserts that if a relationship is seen to offer the prospect of reward (for either party), it is more likely to form – if there is little or no perceived reward, the relationship does not form. Their model is based on the behaviourist principles of operant and classical conditioning. According to the former, behaviour that results in a beneficial outcome makes repetition of this behaviour more likely, whereas if the outcome is undesirable, the behaviour is less likely to be repeated or continued. A relationship that brings perceived advantages is a case of positive reinforcement but the relationship can also be characterised by negative reinforcement if the
B. should always be equal to net realizable value less a normal profit margin. C. should always be equal to net realizable value. D. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. 16) The retail inventory method is based on the assumption that the A. ratio of cost to retail changes at a constant rate. B. proportions of markups and markdowns to selling price are the same.
(a) lower; lower (b) lower; raise (c) raise; lower (d) raise; raise (e) raise; not change Supply curves do not shift if there is a change in the (a) number of sellers of the good. (b) technology used to produce the good. (c) price of the good. (d) price of resources used to produce the good. (e) price of other
Rational people think in the margins is simply means the purchase of a good is based on the marginal benefit the purchase will have for the person. A marginal increase in a person’s water supply rarely comes at a significant cost to the person, however, a marginal increase in diamonds is extremely valuable(Gregory, 2008). People respond to incentives. This is when consumer’s decision is based on what the seller is offering as an incentive to buy their products. Incentives can come in the form of rebates, coupons, or lower interest rates.
This involves the application of indirect costs as they relate to a period of revenues. The idea being that the cost is related to all revenues occurring during the measured period of time, yet not able to be directly applied to a specific event of revenue. 3. The important wording to recognize in understanding a systematic and rational allocation to specific time periods is “assets that provide benefits to the company for more than one reporting period, so we recognize expenses over those time periods” (Spiceland, Sepe, & Nelson, 2013.