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.
Market failure refers to a situation in which the market does not allocate resources efficiently. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxii]. Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society’s resources. ANSWER: F TYPE: T KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxiii]. A monopolist has market power.
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).
How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function? Explain your answer. Answer: Adam Smith’s concept of the invisible hand explains why markets move toward equilibrium because it allows consumers to freely choose what to buy and producers to choose freely what to sell and ultimately how to product it. It is important for market participants to know how the invisible hand functions so they can all benefit by understanding how self-interest regulates the markets supply and demand.
C. status fulfillment. D. utility. 3. When economists say that people act rationally in their self interest, they mean that individuals: A. look for and pursue opportunities to increase their utility.
E&Y reasoned this as it creates an exception to the general rule of reserving for expected future product returns at the gross sales price and deferring the recognition of an equal amount of revenue. This justification is invalid. The company’s customers are not “ultimate customers,” but are wholesalers that sold their product to retailers. In addition, Medicis’s returns were not returns of products in exchange for products of “the same kind, quality, and price,” but of unsalable product for
People respond to incentives People face trade offs when a consumer uses resources to purchase a product or service, understanding the resources used can not be used for a different purchase. This will cause the consumer to prioritize purchases, such as to pay the mortgage, before paying for a vacation. The cost of something is what you give up to get it, is when the consumer compares not only the price of a good or service, but if there are any long term cost associated with the expense. A good example of this is a pool, a consumer will compare prices of the pools available and take into consideration the maintenance required to keep the pool, such as chemicals and cleaning. 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.
Prices influence what consumers want and how they are regulated. Team B also learned about a market where economic forces function unrestrained, also known as the perfectly competitive market according to Colander (2010).
Producer surplus is closely related to the supply curve and is measured using the graphical representations. b. What is the relationship between the cost to sellers and the supply curve? The relationship between the cost to sellers and the supply curve is the area below the price and above the supply curve measures the producer surplus in a market. c. Other things equal, what happens to producer surplus when the price of a good rises?
If no service contract exists, those fees are recognized over the average customer relationship period. Associated expenses are deferred only to the extent of such deferred revenue. For contracts that involve the bundling of services, revenue is allocated to the services based on their relative fair value. AT&T Inc. records the sale of equipment to customers as gross revenue when AT&T Inc. is the primary obligor in the arrangement, when title is passed and when the products are accepted by customers. For agreements involving the resale of third-party services in which AT&T Inc. is not considered the primary obligor of the arrangement, AT&T Inc. records the revenue net of the associated costs incurred.