c). The transfer price of an intermediate product that has an imperfectly competitive external market for the for the product exists when the transfer price of the intermediate product is given at the point at which the net marginal revenue of the marketing division of the firm is equal to the marginal cost of the production division at the best total level of output of the intermediate product, and the price charged in the external market is given on the external demand curve. DQ13) The advantages of cost plus pricing is that it leads to approximately the profit-maximizing price because firms usually apply higher markups for products facing less elastic demand than for products with more elastic demand. p This involves calculating the average variable cost of producing the normal or standard level of output , adding an average overhead charge so as to get the fully allocated average cost for the product. The disadvantages for cost-plus pricing is that it may be very difficult to
So to be able to have a productive and successful business, business owners may want to look into maximizing their profits by way of the profit maximization concept. Profit maximization is when a company comes to a conclusion on the price and output level that will turn the maximum profit by using this particular process (Wikipedia). Granted there are many different approaches to this problem; however in this essay we will be considering the TR to TC method and the MR MC method. Tiffany C Wright expressed that the total revenue to total cost method is dependent on the fact that profit equals revenue minus cost. Total revenue equals price time’s quantity.
(p. 191) ______________ theory is typically associated with greater profits. a. Signaling b. Compensating wage differentials C. Efficiency wage d. Human capital 4. (p. 193) Implications of _______________ theory are that pay level affects an employer's ability to recruit.
Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
Figure 1 Reported Company Profits (In billions of dollars) Average Self-esteem Scores 1. Summarize the information presented in Figure 1. According to the information the researcher collected from the employees through a self-esteem questionnaire, shows that the greater a companies profit the higher its employees self-esteem is. 2. The researcher conducting this study believes that employees are more productive when they have higher levels of self-esteem.
Productive efficiency is absent in the monopolistic competition. This exists because the price the company would have to set is above the average cost of that product, product efficiency is not achieved (The McGraw-Hill Companies, Inc.,
Purchasing Power Parity (PPP) is also not taken into account with income per capita; this means that the cost of living in each country is not accounted for so development may appear better in some countries than it actually is. Income per capita can be used to measure the economic and social development, but not any of the other factors of development, such as environmental development. Development can be further measured by income inequality. This can be a useful measurement as it shows the differences between the rich and poor. The greater the inequality, gap between the rich and poor, the worse developed the country is.
Recession is two consecutive quarters of negative economy growth. During recession, there is low level of demand because people don’t have much money to spend. So they look for cheaper products that they can afford. At this time businesses confidence gets low as people aren’t demanding for their products so they would have to cut out their productions as they don’t need to make as much products. At this time they would need to provide cheaper price to attract their consumers and to increase the demand.
Governments may choose to increase minimum wage on an arbitrary basis, making it difficult for companies to hire individuals at a consistent market rate. Government price controls distort the economic theory of supply and demand. Supply and demand is a significant underlying feature of free-market economies. This theory allows individuals and businesses to make decisions based on self-interest. Businesses often pay individuals a wage based on current market standards.
If there is no minimum amount the company has to pay, it can save some costs that it might otherwise incur. 2. The company can hire more people at a lower income and in fact decrease unemployment 3. B. Deprives students and low skilled workers an opportunity to make an earning (Rector) 1. Minimum wage actually make low-income citizens and students worse off by pricing them out of a job due to their minimal skill sets and resources 2.