Answer and Explanation:
Competitive and corporate strategy are very important for the success and good management of a business. Competitive strategy is one that allows a company to promote elements capable of making it different from its competitors. Examples of competitive strategy are offering lower prices, higher quality products and negotiation between customers.
Corporate strategy, on the other hand, is one that allows the company to generate elements that will increase its profit and strengthen its capacity to be more competitive. Examples of this type of strategy are the acquisition of subsidiary companies, the merger of competing companies and the restructuring of the company.
During the Middle Ages, the African city of Taghaza quarried salt in 200-pound blocks to be sent to the salt market in Timbuktu, in present-day Mali. Travelers report that Taghazans used salt instead of wood to construct buildings. How would the elasticity of demand for wood in Taghaza have compared with the elasticity of demand for wood in other towns without big salt mines
Answer:
a. it would have been more elastic.
Explanation:
How could a strategy plan be used by a local restaurant chain
Explanation:
A strategic plan for a restaurant should involve decisions regarding advertising and how customers view the restaurant from the outside. Your advertising strategy should address your customers in a way that is geared toward your primary demographic.
Which set of items appears on the loan estimate
_ refers to exploiting price differences on identical or similar goods, services, assets or factors in different markets. Group of answer choices Externalization Internalization Rationalization Arbitrage Speculation
Answer:
Arbitrage
Explanation:
Arbitrage refers to exploiting price differences on identical or similar goods, services, assets or factors in different markets.
This ultimately implies that, arbitrage allows an individual to profit from the price difference between similar goods, commodity, securities or currency in different markets.
Basically, an individual might decide to almost simultaneously purchase a financial instrument such as a commodity, securities or currency and sell it in a different form or market.
For example, if a stock is trading at £80 on the London Stock Exchange (LSE) while it is trading for £81 on the Nigeria Stock Exchange (NSE) at the same time. John buy the stock on the LSE and sells the same shares immediately on the NSE and earns a profit of £1 per share. Thus, this is simply an arbitrage.
In conclusion, an arbitrage is a type of trade that is caused as a result of market inefficiency.
When the market for ___________ money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, the price level increases if money demand shifts _____________
Answer:
money demand; leftward
Explanation:
Money demand depends upon the interest rate as well as the price level.
When the money market is been drawn with a value of the money on the [tex]\text{vertical axis}[/tex], the quantity of money demanded is increased and the price level also increases. Also the curve slopes downward. But it decreases the the money supply as well as the price level.
When the money demand shifts towards left or when the money supply shifts rightwards, the price level increases.
Wilson's Antiques is considering a project with an initial cost today of $10,000. The project has a life of 2 years with cash inflows of $6,500 a year. Should the firm decide to wait one year to commence this project, the initial cost will increase by 5 percent, and the cash inflows will increase to $7,500 a year. What is the value of the option to wait at a discount rate of 10 percent
Answer:
Wilson's Antiques
The value of the option to wait is:
= $1,236.
Explanation:
a) Data and Calculations:
Alternative 1 Alternative 2
Now Wait (one year after)
Initial cost of project $10,000 $10,500 ($10,000 * 1.05)
Increase in initial cost 5%
Project's estimated life 2 years 2 years
Annual cash inflows $6,500 $7,500
Discount rate = 10%
PV annuity factor at 10% 1.736 1.736
Present value of annuity $11,284 $13,020
Net present value $1,284 $2,520
The value of the option to wait is $1,236 ($2,520 - $1,284)
Consider the future value of $1 in 10 periods when the interest rate is 5%. When the interest rate doubles to 10%, the future value: Increases but by less than double Exactly doubles Increases by more than double Cannot be determined a
Answer: Increases but by less than double
Explanation:
The formula for future value will be calculated as:
FV = PV (1 + r )^n
When interest rate = 5%, then the future value will be:
= 1 × (1 + 5%)^10
= 1 × (1 + 0.05)^10
= 1 × (1.05)^10
= 1.63
When Interest rate is 10%, then the future value will be:
= 1 × (1 + 10%)^10
= 1 × (1 + 0.10)^10
= 1 × (1.10)^10
= 2.59
Therefore, the answer is "Increases but by less than double"
Assume that Guardian Company uses a periodic inventory system and has these account balances: Purchases $500,000; Purchase Returns and Allowances $14,000; Purchase Discounts $9,000; and Freight-in $15,000. Determine net purchases and cost of goods purchased.
Answer:
Net purchases:
= Purchases - Purchase Returns and Allowances - Purchase Discount
= 500,000 - 14,000 - 9,000
= $477,000
Cost of goods sold:
= Net purchase + Freight-in
= 477,000 + 15,000
= $492,000
Terrell Corporation produces various products used in the construction industry. The plumbing division produces and sells100,000 copper fittings each month. Relevant information for last month follows:
Total sales (all external) $250,000
Expenses (all on a unit base):
Variable manufacturing $0.50
Fixed manufacturing .25
Variable selling .30
Fixed selling .40
Variable G & A .15
Variable G & A .50
Total $2.10
Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products Division.
1. Refer to Terrell Corporation. A transfer price based on variable cost will be set at ________ per unit.
a) $0.50
b) $0.65
c) $0.95
d) $1.10
2. Refer to Terrell Corporation. A transfer price based on full production cost would be set at ______ per unit.
a) $0.75
b) $1.45
c) $1.60
d) $2.10
3. Refer to Terrell Corporation. A transfer price based on market price would be set at __________ per unit.
a) $2.10
b) $2.50
c) $1.60
d) $2.25
4. Refer to Terrell Corporation. If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month, the per-unit transfer price is not likely to be below
a) $0.75
b) $1.60
c) $2.10
d) $2.50
Answer:
Terrell Corporation
1. Refer to Terrell Corporation. A transfer price based on variable cost will be set at ________ per unit.
c) $0.95
2. Refer to Terrell Corporation. A transfer price based on full production cost would be set at ______ per unit.
d) $2.10
3. Refer to Terrell Corporation. A transfer price based on market price would be set at __________ per unit.
b) $2.50
4. Refer to Terrell Corporation. If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month, the per-unit transfer price is not likely to be below
d) $2.50
Explanation:
a) Data and Calculations:
Monthly production and sales units of the plumbing division = 100,000
Total sales (all external) $250,000
Expenses (all on a unit base):
Variable manufacturing $0.50
Fixed manufacturing .25
Variable selling .30
Fixed selling .40
Variable G & A .15
Fixed G & A .50
Total $2.10
Variable manufacturing $0.50
Variable selling .30
Variable G & A .15
Total variable costs (unit) $0.95
According to the video, what qualities or items do Cargo and Freight Agents need? Check all that apply.
college degree
familiarity with computers
driving skills
supervisory experience
high-school diploma
answers are 2 and 5
Answer:
B
E
Explanation:
S945274 is correct
Answer:
2 and 5 r the answer
Explanation:
Mia and Mario specialize in producing the item in which she or he has a comparative advantage. Then they trade one pasta dish for one pizza.. Before specialization and trade, Mia and Mario produce 4 dishes of pasta and 4 pizzas an hour each. What are the total gains from specialization and trade?
Answer:
4, 4
Explanation:
Now mia has comparative advantage in pasta production while Mario has advantage in pizza making
Before they both specialized, one was making 4 pizza and 4 pasta while the other made 4 pasta and 4 pizza.
Total pizza made = 8
Total pasta made = 8
After they specialized,
Maria makes 4 + 8 = 12 pizza
Mia makes 4+8 = 12 pizza
12-8= 4
So they both make 4 more pasta and 4 more pizza
Which of the following is NOT an accurate statement about business processes in the context of implementing supply chain management?
A. Logistics are one of front-end practices that drive entire business practices.
B. Front-end business processes refer to the practices related to customers-product development-suppliers.
C. Key aspects of strategic management include leadership and (organizational) cultures.
D. Infrastructure support includes IT, knowledge/innovation management)
E. Complex performance measures are related to customers and supply chain management
Answer:
B. Front-end business processes refer to the practices related to customers-product development-suppliers.
Explanation:
The above given statement is NOT an accurate statement about business processes in the context of implementing supply chain management.
Which of the three types of business is the shoe store?
Answer:
I think a shoe store would be considered a corporation, however it could be a sole proprietorship meaning the business is solely owned and taken care of by one person, but that's unlikely since a shoe store would need employees to maintain their store.
Explanation:
There are three categories of business which are the following:(1) sole proprietorship, (2) partnership, and (3) corporation. Within each category, there are several variations.
Hope I helped, have a nice day :)
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.0%, and the current dividend yield is 8.00%. Its beta is 1.32, the market risk premium is 14.00%, and the risk-free rate is 2.80%.
Required:
a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
c. Which of the two estimates is more reasonable?
Answer:
a. Calculation of the firm's cost of equity using CAPM
Required rate of return (Cost of equity) = Risk free rate + Beta*Market risk premium
Cost of equity = 2.80% + 1.32*14%
Cost of equity = 2.80% + 18.38%
Cost of equity = 21.28%
b) Calculation of the cost of equity using constant growth model:
Cost of equity = Dividend yield + Growth rate(Capital gain yield)
Cost of equity = 8.00% + 36.00%
Cost of equity = 44.00%
Perez Corporation has the following financial data for the years 20X1 and 20X2:
20X1 20X2
Sales $8,000,000 $10,000,000
Cost of goods sold 6,000,000 9,000,000
Inventory 800,000 1,000,000
Required:
a. Compute the inventory turnover for each year using the formula Sales/Inventory.
b. Compute inventory turnover based on an alternative calculation that is used by many financial analysts, Cost of goods sold/Inventory, for each year.
Answer:
Perez Corporation
a. Inventory turnover = Sales/Inventory
20X1 = 10x
20X2 = 10x
b. Inventory turnover = Cost of goods sold/Inventory
20X1 = 7.5x
20X2 = 9x
Explanation:
a) Data and Calculations:
20X1 20X2
Sales $8,000,000 $10,000,000
Cost of goods sold 6,000,000 9,000,000
Inventory 800,000 1,000,000
Average inventory = $900,000 ($1,800,000/2)
a. Inventory turnover = Sales/Inventory
20X1 = 10x ($8,000,000/$800,000)
20X2 = 10x ($10,000,000/$1,000,000)
b. Inventory turnover = Cost of goods sold/Inventory
20X1 = 7.5x ($6,000,000/$800,000)
20X2 = 9x ($9,000,000/$1,000,000)
a. On March 2, Sheridan Company purchased $862,000 of merchandise from Skysong Company, terms 2/10, n/30.
b. On March 6, Sheridan Company returned $110,700 of the merchandise purchased on March 2.
c. On March 12, Sheridan Company paid the balance due to Skysong Company.
Requried:
Prepare the journal entry to record these transaction.
Answer:
Sheridan Company
Journal Entries:
a. March 2: Debit Inventory $862,000
Credit Accounts Payable (Skysong Company) $862,000
To record the purchase of merchandise on credit terms 2/10, n/30.
b. March 6: Debit Accounts Payable (Skysong Company) $110,700
Credit Inventory $110,700
To record the return of merchandise on account.
c. March 12: Debit Accounts Payable (Skysong Company) $751,300
Credit Cash $736,274
Credit Cash Discounts $15,026
To record the payment on account in full settlement, including cash discounts.
Explanation:
1) Data and Analysis:
a. March 2: Inventory $862,000 Accounts Payable (Skysong Company) $862,000 terms 2/10, n/30.
b. March 6: Accounts Payable (Skysong Company) $110,700 Inventory $110,700
c. March 12: Accounts Payable (Skysong Company) $751,300 Cash $736,274 Cash Discounts $15,026
Two alternatives for a construction project are being considered. Both projects have a 5-year life. Alternative A's initial cost is $2,260 and yields $355 annually for 5 years. Alternative B initially costs $5500 and yields $1,250 annually for 5 years. The rate of return on the difference between the alternatives is approximately
Answer:
The rate of return on the difference between the alternatives is approximately 38.12%.
Explanation:
Alternative A's initial cost = $2,260
Alternative A's total yields for 5 years = $355 * 5 = $1,775
Alternative B's initial cost = $5,500
Alternative B's total yields for 5 years = $1,250 * 5 = $6,250
Difference between initial costs of A and B = Alternative B's initial cost - Alternative B's initial cost = $5,500 - $2,260 = $3,240
Difference between total yields for 5 years of A and B = Alternative B's total yields for 5 years - Alternative A's total yields for 5 years = $6,250 - $1,775 = $4,475
Rate of return on the difference between the alternatives = (Difference between total yields for 5 years of A and B - Difference between initial costs of A and B) / Difference between initial costs of A and B = ($4,475 - $3,240) / $3,240 = 0.3812, or 38.12%
Therefore, the rate of return on the difference between the alternatives is approximately 38.12%.
The net income reported on the income statement of Cutler Co. was $2,460,000. There were 50,000 shares of $18 par common stock and 20,000 shares of $5 preferred stock outstanding throughout the current year. The income statement included a gain on discontinued operations of $300,000 after applicable income tax.
a. Determine the per-share figure for common stock for income before discontinued operations. Round your answer to the nearest cent.
$ per share
b. Determine the per-share figure for common stock for net income. Round your answer to the nearest cent.
$ per share
Answer and Explanation:
The computation is shown below:
a. The earning per share is
= (PAT - income tax discontinued operations - Preference dividend) ÷ number of common stock
= ($2,460,000 - $300,000 - (20,000 × $5)) ÷ (50,000 shares)
= $41.2 per share
b. The earning per share is
= (PAT - Preference dividend) ÷ number of common stock
= ($2,460,000 - (20,000 × $5)) ÷ (50,000 shares)
= $47.2 per share
You’ve borrowed $21,518 on margin to buy shares in Ixnay, which is now selling at $40.6 per share. You invest 1,060 shares. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price changes to $38 per share. a. Will you receive a margin call?
Answer:
a. No, you will NOT receive a margin call.
b. The price at which you will receive the margin call is $31.23 per share.
Explanation:
Note: This question is not complete as the part b of the requirement is omitted. To complete the question, the omitted part b is therefore provided before answering the question as follows:
b. At what price will you receive the margin call?
The explanation of the answer is now provided as follows:
a. Will you receive a margin call?
Margin loan = $21,518
Total amount invested = Number shares purchased * Selling price per share when purchased = 1,060 * $40.60 = $43,036
Initial equity = Total amount invested - Margin loan = $43,036 - $21,518 = $21,518
Market value of the stock two days later = Number shares purchased * Selling price per share two days later = 1,060 * $38 = $40,280
New equity = Market value of the stock two days later - Margin loan = $40,280 - $21,518 = $18,762
Percentage margin = New equity / Market value of the stock two days later = $18,762 / $40,280 = 0.4658, or 46.58%
Since your percentage margin of 46.58% is lower than the new required maintenance margin of 35%, you will NOT receive a margin call.
b. At what price will you receive the margin call?
Price to receive the margin call = (Margin loan / (100% - Maintenance margin after two days)) / Number of shares purchased = ($21,518 / (100% - 35%)) / 1,060 = $31.23
Therefore, the price at which you will receive the margin call is $31.23 per share.
Lindon Company is the exclusive distributor for an automotive product that sells for $54.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $388,800 per year. The company plans to sell 28,600 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $226,800 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $5.40 per unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $226,800?
Answer:
Results are below.
Explanation:
First, we need to calculate the unitary variable cost:
Unitary variable cost= (1 - Contribution margin ratio)*selling price
Unitary variable cost= 0.70*54
Unitary variable cost= $37.8
Now, the break-even point in units and dollars:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 388,800 / (54 - 37.8)
Break-even point in units= 24,000
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 388,800 / 0.3
Break-even point (dollars)= $1,296,000
If the desired profit is $226,800; the following formula is required:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (338,800 + 226,800) / 16.2
Break-even point in units= 34,914
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= 565,600 / 0.3
Break-even point (dollars)= $1,885,333
Finally, if the variable cost per unit decreases by $5.4:
Unitary variable cost= $32.4
Break-even point in units= 388,800 / (54 - 32.4)
Break-even point in units= 18,000
Contribution margin ratio= unitary CM / Selling price
Contribution margin ratio= 21.6/54= 0.4
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 388,800 / 0.4
Break-even point (dollars)= 972,000
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (388,800 + 226,800) / 0.4
Break-even point (dollars)= $1,539,000
A short-term financial decision based on an MNC management's expectation that the local foreign currency will appreciate may be
Answer:
increasing local accounts receivable and decreasing local accounts payable
Explanation:
In simple words, accounts receivables refers to the amount that the company will receive from its debtors and accounts payable is the amount that the company will pay to its creditors. Thus, if the local currency appreciates , the company will receive a higher amount but will be obligated to pay a lower amount.
A company's perpetual preferred stock currently trades at $87.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?
a. 8.25%
b. 9.14%
c. 8.69%
d. 9.62%
Answer:
9.62%
Explanation:
The firm cost of preferred stock can be calculated as follows
Dividend= $8
Price= $87.50
Floation cost= 5%
= 5/100
= 0.05
= 8/87.50(1-0.05)
= 8/87.50(0.95)
= 8/83.125
= 0.0962×100
= 9.62%
Hence the firm cost of preferred stock is 9.62%
Prepare a Master Schedule given the following information:
Forecast for each week for an eight-week schedule is 75 units.
The Master Production Schedule (MPS) rule is to schedule production if the projected on-hand inventory would be negative without it.
Committed customer orders are as follows:
WeeWeek CjusCustomer order
1 75
2 53
3 26
4 18
Use a production lot size of 100 units and no beginning inventory.
Week
1 2 3 4 5 6 7 8
Forecast 75 75 75 75 75 75 75 75
Customer Orders 75 53 26 18 0 0 0 0
Projected On-Hand Inventory
MPS
Formulas for Projected On-Hand Inventory
Week 1 = Beginning Inventory + MPS – MAX (Forecast:Customer Order)
Highest number
Weeks 2 – 8 = Previous Week Inventory + MPS – (Forecast: Customer Order)
Because the problem says we cannot have any negative inventory, then we require MPS shipments to come in. When a shipment comes in, it is in lots of 100. In this problem, MPS will be added for Weeks 1,2,3 and Weeks 5, 6, 7. No MPS shipments are expected in Week 4 or Week 8.
Answer:
Master Production Schedule (MPS)
Week 1 2 3 4 5 6 7 8
Forecast Customer Order 75 75 75 75 75 75 75 75
Customer Orders 75 53 26 18 0 0 0 0
Projected On-Hand Inventory 25 50 75 0 25 50 75 0
MPS 100 100 100 0 100 100 100 0
Explanation:
a) Data and Calculations:
Master Production Schedule (MPS)
Week 1 2 3 4 5 6 7 8
Forecast Customer Order 75 75 75 75 75 75 75 75
Customer Orders 75 53 26 18 0 0 0 0
Projected On-Hand Inventory
MPS
Formulas for Projected On-Hand Inventory
Week 1 = Beginning Inventory + MPS – MAX (Forecast:Customer Order)
Highest number
Weeks 2 – 8 = Previous Week Inventory + MPS – (Forecast: Customer Order)
Ana is training for a triathlon, a timed race that combines swimming, biking, and running. While Ana usually practices swimming for two hours per day, she decides to continue for an additional hour because the pool is less crowded than usual today allowing her practice time to be more productive. Which basic principle of individual choice does Valerie's plan illustrate that her husband's advice does not?
a. Resources are scarce.
b. All decisions involve opportunity costs.
c. Decisions are made at the margin.
d. People usually exploit opportunities to make themselves better off.
Answer:
c. Decisions are made at the margin.
Explanation:
It is better to make a trade-off when someone compares the costs with that of the benefits of doing something. The [tex]\text{decisions about whether one must do a bit more or a bit less of an activity}[/tex] are called marginal decisions. Making the [tex]\text{trade-offs at the margin}[/tex] means comparing its costs as well as its benefits of an activity by doing it a little bit more versus doing a little bit less.
In the context, Ana is making decision at the margin when she decides to practice one hour extra and improve her swimming performance as the event of triathlon is approaching.
Thus, option (d) is correct.
The prepaid insurance account had a beginning balance of $7,560 and was debited for $810 for premiums paid during the year.
Required:
Journalize the adjusting entry required at the end of the year.
Answer: See explanation
Explanation:
Debit Insurance Expenses = $8370
Credit Prepaid insurance = $8370
(To record insurance expense for the current year)
Note that:
Opening prepaid Insurance = $7560
Add: Insurance premium = $810
Insurance expense = $8370
When you send a negative employment message, recipients have an emotional stake, so which approach is best?
Question 1 options:
Discreet
Indirect
Direct
Face-to-face
Answer:
Sería directo.
Explanation:
Espero ayudarte
Your broker suggests that the stock of DUH is a good purchase at $25. You do an analysis of the firm, determining that the recent $1.40 dividend and earnings should continue to grow indefinitely at 5 percent annually. The firm's beta coefficient is 1.3, and the yield on Treasury bills is 1.4 percent. If you expect the market to earn a return of 8 percent, what is your valuation of DUH
Answer:
The correct answer is "$28.03".
Explanation:
The given values are:
Good purchase,
= $25
Dividend,
= $1.40
Annually earning,
= 5%
Beta coefficient,
= 1.3
Treasury bills,
= 1.4%
Now,
= [tex]1.4+1.34\times 8-1.4[/tex]
= [tex]1.34\times 8[/tex]
= [tex]10.244[/tex] (%)
hence,
The fair value will be:
= [tex]1.4\times \frac{1.05}{.10244}-.05[/tex]
= [tex]28.03[/tex]
Absolutely, the proposal including its brokerage must be adopted because as fair market value was almost $25.
How dose the very small businesses finance
Answer:
Small Business Administration offers lenders, mostly traditional banks, a federal guarantee on your loan
Prime Computers is a company that sells computers and software. The company has a website that allows customers to post comments about the computers and software it sells. Why is it important for this company to encourage customer feedback
Group of answer choices.
A. Most online shoppers will only buy products if they can voice their opinions about them after the purchase.
B. Most online shoppers search the Internet for ratings and reviews before making major purchase decisions.
C. Negative consumer feedback can actually attract more customer interest in the product.
D. Allowing consumer feedback makes it less likely that consumers will provide their feedback.
E. Consumers are more likely to say positive things about companies that value their opinions.
Answer:
B. Most online shoppers search the Internet for ratings and reviews before making major purchase decisions.
Explanation:
Customer relationship management can be defined as a strategic process which typically involves combining strategies, techniques, practices and technology so as to effectively and efficiently manage their customer data in order to improve and enhance customer satisfaction. Thus, this set of employees are saddled with the responsibility of ensuring the customer are satisfied and happy with their service at all times.
This ultimately implies that, customer relationship management is focused on developing an ongoing connection between a business firm (organization) and all of its customers, as well as potential customers.
Hence, it is very important for Prime Computers to encourage customer feedback on its website and as a policy because most online shoppers (customers) usually engage in an online search in order to see other customer's ratings and reviews of company's product or service before making major purchase decisions.
Suppose that the price of a cupcake is $4. At this price, 50 cupcakes will be demanded. If the price rises to $5 per cupcake, consumer surplus will
Answer: fall by less than $50.
Explanation:
The options are:
• fall by more than $50.
• fall by less than $50.
• rise by less than $50.
• rise by more than $50.
Expert Answer
Consumer surplus, is referred to as the economic measure of the excess benefit that a customer gets. The consumer surplus is the difference between the amount that the customer is willing to pay and the amount that he or she eventually pays.
Based on the question, the total Price paid is: 50 × $4 = $200
Total Revised Price = 50 × $5 = $250
Therefore, there will be a fall by $50 that's ($250 - $200).