Answer:
car is economic good because it help us to transport goods from one place to another and is can used for travelling from one place to another in a short period of time
An economic good is something that requires resources to produce and has a finite supply. Because the resources and labor used to create a car could have been used to create another good or group of goods, cars are considered economic goods.
What makes a good an economic good?A good is referred to as an "economic good" if its demand outweighs its supply and it requires human effort to obtain. Free goods, however, like air, are always available and don't require any conscious effort to obtain.
Through the sale and servicing of automobiles, the auto manufacturing industry contributes $1.1 trillion annually to the economy. This money circulates throughout the economy, paying suppliers of auto parts, paying employees at assembly plants, and giving the government money.
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Leadership is primarily concerned with assuring:_________.
a. An effective daily operation in the present
b. A legacy of recognition from the past
c. A future vision and surviving change
d. None of these are correct
Answer:
a. An effective daily operation in the present
Explanation:
Leadership is a process of social influence in which it maxmize the others efforts for attainting the goals and objectives of an orgaznaition. It is the process of the social influence that maximize the other efforts
So as per the given situation, leadership is concerned with the effectieveness of the daily operation in the current situation
So as per the given situation, the option a is correct
A physical count of merchandise inventory on July 30 reveals that there are 170 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for July is
Answer: $3,502
Explanation:
When using FIFO, It means that the earliest goods were sold first which means that the later goods would be the ones in the ending inventory.
The 170 units on hand would therefore include:
The 51 units which cost $22(170 - 51) units which cost $20Ending inventory = (22 * 51) + ((170 - 51) * 20)
= 1,122 + (119 * 20)
= 1,122 + 2,380
= $3,502
Chance, Inc. sold 4,300 units of its product at a price of $137 per unit. Total variable cost per unit is $103, consisting of $71 in variable production cost and $32 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.a. $346,500 b. $499,500 c. $315,000 d. $661,500 e. $337,500
Answer:
Results are below.
Explanation:
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
Unit product cost= direct material + direct labor + variable overhead
Unit product cost= $71
Now, the total sales and total variable cost:
Total sales= 4,300*137= $589,100
Total variable cost= 4,300*71= $305,300
Finally, the variable costing margin:
Variable costing margin= total sales - total variable cost
Variable costing margin= 589,100 - 305,300
Variable costing margin= $283,800
Which of the motivational theories below argues that employee productivity increases as managers pay more attention to their employees? Maslow's Hierarchy of Needs Two Factor Theory Classical Theory & Scientific Management Hawthorne Effect
Answer: Two Factor Theory
Explanation:
The two factor theory is also referred to as the Herzberg's motivation-hygiene theory and it states that job satisfaction and job dissatisfaction in a workplace are caused by different factors and these factors act independently of each other.
The factors are the hygiene factors and
the motivating factors. If the hygiene factors isn't present, an employee will work less. On the other hand, the motivating factors will make an employee to work harder when it's present.. Two factor theory argues that employee productivity increases as managers pay more attention to their employees.
The bond contract rate determines the annual interest paid by multiplying the bond ______ value by the contract rate.
Answer:
par value
Explanation:
The bond's contract rate can also be regarded as bond's coupon rate. It can be explained as what the issuing company usually utilized in calculation of what it must pay as regards the interest on the bond. The market rate can be regarded as what other bonds which posses same risk pay in interest.
Coupon rate can as well be explained as nominal yield that is been paid by a fixed-income security. It is been regarded as annual coupon payments that is been paid by the issuer with relativity to the
par value or face of bond.
It should be noted that The bond contract rate determines the annual interest paid by multiplying the bond par value by the contract rate
Fraud alerts are generally only allowed for individuals who have had their personal information stolen.
a)true
b)false
Answer:
B)False
Explanation:
Because it's false.
False that fraud alerts exist generally only permitted for people who have had their private information stolen.
What is a fraud alert?A fraud alert exists a free notification you can count on your credit report, requiring anyone receiving a credit application in your name to confirm your identity before processing the application.The purpose of a fraud alert exists to add a layer of protection to the loan application procedure, to prevent criminals from spreading bogus credit accounts or accepting out loans in your name. A fraud alert encourages lenders and creditors to bring extra steps to ascertain your individuality before issuing credit.Hence, the provided statement is false.
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Sales of battery-powered cars are increasing. People concerned with the environment are the primary buyers of battery-powered cars. Surveys show that people buy battery-powered cars are very concerned about pollution and its long-term impact on the environment. Other research also shows that people with battery-powered cars, compared to others, are more likely to use energy-saving appliances at home.
Which of the following statements best expresses the main conclusion of the above argument?
1. People concerned with the environment are likely to use energy-saving appliances.
2. Primary buyers of battery-powered cars are those concerned with the environment.
3. More people are concerned about the environment today than in the past.
Answer:
There are two statements that can better express the main conclusion of the above argument:
1. People concerned with the environment are likely to use energy-saving appliances.
2. Primary buyers of battery-powered cars are those concerned with the environment.
Explanation:
It is correct to say that both statements express the main conclusion of the above argument.
In the first premise it is said that "People concerned about the environment are the main buyers of battery-powered cars."
In the second premise, it is said that: "people with battery-powered cars, compared to others, are more likely to use energy-saving appliances at home."
Therefore, it is possible to conclude that the main buyers of battery-powered cars are those who care about the environment and also those who save energy at home.
Joey, Many and Jim have the following labor supply.
Wage Joey Mandy Jim
$5 4 0 2
$10 8 4 6
$15 12 8 9
a. Who values thier leisure most, Joey, Mandy or Jim?
b. What is the total labor supply given a wage of $15?
c. What if the demand for labor were fixed at 18. what would be the equilibrium wage?
Answer:
a. Mandyb. 29 units c. $10Explanation:
a. Mandy enjoys leisure the most
The person who enjoys leisure the most is the one that supplies the least amount of labor. The logic is that if they are not supplying labor then they would be on leisure.
Mandy supplies the least labor so must enjoy leisure the most.
b. Total supply for a wage of 15:
= Joey supply + Mandy supply + Jim supply
= 12 + 8 + 9
= 29 units
c. If demand for labor was fixed at 18:
The equilibrium wage would be the wage that gets those 18 units of labor.
That wage is $10.
At $10, the labor units supplied by all 3 people is:
= 8 + 4 + 6
=18 units
Assume the equilibrium price for a good is $10. If the market price is $5, a:_____________
a. Shortage will cause the price to remain at $5
b. Surplus will cause the price to remain at $5
c. Shortage will cause the price to rise toward $10
d. Surplus will cause the price to rise toward $10
Answer:
c. Shortage will cause the price to rise toward $10
Explanation:
c. Shortage will cause the price to rise toward $10
The equilibrium price is $10 this any price below the equilibrium price will create a shortage in the market because at price lower than equilibrium price, the demand is greater than the supply. Thus, shortage will push the prices upwards or towards equilibrium price.
0.58 points eBookPrintReferencesCheck my workCheck My Work button is now enabledItem 1 On December 1, 2018, your company borrowed $15,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2019, $2,000; 2020, $3,000; 2021, $4,000; and 2022, $6,000. Show how this loan will be reported in the December 31, 2019 and 2018, balance sheets, assuming principal payments will be made when required.
Answer:
Balance Sheets 2019 2018
Current liabilities:
Loan Payable $3,000 $2,000
Long-term Liabilities:
Loan Payable $10,000 $13,000
Explanation:
a) Data and Calculations:
Principal amount of loan on December 1, 2018 = $15,000
Repayments on November 30 each of the following years:
Year Repayment Loan Balance Current Long-term
Liabilities Liabilities
Dec. 1, 2018 $15,000 $2,000 $13,000
2019, $2,000 13,000 3,000 10,000
2020, $3,000 10,000 4,000 6,000
2021, $4,000 6,000 6,000 0
2022, $6,000 0 0 0
Loan Payable:
December 31, 2018 = $15,000
December 31, 2019 = $13,000
Heidi is having trouble understanding the Black Lives Matter (BLM) movement and why her workplace sent out an email affirming the company's commitment to diversity and inclusion. This is probably because as a white woman from a small town with little exposure to diversity efforts, Heidi has not had much education about what BLM is trying to accomplish. She is wrestling with this new information about systemic racism and ultimately dismisses it as unfounded because it is contrary to her past experiences. This is an illustration of which of the following. Pick the best answer from the list based on our book's discussion of these terms:
a. Stereotyping
b. An entrenched mental model
c. Leader-Member Exchange Theory
d. Ethnocentrism
e. Social Identity Theory
Answer:
e. Social Identity Theory
Explanation:
Identity is the sense of who and what we are and also where do we belong. According to this social identity theory, people is most likely to [tex]\text{favor their ingroup}[/tex] over an outgroup as the former is a part of their self-identity. It means that people tend to overestimate the features of their own group to which they belong whereas they try to minimize the characteristics of the other groups.
In the context, Heidi is finding it difficult to understand about the new email by the company about the Black Lives Matter movement. She is a woman from a small town and do not have much exposure to the diversity efforts. She dismisses the email as unfounded as it was contrary to her past experiences. This shows an example of social identity theory.
Rains Company is a furniture retailer. On January 14, 2022, Rains purchased merchandise inventory at a cost of $70000. Credit terms were 2/10, n/30. The inventory was sold on account for $300000 on January 21, 2022. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2022, and the accounts receivables were settled on January 30, 2022. Which statement is correct
Answer:
On January 30 , 2022, customers should remit cash in the amount of $297,000
Explanation:
Calculation to determine Which statement is correct
Based on the information given the statement that is correct will be On January 30 , 2022, CUSTOMERS SHOULD REMIT CASH in the amount of $297,000 calculated as:
Cash= (Sales amount × (1−.01))
Cash =$300,000 ×(1-.01)
Cash =$300,000 × .99
Cash = $297,000
A company issued bonds 8 years ago with original maturity of 25 years, 7.5% coupon rate with semiannual coupon payments, and a par value of $1,000. The current market interest rate is 11.75%. What is the bond's price?
a. $718.52
b. $690.22
c. $780.75
d. $890.46
e. $814.97
A company issued bonds 8 years ago with original maturity of 25 years, 7.5% coupon rate with semiannual coupon payments, and a par value of $1,000. The current market interest rate is 11.75%. The bond's price is $718.52. Option A is the correct answer.
To calculate the bond's price, we can use the present value formula. The present value of a bond is the sum of the present value of its future cash flows, which are the coupon payments and the final principal repayment. Option A is the correct answer.
1. Determine the number of periods: The bond has an original maturity of 25 years and semiannual coupon payments, so there are a total of 50 periods (25 years * 2).
2. Calculate the periodic coupon payment: The coupon rate is 7.5% and the par value is $1,000. Therefore, the annual coupon payment is $1,000 * 7.5% = $75. Since there are semiannual coupon payments, the periodic coupon payment is $75 / 2 = $37.50.
3. Determine the market interest rate: The current market interest rate is 11.75%, which is the rate we will use to discount the bond's cash flows.
4. Calculate the present value of the coupon payments: We will use the present value of an annuity formula to calculate the present value of the 50 coupon payments. The formula is: PV = C * (1 - (1 + r)⁻ⁿ) / r, where PV is the present value, C is the periodic coupon payment, r is the periodic interest rate, and n is the number of periods.
Using the formula, PV = $37.50 * (1 - (1 + 11.75% / 2)⁻⁵⁰) / (11.75% / 2), the present value of the coupon payments is approximately $613.74.
5. Calculate the present value of the final principal repayment: The final principal repayment is the par value of $1,000. We will use the present value formula PV = F / (1 + r)ⁿ, where PV is the present value, F is the future value (par value), r is the periodic interest rate, and n is the number of periods.
Using the formula, PV = $1,000 / (1 + 11.75% / 2)^50,
the present value of the final principal repayment is approximately $104.78.
6. Add the present value of the coupon payments and the present value of the final principal repayment to get the bond's price:
$613.74 + $104.78 = $718.52.
Therefore, the correct answer is a. $718.52.
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You bought one soybean future contract at $5.13 per bushel. What would be your profit (loss) at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.
Answer:
Your profit at maturity is:
= $650.
Explanation:
a) Data and Calculations:
Cost of purchase of soybean future contract = $5.13 per bushel
Contract size bought = 5,000 bushels
Maturity spot price = $5.26 per bushel
Profit = Selling Price Minus Purchase cost
= ($5.26 - $5.13) * 5,000
= $0.13 * 5,000
= $650
b) You will be making a profit of $650 ($0.13 * 5,000) from the sale since it was bought at $5.13 per bushel and sold at $5.26 per bushel. Therefore, a profit of $0.13 ($5.26 - $5.13) per bushel was generated.
What is the Selling Division’s opportunity cost per unit from selling 3,000 units to the Purchasing Division? g
Answer:
the opportunity cost per unit is $19
Explanation:
The computation of the opportunity cost per unit is shown below:
The opportunity cost per unit is
= Selling price per unit - variable cost per unit
= $34 - $15
= $19
Hence, the opportunity cost per unit is $19
The same should be considered and relevant
We simply deduct the variable cost per unit from the selling price per unit so that the opportunity cost could come
The per-unit opportunity cost of the Selling Division is $19 and the total opportunity cost will be $57,000.
What is an opportunity cost?Opportunity cost refers to the cost of a foregone alternative. It is the profit that can be achieved by choosing another available alternative.
In the given question, the company has two options, either to sell the product in the market or to sell it to the purchasing division.
If the company sells the product to the Purchasing Division, the opportunity cost will be the profit that can be achieved by selling the same in the market.The opportunity cost will be the contribution lost by not selling the product in the market.
The opportunity cost will be:
[tex]\rm Opportunity \:cost = Selling\:price - Variable \:cost\\\\\rm Opportunity \:cost = \$34 - \$15\\\\\rm Opportunity \:cost = \$19[/tex]
The number of units sold to the Purchasing Division is 3,000.
Therefore the total opportunity cost will be:
[tex]\rm Total \:opportunity \:cost = Number \:of\:units \times Opportunity \:cost\:per\:unit\\\\\rm Total \:opportunity \:cost = 3,000 \times \$19\\\\\rm Total \:opportunity \:cost =\$57,000[/tex]
Therefore the opportunity cost is $57,000.
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Imitation by rivals is most challenging when Group of answer choices resources must be built over time. resources and capabilities require a high level of capital investment. resources are unique. resources and capabilities are accessible and require low levels of investment. capabilities reflect a high level of social complexity and causal ambiguity.
Answer:
capabilities reflect a high level of social complexity and causal ambiguity.
Explanation:
The more complex of ambiguous a product is, the more challenging it is for rivals to imitate the product
While it is generally accepted that intellectual property rights provide a method for increasing the rate of return for inventors, some economists believe there are a number of reasons to doubt whether patents provide:
Answer: a. sufficient incentives for innovation, as well as completely appropriate incentives for innovation
Explanation:
Some economists do not believe that providing intellectual property rights are enough to inspire or compensate for innovation and believe that even more rights should be given to inventors.
They also do not believe that patents are completely appropriate because they tend to expire eventually.
A major disadvantage of the payback period method is that it:_____.
a. Is useless as a risk indicator.
b. Ignores cash flows beyond the payback period.
c. Does not directly account for the time value of money.
d. All of the answers above are correct.
e. Only answers b and c are correct.
Answer:
C.
Explanation:
Does not directly account for the time value of money.
A 10-year loan in the amount of $100,000 is to be repaid in equal monthly payments. The interest rate is 12 percent, compounded monthly. What is the amount of principal paid in the loan payment for month 3
Answer:
The amount of principal paid in the loan payment for month 3 is:
= $443.45.
Explanation:
a) Data and Calculations:
Loan amount = $100,000
Interest rate per annum = 12%
Period of loan = 10 years or 120 months
Repayment of loan principal and interest = equal monthly payments.
3rd Month Payment:
Total payment = $1,434.71
Interest $991.26
Principal = $443.45
Schedule of Payment for the first 3 months:
Period PV PMT Interest FV
1 $100,000.00 $1,434.71 $1,000.00 $99,565.29
2 $99,565.29 $1,434.71 $995.65 $99,126.23
3 $99,126.23 $1,434.71 $991.26 $98,682.79
Pharsalus Inc. just paid a dividend (i.e., D0) of $ 3.32 per share. This dividend is expected to grow at a rate of 8.0 percent per year forever. The appropriate discount rate for Pharsalus's stock is 9.6 percent. What is the price of the stock
Answer:
$224.10
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
(3.32 x 1.08) / (0.096 - 0.08) = 224.10
The organization charged with protecting investors and the public by requiring full disclosure f financial information by companies offering securities to the public is the:_______
a. Auditing Standards Board.
b. Financial Accounting Standards Board.
c. Government Accounting Standards Boards.
d. Securities and Exchange Commission.
Answer:
The organization charged with protecting investors and the public by requiring full disclosure f financial information by companies offering securities to the public is the:_______
d. Securities and Exchange Commission.
Explanation:
The SEC (Securities and Exchange Commission) is an organization that has continued to discharge three main responsibilities with regards to the securities market. It has protected investors' investments in the capital market, maintained fair, orderly, and efficient capital markets, and facilitated capital formation. It regulates investments and the exchange of securities. It restores confidence in the capital market. It also provides transparency into the financial workings of U.S. companies.
Show the change in the market for gasoline that is consistent with the following statement:
"When a war breaks out in the Middle East, the price of gasoline rises, and the price of a used Cadillac falls." (Hint: Assume that used Cadillacs are gas guzzlers that are undesirable to own if gasoline becomes more expensive.)
Answer:
Supply reduces and supply curve shifts left. Price increasesExplanation:
The Middle East supplies a significant amount of the world's oil which means that conflict there could disrupt the movement of oil in the world.
In this scenario there is a conflict. This conflict would cause the supply of oil to reduce which means that the Supply curve will be forced to shift left to show that it has dropped.
This new supply curve will then intercept with the demand curve at a higher equilibrium price thereby leading to a price increase.
g Todd Foley is applying for a $210,000 mortgage. He can select either a $1,470 monthly payment with no points or a $1,323 payment with 4 points. How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment
Answer:
57 months
Explanation:
Calculation to determine How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly
payments
Number of months to cover cost=(.04 x $210,000)/($1470-$1323)
Number of months to cover cost = $8400/147
Number of months to cover cost =57 months
Therefore the number of many months it will take Todd to cover the cost of the discount points if he takes the lower monthly
payments is 57 months
Phelps, Inc. had assets of $87,938, liabilities of $19,174, and 13,190 shares of outstanding common stock at December 31, 2017. Net income for 2017 was $9,761. The company had assets of $103,319, liabilities of $23,003, 11,527 shares of outstanding common stock, and its stock was trading at a price of $10 per share at December 31, 2018. Net income for 2018 was $10,719. Required: Calculate EPS for 2018. Calculate ROE for 2018. Calculate the Price/Earnings Ratio for 2018.
Answer:
Phelps, Inc.
EPS for 2018 $0.93
ROE for 2018 13.3%
Price/Earnings Ratio for 2018 10.75
Explanation:
a) Data and Calculations:
December 31, 2017 December 31, 2018
Assets $87,938 $103,319
Liabilities 19,174 23,003
Equity $68,764 $80,316
Outstanding common
stock 13,190 11,527
Stock price per share $10
Net income $9,761 $10,719
EPS for 2018 $0.93 ($10,719/11,527)
ROE for 2018 13.3% ($10,719/$80,316*100)
Price/Earnings Ratio for 2018 10.75 ($10/$0.93)
EPS (Earnings Per Share) = Net income/Number of outstanding shares
ROE (Return on Equity) = Net income/Equity * 100
Price/Earnings Ratio = Stock price/EPS
Siam Traders had Net Income for 2020 of $9,500,000. The firm invested $1,000,000 in manufacturing equipment during 2019 but made no additional capital investments in 2020. The equipment is being depreciated over five years using straight-line depreciation, starting in 2019. Assuming no other adjustments to cash flow than those mentioned here, create a statement of cash flows for 2020 with amounts in thousands.
Required:
What is the Net Cash Flow in 2020?
Answer:
Cash flows from operating activities:
Net income $9,500,000
Adjustments
Depreciation Expense [$1,000,000/5 years] $200,000
Net cash flows from Operating activities $9,700
Cash flows from investing activities $0
Cash flows from investing activities $0
Net cash flow $9,700
Suppose a company is considering the following 5 independent projects:
Project
A
B
C
D
E
initial Investment
$100
$300
$400
$500
-$200
NPV
$20
$30
$40
$45
$15
What projects, if any, should be selected if the capital budget is $500?
Answer:
A & C
Explanation:
NPV, The Net Present Value of an investment is used in finance to calculate the profitability of a projected investment.
Since the capital budgeted for any investment is $500 ; hence the total initial investment the company can make should not exceed $500 ;
The company will be looking indulge in the most profitable investment, this we can judge Yung the NPV of each investment :
Therefore, the total NPV on investment A and Investment C is the highest while maintaining the $500 capital budget value.
Investment : ___ NPV
$100 - - - - - - - - > $20
$400 - - - - - - - - > 40
$500 - - - - - - - - > $60
The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:
Answer: interest
Explanation:
Notes payable occurs when a promissory note is issued to the bearer by the firm. Notes payable can either be short term which is within a year or long term which is more than a year.
The difference between the amount received from issuing a note payable and the amount repaid at maturity is known as the interest.
Allison bought a bond when it was issued by ABC Corporation 20 years ago. The bond, which has a $1,000 face value and a coupon rate equal to 10 percent, matures in eight years. Interest is paid every six months; the next interest payment is scheduled for six months from today. If the yield on similar risk investments is 8 percent, what should be the current market value (price) of the bond
Answer:
Current market value (price) of the bond = $ 1,081.11
Explanation:
The current market value (price) of the bond can be calculated using the following excel function:
Current market value (price) of the bond = PV(rate, NPER, -PMT, -FV) ........... (1)
Where:
rate = Semiannual yield on similar risk investments = yield on similar risk investments / 2 = 8% / 2 = 4%
NPER = Number of period = Year to maturity * Number of semiannuals in a year = 8 * 2 = 16
PMT = Payment = (FV * Coupon rate) / Number of semiannuals in a year = ($1,000 * 10%) / 2 = $50 = 50
FV = Face value = $1,000 = 1000
Substituting all the relevant value into equation (1), we have:
Current market value (price) of the bond = PV(4%, 10, -50, -1000)
Inputing =PV(4%, 10, -50, -1000) in any cell in excel sheet (Note: as done in the attached excel file), we have:
Current market value (price) of the bond = $ 1,081.11
A tyre manufacturer wants to set a minimum mileage guarantee on its new MX100 tyre. Tests reveal the mean mileage is 47,900 with a standard deviation of 2,050 miles and the distribution is a normal distribution. The manufacturer wants to set the minimum guaranteed mileage so that no more than 4% of the tyres will have to be replaced. What minimum guaranteed mileage should the manufacturer announce
Answer:
51,487.5
Explanation:
Calculation to determine the minimum guaranteed mileage should the manufacturer announce
Sinces no more than 4% of the tires will have to be replaced First step will be to determine the InvNorm(.96) using normal distribution table
InvNorm(100%-4%)
InvNorm(.96) = 1.75
Now let determine the minimum guaranteed mileage
Let x represent the Minimum guaranteed mileage
(2050*1.75)+47,900=x
x=3,587.5+47,900
x = 51,487.5
Therefore the minimum guaranteed mileage that the manufacturer should announce is 51,487
Between 1995 and 1997, American Airlines competed in the Dallas/Ft WorthAirport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selectedroutes. As a result, one of the low-cost carriers stopped service, which led Ameri-can Airlines to increase its price. Why do you think a lawsuit was filed againstAmerican Airlines? Why do you think American Airlines prevailed at trial?
Answer:
1. Why do you think a lawsuit was filed against American Airlines?
Because they engaged in predatory practices.
The United States is a free market economy that encourages competitive behavior which is why there are certain practices that are not tolerated such as predatory practices.
Predatory practices occur when a company reduces its cost to a price below that of its competitors till they are forced out of business because their costs would be larger than the revenue they make from the reduced prices. The former company would then increase its cost after the competitors are gone. This is usually done by large companies that can afford to take losses.
American Airlines did this and was the reason they were sued.
2. Why do you think American Airlines prevailed at trial?
Difficulty in proving marginal cost.
Generally, it is difficult to prove the marginal costs incurred by airline companies so American Airlines argued that their marginal costs had reduced when there were more competitors but increased when the other competitors left and that this was why they had to reduce prices when the competitors were there and increase when they were not.
