g A construction company builds roads with machinery​ (capital, K) and labor​ (L). If we plot the isoquants for the production function so that labor is on the horizontal​ axis, then a point on the isoquant with a small MRTS​ (in absolute​ value) is associated with high​ __________ use and low​ __________ use. A. ​labor; capital B. ​concrete; gravel C. ​capital; labor D. None of the above.

Answers

Answer 1

Answer:

A. ​labor; capital

Explanation:

In the production function theory, here we presume that the isoquants should be convex shaped and the MRTS should be isoquant slop that should be downward as it is shifted from left to right. Now if it is along on the horizontal axis that goes towards right so here MRTS falls and the labor rises. Due to increased in labor, the capital should falls because of the negative slope

Therefore the option a is correct

Answer 2

The point on the isoquant with a small MRTS​ (in absolute​ value) is associated with high labor use and low capital use.

In a production function theory, we will presume that the isoquants should be convex shaped and the MRTS should be isoquant slop hence, should be downward as it is shifted from left to right.

if the MRTS is along on the horizontal axis that goes towards right, hence, the MRTS falls and the labor rises.

Hence, due to the increase in labor, the capital should falls because of the negative slope.

Therefore, the Option A is correct since the point on the isoquant with a small MRTS​ (in absolute​ value) is associated with high labor use and low capital use.

Read more about production function theory

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Related Questions

Question 4
Which of the following is an example of an asset?
A. Repairs and Maintenance

B. Accounts Receivable

C. Accounts Payable
D. GST Collected

Answers

Answer:

Accounts Receivable

Explanation:

A is an expense, C and D are liabilities

What is the present value of an annuity that pays $58 per year for 13 years and an additional $1,000 with the final payment

Answers

Answer:

$882.03

Explanation:

Interest rate used is 7.23%

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 to 12 = 58

cash flow in year 13 = 1058

I = 7.23

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

A select list of transactions for Goals​ follows:
For each​ transaction, identify what type of adjusting entry would be needed. Select from the following four types of adjusting​ entries: deferred​ expense, deferred​ revenue, accrued​ expense, and accrued revenue.
Apr. 1 Paid six months of rent, $4,800.
10 Received $1,200 from customer for six month service contract that began April 1.
Apr. 15 Purchased a computer for $1,000.
Apr. 18 Purchased $300 of office supplies on account.
Apr. 30 Work performed but not yet billed to customer, $500
Apr. 30 Employees earned $600 in salaries that will be paid May 2.

Answers

Answer:

Goals

Identification of Needed Adjusting Entry:

Transaction                                                          Adjusting Entry Type

Apr. 1 Paid six months of rent, $4,800.              Deferred expense

Apr. 10 Received $1,200 from customer for      Deferred revenue

six month service contract that began April 1.

Apr. 15 Purchased a computer for $1,000.        Deferred expense

Apr. 18 Purchased $300 of office

supplies on account.                                          Accrued expense

Apr. 30 Work performed but not yet

billed to customer, $500                                   Accrued revenue

Apr. 30 Employees earned $600 in                  Accrued expense

salaries that will be paid May 2.

Explanation:

Four types of adjusting​ entries:

Goal's deferred​ expense refers to an expense that Goal will incur in future periods but already paid for.

Goal's deferred​ revenue includes its revenue received in advance of service.

Goal's accrued​ expense refers to an expense that has been incurred but not yet paid for.

Goal's accrued revenue includes revenue that has been earned but not yet received.

U.S. real gross domestic product changed from $14.6 trillion in 2006 to $14.4 trillion in 2009. During that same time period, the share of manufactured goods (e.g., cars, appliances) of U.S. real gross domestic product was 12.8 percent in 2006 and 12.0 percent in 2009. What was the dollar value of manufactured output Instructions: Enter your responses rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. In 2006

Answers

Answer:

Missing word "b. In 2009"

a. Dollar value (2006) = Real GDP (2006) * Share of manufacturing goods (2006) / 100

Dollar value (2006) = 14.6 * 12.8 / 100

Dollar value (2006) = 186.88 / 100

Dollar value (2006) = $1.8688 trillion

Dollar value (2006) = $1.87 trillion

Thus, the dollar value of manufactured output in 2006 is $1.9 trillion

b. Dollar value (2009) = Real GDP (2009) * Share of manufacturing goods (2009) / 100

Dollar value (2009) = 14.4 * 12.0 / 100

Dollar value (2009) = 172.8 / 100

Dollar value (2009) = $1.728 trillion

Dollar value (2009) = $1.73 trillion

Thus, the dollar value of manufactured output in 2009 is $1.7 trillion

Han Products manufactures 29,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:

Direct materials $3.70
Direct labor 12.00
Variable manufacturing overhead 2.30
Fixed manufacturing overhead 9.00
Total cost per part $27.00

An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $23 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $79,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:
What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?

Answers

Answer:

Financial advantage of accepting supplier's offer = $21,000

Explanation:

Relevant costs saved by outsourcing production:

Direct materials $3.70

Direct labor $12.00

Variable manufacturing overhead $2.30

Fixed manufacturing overhead $9.00 * 1/3 = $3

Total cost per part $21.00

Total savings per year = $21 * 29,000 = $609,000

Additional rental income = $79,000

Total = $688,000

Cost of purchasing 29,000 parts = $23 * 29,000 = $667,000

Financial advantage of accepting supplier's offer = $21,000

Andrews Corporation has income from operations of $240,000. In addition, it received interest income of $24,000 and received dividend income of $29,500 from another corporation. Finally, it paid $11,800 of interest income to its bondholders and paid $45,000 of dividends to its common stockholders. The firm's federal tax rate is 21%. What is the firm's federal income tax

Answers

Answer: $54,820.50

Explanation:

Federal income tax = Taxable income * tax rate

Taxable income = Income from operations + Interest income received + Dividend income received - Interest income paid

= 240,000 + 24,000 + (30% * 29,500) - 11,800

= $261,050

Federal income tax = 261,050 * 21%

= $54,820.50

Note: Only 30% of Dividends received are taxable

Kiwi Plc sold an antique painting which had been purchased inJanuary 1996 for £21,000. It was sold for £4,200 in January 2021. The proceeds were received net of auction fees of £650. What is Kiwi Plc's allowable loss?​

Answers

Answer:

$17,450

Explanation:

The antique painting that was bought in January 1996 was sold for $21,000

It was sold for 4,200 in January 2021

It received a net auction fee of 650

Therefore the allowable loss can be calculated as follows

= 21,000-4200+650

= 17,450

Hence the allowable loss is $17,450

Which of the following food borne illness has a preventative vaccine

A. E.coli
B.norovirus
C. Hep. A
D. Shigella

Answers

Answer:

C. Hep. A

Explanation:

From the available options, Hep. A is preventable with a vaccine. The vaccine was created in 1995. It is administered to individuals in two seperate doses and usually done with a time span of 6 months between dose. Having both doses administered helps prevent the individuals from the Hep. A virus long term. Like most vaccines, this one has a 95% effectiveness for preventing the virus from affecting the individual's body.

A sporting equipment store expects to purchase $8,200 of ski boots in October. The store had $2,800 of ski boots in merchandise inventory at the beginning of October, and expects to have $1,800 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?
a) $7,000.
b) $9,000.
c) $8,000.
d) $12,000.
e) $11,000.

Answers

Answer:

$9,200

Explanation:

Calculation to determine the budgeted cost of goods sold for October

Using this formula

Budgeted cost of goods sold for October =Cost of ski boots + Inventory at the beginning - Inventory at the end

Let plug in the formula

Budgeted cost of goods sold for October = $2800 + $8200 - $1800

Budgeted cost of goods sold for October= $9200

Therefore the budgeted cost of goods sold for October is $9,200

Tucker Company's Work in Process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?

Answers

Answer:

$5500.

Explanation:

The computation of the cost of goods sold is shown below:

Let us assume beginning WIP be $2000

So,  

ending WIP is

= ($2000 - $1000)

= $1000

And,  

Let us assume the beginning finished goods be $1000

So, the ending finished goods is

= ($1000 + $500)

= $1500

Now as we know that  

Cost of goods manufactured = Total manufacturing cost + Beginning WIP - Ending WIP

= $5000 + $2000 - $1000

= $6000

Now

cost of goods sold=Cost of goods manufactured+Beginning finished goods-Ending finished goods

= $6000 + $1000 - $1500

 =$5500.

When you retire, you wish to have $3 million in your retirement account. You decided to add $2,000 every quarter to your retirement account and invest to generate annualized return of 8% from your investment, how many years do you think it will take to have $3 million in the account

Answers

Answer:

43.35 years

Explanation:

Use the following formula to determine the number of years

Future Value of Annuity = Periodic Annuity x ( 1 + Periodic Interest rate )^numbers of periods ) - 1 / Periodic Interest rate

Where

Future Value of Annuity = $3 million = $3,000,000

Periodic Annuity = $2,000 per quarter

Periodic Interest rate = Interest rate x Quarterly fraction = 8%  x 3/12 = 2%

Numbers of periods = n = ?

Placing values in the formula

$3,000,000 = $2,000 x ( 1 + 2% )^n ) - 1 / 2%

$3,000,000 / $2,000 = ( 1 + 2% )^n ) - 1 / 2%

1,500 =  ( 1.02 )^n ) - 1 / 2%

1,500 x 2% = ( 1.02 )^n ) - 1

30 = ( 1.02 )^n ) - 1

30 + 1 = 1.02^n

31 = 1.02^n

Log 31 = n log 1.02

n = Log 31 / Log1.02

n = 173.41

Now calculat ethe nUmbers of years as follow

Numbers of years = n x 3/12

Numbers of years = 173.41 x 3/12

Numbers of years = 43.35 years

Say that Fed policy requires all banks to hold 8% of deposits in reserves. If Ventura Bank does not hold any excess reserves and the Fed increases the reserve requirement to 10%, what will be the result

Answers

Answer:

the money supply decreases

Explanation:

Reserve ratio is the percentage of deposits that is required of commercial banks to keep as reserves. The higher the ratio, the lower the money supply

For example, assume reserve ratio is initially 8% of deposits. It is later reduced to  10%. 1000 is deposited

Increase in money supply = deposit / reserve ratio

1000 / 0.08 = 12,500

1000 / 0.1  = 10,000

It can be seen the money supply decreased when reserve ratio was increased from 8% to 10%

Fruit Computer Company makes a fruit themed computer. Variable costs are $220 per unit, and fixed costs are $32,000 per month. Fruit Computer Company sells 500 units per month at a sales price of $300. The company believes that it can increase the price if the computer quality is upgraded. If so, the variable cost will increase to $240 per unit, and the fixed costs will rise by 50%. The CEO wishes to increase the company's operating income by 25%. Which sales price level would give the desired results

Answers

Answer:

Fruit Computer Company

The sales price level that would give the desired results is:

= $356 per unit

Explanation:

a) Data and Calculations:

Variable costs per unit = $220

Fixed costs per month = $32,000

Monthly sales units = 500 units

Selling price per unit = $300

                                  Before Change   After Change

Sales revenue                $150,000       $178,000 ($168,000 + $10,000)

Variable costs                   110,000         120,000

Fixed costs                        32,000           48,000

Total costs                     $142,000       $168,000

Operating income            $8,000          $10,000 ($8,000 * 1.25)

The sales price level that would give the desired results is $356 ($178,000/500).  This represents an increase of 18.7% ($56/$300 * 100).

An organization's job structure consists of relative pay for different functions and different levels of responsibility.

a. True
b. False

Answers

Answer:

a). True

Explanation:

The given statement asserts a true claim that the job structure of an organization comprises of corresponding pay scales for the different employees performing different activities and functions according to the levels of authority or leadership they have been provided. The job structure is the aspect that establishes the hierarchy or of various ranks and positions in which the company is organized to aptly manage the running of the business and its associated activities successfully and efficiently. Thus, the statement is true.

Investors with 30 per cent of the voting stock of a corporation, interested in a seat on the board of directors, had better have __________ voting privileges. a. straight b. cumulative c. proxy d. limited

Answers

Answer:

B)cumulative

Explanation:

Money markets trade securities that: _______________

I. mature in one year or less.
II. have little chance of loss of principal.
III. must be guaranteed by the federal government.

a. I and III only
b. I only
c. I and II only
d. I, II, and III

Answers

The answer is d because d
A: I and II only is the correct answer

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: M N OUnit sales price$12 $10 $11Unit variable costs 9 8 9Total fixed costs are $585,000. The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

Answers

Answer:

Selling price per composite unit= $11.3

Explanation:

Giving the following information:

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2.

Unit price and cost data are: M N OUnit sales price$12 $10 $11

First, we need to calculate the sales proportion for each product:

M= 3/6= 0.5

N= 1/6= 0.17

O= 2/6= 0.33

Now, the selling price per composite unit:

Selling price per composite unit= (0.5*12) + (0.17*10) + (0.33*11)

Selling price per composite unit= $11.3

Well Water Inc. wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2.00 per 12 oz. bottle. The following data has been collected:

Annual sales......................................................50,000 bottles
Projected selling and administrative costs.....$8,000
Desired profit.....................................................$80,000

The target cost per bottle is:__________

Answers

Answer:

The answer is "0.4".

Explanation:

[tex]\\\to \text{Total Cost of Goods Sold = Sales revenue - Desired profit}[/tex]

                                              [tex]= (2\times 50,000) - 80,000\\\\= 1,00,000 - 80,000\\\\= 20,000[/tex]

Calculating the target cost per bottle:

[tex]= \frac{\text{Total cost of goods sold}}{ \text{units sold}}\\\\= \frac{20,000}{50,000}\\\\= \frac{2}{5}\\\\= 0.4[/tex]

Stacy Cool wants to invest her money to earn at least 14%. A friend who is interested in investments has suggested her to buy a bond issued by the Buckeye Bravo Company that will mature in seven years. It has a face value of $1,000, pays an annual coupon of $110, and currently sells for $950. Should she buy this bond

Answers

Answer:

no

the yield to maturity is 12% which is less than 14%

Explanation:

To determine if Stacy should buy the bond, determine the yield to maturity of the bond

yield to maturity can be determined using a financial calculator

Cash flow in year 0 = -950

Cash flow in year 1 - 6 = 110

Cash flow in year 7 = 110 + 1000

YTM = 12.1%

The YTM is less than the minimum return she wants. So, she should not buy the bond

To determine YTM using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

To determine YTM using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

Consider the following information for Maynor Company, which uses a periodic inventory system: Transaction Units Unit Cost Total Cost January 1 Beginning Inventory 21 $ 71 $ 1,491 March 28 Purchase 31 77 2,387 August 22 Purchase 42 81 3,402 October 14 Purchase 47 87 4,089 Goods Available for Sale 141 $ 11,369 The company sold 47 units on May 1 and 42 units on October 28. Required: Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods. FIFO LIFO Weighted Average

Answers

Answer:  

FIFO LIFO WEIGHTED AVERAGE  

Ending inventory   4494 3878 4193  

Cost of Goods Sold   6875 7491 7176  

Explanation:

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO          

RECIEPTS   COST OF GOODS SOLD   BALANCE  

DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $

balance   21 71 1491 21 71 1491    

Purchasse          

28-Mar 31 77 2387 31 77 2387    

22-Aug 42 81 3402 37 81 2997 5 81 405

14-Oct 47 87 4089    47 87 4089

TOTAL 141  11369 89  6875 52  4494

         

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO          

RECIEPTS   COST OF GOODS SOLD   BALANCE  

DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $

balance   21 71 1491    21 71 1491

Purchasse          

28-Mar 31 77 2387    31 77 2387

22-Aug 42 81 3402 42 81 3402    

14-Oct 47 87 4089 47 87 4089    

TOTAL 141  11369 89  7491 52  3878

         

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC WEIGHTED AVERAGE          

RECIEPTS   COST OF GOODS SOLD   BALANCE  

DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $

balance   21 71 1491      

Purchasse          

28-Mar 31 77 2387      

22-Aug 42 81 3402      

14-Oct 47 87 4089      

TOTAL 141 80.63 11369 89 80.63 7176 52 80.63 4193

         

Dunbar sold 640 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimal places and final answer to the nearest dollar amount.)

Answers

Answer:

$428.13

Explanation:

Note The missing word have been attached as picture below

Weighted average cost per unit = [(450*$2.18) + (370*$2.62)] / (450 + 370)

Weighted average cost per unit = ($981 + $969.4) / 820

Weighted average cost per unit = $1950.4 / 820

Weighted average cost per unit = 2.378536585365854

Weighted average cost per unit = $2.3785

Ending inventory unit = 450 + 370 - 640

Ending inventory unit = 180

Value of ending inventory = $2.3785 * 180 units

Value of ending inventory = $428.13

International trade in goods and services is a major component of the globalization process.

a. True
b. False

Answers

it’s true periodddddddddddd

Evaluate whether all of the following are considered to be investment (I) in calculating GDP.

a. The purchase of a new automobile for private, non-business use
b. The purchase of a new house
c. The purchase of corporate bonds

Answers

Answer:

only the purchase of a new house would be considered investment spending of the three options

Explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export  

Consumption spending includes spending by households on goods and services. Consumption spending includes :  

spending on durables - e.g. laptop  

spending on nondurables - e.g. clothes, food

spending on services  - e.g. payment of hospital bill  

the purchase of a textbook by a student is an example of consumption spending on durable goods

Investment - It includes purchases of goods and services made by businesses in the production of goods and services

Government spending - It includes government consumption expenditure and gross investment.  The purchase of a new  limousine for the president is an example of consumption expenditure

The purchase of a new automobile for private, non-business use is an example of consumption spending on durables

The purchase of a new house is an example of investment spending

The purchase of corporate bonds is not included in the calculation of GDP

On Jan. 1, 2018, your cousin, Laura, purchased one $1,000, 5-year semiannual bond with a coupon rate of 8%. The yield of the bond was 8% at the time. How much did Laura pay for the bond?

Answers

Answer:

the amount pay for the bond is $1,000

Explanation:

The computation of the amount pay for the bond is shown below:

Given that

Future value be $1,000

NPER is 5 × 2 = 10

RATE = 8% ÷ 2 = 4%

PMT = $1,000 × 8% ÷ 2 = $40

The formula is given below:

=-PV(RATE,NPER,PMT,FV,TYPE)

After applying the above formula, the present value is $1,000

Hence, the amount pay for the bond is $1,000

bRamapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number of Units Direct Labor Hours Per Unit Machine Hours Per Unit Blinks 1,048 4 7 Dinks 2,236 5 6 All of the machine hours take place in the Fabrication department, which has an estimated overhead of $82,200. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $102,000. Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs based on direct labor hours. The factory overhead allocated per unit of Dinks is

Answers

Answer:

Ramapo Company

The factory overhead allocated per unit of Dinks is:

= $56.94.

Explanation:

a) Data and Calculations:

Product   Number of Units    Direct Labor         Machine

                                            Hours Per Unit   Hours Per Unit

Blinks                1,048                   4                           7

Dinks               2,236                   5                           6

                                      Fabrication      Assembly

Estimated overhead       $82,200       $102,000

Machine hours:

Blinks                              7,336

Dinks                              13,416

Total machines hours  20,752

Direct Labor hours:

Blinks                                                          4,192

Dinks                                                          11,180

Total machines hours                              15,372

Total factory overhead         Blinks          Dinks

Fabrication department    $29,058      $53,142

Assembly department          27,816        74,184

Total allocated overhead  $56,874   $127,326

Units produced                       1,048        2,236

Factory overhead per unit  $54.27      $56.94 ($127,326/2,236)

If Marjorie makes an investment of principal, and leaves the full amount, both principal and interest in the account to some time in the future when she withdraws all funds, she is earning what type of interest

Answers

Answer: Compounding

Explanation:

Based on the information given, we can infer that Marjorie earns a compounding interest. The compound interest is the interest on a loan that is calculated based on the initial principal as well as the interest that is accumulated from the previous periods. In compounding interest, the interest is earned on the principal and the interest amount. The compounding interest is also referred to as the interest on interest.

An individual in the 36 percent tax bracket has $20,000 invested in a tax-exempt account. If the individual earns 10 percent annually before taxes and inflation is 3.0 percent per year, what is the real value of the investment in 10 years?

Answers

Answer:

the  real value of the investment in 10 years is $38,614

Explanation:

The computation of the real value of the investment is given below:

but before that the rate of return is

= (1.10) ÷ (1.03) - 1

= 6.8%.

Now the

Future value  

= $20,000 × (1 + 0.068)^10

= $38,613.80

Hence, the  real value of the investment in 10 years is $38,614

The same should be calculated

g If there is a breach of contract, the objective of the remedy in the breach contract case will be to: Question 21 options: place the parties back into the position that they would have been in had there been no contract punish the party that committed breach of contract provide both parties relief place the non breaching party into the position that they would have been had the contract not been breached

Answers

Answer: place the non breaching party into the position that they would have been had the contract not been breached

Explanation:

A contract is meant to satisfy the reasons for which the contract was gone into for both parties. If one party breaches the contract, the party that did not breach should still have their reason for entering the contract satisfied because they did what they were supposed to do according to the contract.

This is why the purpose of a breach of contract remedy is to ensure that this non-breaching party does indeed get what was supposed to come to them by the contract.

Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel; $40,000 on seed, fertilizer, and pesticides; and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations. What is the family's accounting cost? What is the family's economic cost? Could the family's economic cost ever exceed its accounting cost? Why or why not?

Answers

Answer:

Accounting Cost

Accounting costs refers to the explicit costs which ar the actual costs related to the business venture. In this case that would be:

= Fuel costs + Seed costs  + Equipment

= 25,000 + 40,000 + 25,000

= $90,000

Economic cost

This includes the accounting costs and then adds the implicit costs which are the opportunity costs of choosing the current business venture. In this case it is the $20,000 they could have been making working at other occupations.

= Accounting cost + Salary foregone

= 90,000 + 20,000

= $110,000

Economic costs will always be higher than Accounting costs because they include both the accounting costs and opportunity costs.

The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 25 thousand tons of coffee per year or 5 thousand barrels of rum. Nicaragua can produce 18 thousand tons of coffee per year or 3 thousand barrels of rum. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum.

RequireDd
a. Which country should specialize in coffee?
b. Which country should specialize in rum?

Answers

Answer:

a. Nicaragua

b, Dominican Republic

Explanation:

A country should specialise in the production of goods for which it has a comparative advantage in its production

A country has comparative advantage in production if it produces at a lower opportunity cost when compared with other countries.

The Dominican Republic

opportunity cost of producing rum = 25,000 / 5000 =  5

opportunity cost of producing coffee = 5000 / 25000 = 0.2

Nicaragua

opportunity cost of producing rum = 6

opportunity cost of producing coffee = 0.17

The Dominican Republic has a lower opportunity cost in the production of rum. It should specialise in the production of rum

Nicaragua has a lower opportunity cost in the production of coffee. It should specialise in the production of coffee

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