How Choice Arises in Economics

Economies of scale: Large companies can produce products at a much lower cost than small ones because the cost per unit drops as the volume of output rises

Any firm’s production function relates to its marginal product of labour. The production function is used to explain the relationship between the quantity of the inputs used in the production process, and the firm’s production capacity in relation to other factors of production such as labour and capital. The marginal product of labour is the increase in the amount of output from an increase in unit labour supply. Therefore, the production function is given by Q=f (L, K).

AFC falls since a fixed amount covers a larger portion of the output. The U-shape indicates the areas are experiencing an increase followed by diminishing returns. The ATC curve sums AFC and AVC vertically. The ATC curve falls when the MC curve is below it. The ATC rises when the MC curve is increases. The MC curve intersects the ATC curve at its lowest point.

A correct response requires that you find an appropriate industry beta and measure for levered/unlevered betas and requires that you define cost of equity capital and free cash flow (FCF) – you may need a formula for FCF.

2. What unit of measurement is a tenfold logarithmic ratio of power output to power input?

From the founding fathers of the historical landmark known as ASU, it is revealed that the leading coefficient of a function will determine if it is a vertical shrink or vertical stretch. In this scenario the leading coefficient is 1/2, which means that this function will have a vertical shrink. This is an example of a vertical shrink because if the parabola is graphed and then compared to its parent function, f (x) = x2, then the parabola is shrunk by a factor of 2.

            The economies of scale exist by the increase of the output of the goods through additional units while the costs decrease. On the other hand, the

increases, but it is far more understandable when considering all the reasons for these increases.

The large scale business can cut down their selling prices in the market which can increase the sales of their product and the as well as the increase in the market share. This increases threat to the low scale businesses which can be undercut in the market.

Outline the similarities and differences between the Single Index Model (SIM) and the Capital Asset Pricing Model (CAPM). Justify which of the two models makes a better assessment of return of a security (25 marks).

According to this Fama & French three factors model, there are two more variable added into the regression model. They are SML factor (the return of small cap companies minus the the return of large cap companies) and HML factor (the

Return on investment (ROI) measures the rate of return generated by an investment center’s assets (Jackson, Sawyers, Sweeney, & Anderson, 2008). ROI is broken down into two components margin and asset turnover. Margin is a measure of operating performance and asset turnover is a measure of how effectively assets are used during a period (et. al. 2008).

The implementation of these scaling criteria for a model can reduced the length by a scaling factor of ‘a’. 1. The value of ϕ, s_w,s_o,s_g, ∆p ,T,∆T are remained same

West Company's cost structure will include a larger proportion of variable costs than East Company's cost structure. A firm's operating leverage factor, at a particular sales volume, is defined as its total contribution margin divided by its net income. Since East Company has proportionately higher fixed costs, it will have a proportionately higher total contribution margin. Therefore, East Company's operating leverage factor will be higher.

Increasing returns are the natural outcome of decreasing output costs and have external and internal factors which influence economies of scale (Ossa, n.d.). Economies of scale are influenced externally by industry size, rather than firm size and include