n prospect theory, loss aversion and the assumption that people aggregate the sunk and current cost in one large loss is sufficient for explaining the sunk-cost fallacy. True or False
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- Indicate whether each of the following is anexplicit cost or an implicit cost.a. A manager’s salaryb. Payments to Dell for computersc. A salary forgone by the owner of a firm byoperating his or her own companyd. Interest forgone on a loan an owner makes tohis or her own companye. Medical insurance payments a companymakes for its employeesf. Income forgone while going to colleExtra The problem of principle agent can be reduced if it is possible to pay the worker a) weekly salary b) a wage based on the number of units produced c) an hourly wage d) out of retained earnings The law of diminishing returns results in a) an eventually rising marginal product curve b) a total product curve that eventually increases at a decreasing rate c) an eventually failing marginal cost curve d) a total product curve that rises indefinitely Which of the following is an example of the prinicipal/agent problem? a) A consumer buys a defective good because she does not know the quality of the good b) A sports agent invests money for a client and the company he invests in goes busy so the athlete doesnt get back the principal on his investment c) a worker shirks off while his boss is on vacation d) a company continues to produce despite losses because of fixed costsModified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines.
- Which of the following is true of sunk costs? It is a type of opportunity cost. It is a type of implicit cost. It should be ignored when making decisions. It includes annual costs like payroll, insurance expenses, etc.Explain why optimal marks- up varyGive few examples of "Sunk Cost" from your real-life experience.
- Indicate whether each of the following is an explicit cost or an implicitcost.a. A manager's salaryb. Payments to Dell for computersc. A salary forgone by the owner of a firm by operating his or herown companyd. Interest forgone on a loan an owner makes to his or her owncompanye. Medical insurance payments a company makes for its employeesf. Income forgone while going to collegePLEASE ANSWER THE FOLLOWING QUESTIONS: Q 1. The hiring of labour with fixed factor of production under short run after sometimes leads to increase in cost only. What’s your opinion at what stage of production producer should make addition in labour, identify which concept in economics explains the whole situation, justify your answer why it happens with the help of table and diagrams. Q 2. Average cost curves (except for average fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Do you think that average and marginal cost curves have the same general shape and why? Q3. The quantity demanded or product X has increased by 10% in response to a 15% increase in price of product Y. Calculate the cross elasticity of demand and tell whether the product pair is (a) Voltas AC and Videocon AC or (b) Cars and Petrol and what you suggest for strategies the…what are the two most significant issues that occur for the current marginalist theory of the company when the firm employs constant-returns-to-scale (CRS) technology? Please answer correctly.
- Is the asset's cost basis used in calculating the gain or loss to the firm?Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines. Diminishing returns, or decreasing marginal product, imply diminishing marginal cost. At the output level where MR = MC, if the corresponding P is above AVC but below ATC, the loss-minimizing move is to shut down or stop production. A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either. Zero economic profit implies zero accounting profit. In the long run, if price is below average total cost, then it pays to just shut down. The shapes of long-run cost curves follow directly from the assumption of a fixed…Functions of several variables and partial differentiation, Unconstrained Optimization with two independent variables, Stationary points, Sufficient conditions for optimisation and saddle point Question 2: A firm has the production function Q=f(L,K)=100L0.5K0.5, where L is labour and K is capital. The wage rate is $5 per hour and the rental price of capital is $4 per hour and the price of the good is $1. 1. Find the marginal product (MP) of labour and capital (that is, fL,fK ) 2. Show that there are diminishing marginal productivities, that is, fLL<0,fKK<0 3. Find the cost function. 4. Find the amount of labour and capital the firm should hire to maximize profits. [Hint: write the profit function in terms of L and K and then take partial derivatives. Use the concepts involved in Question 1 above to determine the profit is maximised.] (Question 1: Let f(x,y)=2x2+x2y+y3+12y2. Find the stationary points and for each stationary point determine whether it is a maximum, minimum,…
