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Cards In This Set
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What is the difference between business profit and economic profit?
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Business profit = TR-TC (Explicit)
Economic Profit = TR-TC (Explicit & Implicit) |
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What is the difference between free market economy and centralized economy?
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Free Market- an economic system in which prices and wages are determined by unrestricted competition between businesses, without government regulation or fear of monopolies.
Centralized Economy- decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a public body such as a government agency. |
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What is the difference between managers who seek for optimal results as opposed to satisfactory?
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Actions that don’t benefit stockholders
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Why is government regulation important?
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Government uses scarce resources
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What is unique about Warren Buffet?
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Consistent Earnings Growth
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Should we maximize short run profit or long run?
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Long Run
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What is value maximization as opposed to profit maximization?
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Value max= Sum of TR-TC/(1+i)n
Profit max=MR=MC |
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What is a typical annual rate of return on invested capital?
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10%
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What is the condition to maximize revenue?
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Revenue=0
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Given price function of P=1,000-4Q, how do you find marginal revenue?
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MR=1000-8Q
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When does average cost minimization occur?
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MC=AC
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What is the Slope of a straight line from the origin to the total profit curve?
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Average Profit
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What is marginal profit?
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The change in total profit following a 1 unit change in output
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Explain the relationship between marginal profit and average profit
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A Profit per unit rises when greater than average profit unit
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Explain the relationship between marginal cost and average cost.
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Marginal cost rises when marginal cost is less than average cost
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