A market with many independent firms, low barriers to entry, and product differentiation is best classified as:
Answer(s): B
Choice "b" is correct. A market with many independent firms, low barriers to entry, and product differentiation is best classified as monopolistic competition. There are few barriers to entry and firms exert some influence over price in such a market. Best examples are brand name consumer products.Choice "a" is incorrect. A natural monopoly exists when economic and technical conditions permit only one efficient supplier.Choice "c" is incorrect. The presence of only one company indicates a monopoly; the presence of a few companies would indicate an oligopoly.Choice "d" is incorrect. Market conditions characterizing pure competition include homogeneous, not differentiated, products.
Which tool would most likely be used to determine the best course of action under conditions of uncertainty?
Choice "b" is correct. Probability and expected value formulate quantitative models to address the issue of appropriate course of action in an environment of uncertainty. The expected value is a weighted average of all values and variables. The course of action with the highest expected monetary value should be selected.Choice "a" is incorrect. Cost-volume profit analysis is a method used to evaluate operating decisions.Choice "c" is incorrect. PERT is a technique used in project management that focuses on the time required to complete each step in a project. It allows a project manager to monitor a project’s progress and identify potential bottlenecks or delays that will postpone the completion date.Choice "d" is incorrect. The scattergraph method is used in statistical analysis to plot relationships between variables to determine a line function that best describes those relationships.
In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision?
Answer(s): A
Choice "a" is correct. Absorption costs are not relevant in situations when management must decide on accepting or rejecting one-time-only special orders, and where there is sufficient idle capacity. All of the following costs are relevant in such situations:B). Direct costsC). Variable costsD). Incremental costs
Dough Distributors has decided to increase its daily muffin purchases by 100 boxes. A box of muffins costs $2 and sells for $3 through regular stores. Any boxes not sold through regular stores are sold through Dough's thrift store for $1. Dough assigns the following probabilities to selling additional boxes:What is the expected value of Dough's decision to buy 100 additional boxes of muffins?
Answer(s): C
Choice "c" is correct. The expected value of a decision is computed by multiplying the probability of each outcome by its value or profit. Each outcome is then added.There is a 60% probability that Dough will sell 60 of the 100 additional boxes through regular stores and that means that Dough would have a 60% chance of making a profit of $20 (60 boxes at a $1 profit ($3 - $2) sold through the regular stores and 40 boxes at a $1 loss ($1 - $2) sold through the thrift stores).There is a 40% probability that Dough will have a profit of $40 (100 boxes at a $1 profit through the regular store sales and zero boxes sold at a loss through the thrift store).Choice "a" is incorrect. The expected value of a decision is computed by multiplying the probability of each outcome by its value or profit.Choice "b" is incorrect. The expected value of a decision is computed by multiplying the probability of each outcome by its value or profit.Choice "d" is incorrect. The expected value of a decision is computed by multiplying the probability of each outcome by its value or profit.
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