One economic question is deciding how to produce. That means businesses need to make decisions on...

One economic question is deciding how to produce. That means businesses need to make decisions on what types of production systems and what types of inputs to use. The isoquant/isocost model allows us to conceptualize the answer(s) a business might have for the question of how to produce. The relative price inputs plays a role in answering the question of how to produce.

There may appear to be times when a firm does not appear to adjust input use to changes in relative prices of inputs. Explain why this might be the case.

Expert Solution

Pricing decisions taken by the firms usually involve analysis regarding marginal contributions to revenues and costs. The firms achieve their aim of profit maximization by increasing their production until marginal revenue is equal to marginal cost and then the price which is determined by the demand curve is charged.

A marginally diminishing rate of production return per unit produced can be seen after the adjustments to inputs driving production are made. This is known as diminishing marginal productivity.

As per the law of diminishing marginal productivity, the changes to inputs will have a marginally positive effect on outputs. Hence, each additional unit produced will result in a marginally smaller production return than the unit before it.

Diminishing marginal productivity can lead to a loss of profit after crossing the threshold. If this occur, there will not be any cost improvement per unit with the increase in production. As a result, there is no return gained for units produced and losses can increase as more units are produced.

Thus, a firm does not appear to adjust input use to changes in relative prices of inputs.

Rahul Sunny answered 8 months ago

Business managers need to know how their decisions will affect the profitability of their businesses. Hypothesis...

Business managers need to know how their decisions will affect the profitability of their businesses. Hypothesis testing allows managers to examine causes and effects before making a crucial management decision. Business managers may use the results of a hypothesis test when making management decisions. Describe how to formulate and test hypothesis about a population mean and/or a population in a business setting. Explain the types of errors that may be possible when conducting a hypothesis test in business application. Explain...

Question A.2 One of the most important decisions a person will make in setting up a...

Question A.2 One of the most important decisions a person will make in setting up a business is to determine the right business structure that fits the purpose of the business. Enumerate and discuss the various business structures available to individuals setting up a business in Australia and analyse the advantages and disadvantages of using each business structure.

Carefully reflect on what it means to be ‘informed’ as you make decisions and judgments. In...

Carefully reflect on what it means to be ‘informed’ as you make decisions and judgments. In addition, what is your perspective on the role of, or need for, authorities in terms of making good decisions (before and after our reading)? For example, if there are medical concerns, you would consult with a doctor. If there are concerns over the environment, you would consult with an environmental scientist or other expert in the field.What about morality? What about becoming the kind...

Explain how economic forces influence decisions such as purchases of goods and services you make a...

Explain how economic forces influence decisions such as purchases of goods and services you make a as consumer ? (please anawer has to be at least in 3 paraghraphs thanks)

Question five: Decisions makers need information that is useful in making rational decisions, the decisions makers...

Question five: Decisions makers need information that is useful in making rational decisions, the decisions makers are different and need different information, so every groups of users need different information, but accounting cant adopts the idea of producing a series of special- purpose report, instead that FASB and IAS adopt uniform report which contain information has several characteristics such as understandability, benefits costs, relevance and reliability, explain?

Economic systems across the globe are unique, and businesses need to adapt to fit in to...

Economic systems across the globe are unique, and businesses need to adapt to fit in to the economic system in which they operate. Consider the types of economic systems: planned, market, and mixed. How are businesses that operate internationally affected by each of these three economic systems? How might this be different for a large business versus a small business?

Question 3: Accounting & Finance (40 marks) Capital investment decisions look at how businesses should assess...

Question 3: Accounting & Finance Capital investment decisions look at how businesses should assess proposed investments in new plant, machinery, buildings and other long-term assets. The essential feature of investment decisions is time. There are different approaches/methods used by businesses to evaluate investment opportunities such as accounting rate of return, payback period, net present value, and internal rate of return. Suppose that you are an analyst for a company considering investments in three projects with the same class of risk...

Businesses need to make a profit. Profit provides capital for expansion and a return on their...

Businesses need to make a profit. Profit provides capital for expansion and a return on their investment to the owners of the business. Do businesses also need to generate cash? Can a business be profitable and yet run out of cash? What is characteristic of a business that generates lots of profits but doesn't have enough cash to operate.

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means:...

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers seek to get the best value for money from the goods they buy. Select one: True False “A person earns a wage per hour working at a fast-food restaurant”. This transaction involves a. The market for factors of production b. The financial market c. The market for goods and services Deadweight loss is the reduction in consumer surplus that results from a...

Businesses are always seeking ways to make sound financial business decisions. Whether a manager needs to...

Businesses are always seeking ways to make sound financial business decisions. Whether a manager needs to determine if a product can be produced in-house or outsourced is just one example of the types of financial decisions businesses are often faced with that require careful analysis. In your managerial accounting class you learned about incremental analysis and how it can be used to make these types of decisions. To test your understanding of incremental analysis, your professor has asked you to...

Question