Question

1 suppose there are two countries of equal size, say liberia and Gambia, that both produce and consume cocoa and coffee. the productive capacities and efficiencies of the countries are such that if both countries devoted all their resources to cocoa production, output would be as follows

liberia: 400 tonnes Gambia: 1600 tonnes

if all the resources of the countries were allocated to production of coffee, output would be

liberia: 400 tonnes. Gambia: 800 tonnes

statement

Liberia has comparative advantage over and above Gambia in the production of both cocoa and coffee

requirement

you are required to determine whether the statement is TRUE OR FALSE and advance appropriate reasons

1b) discus with exeception of profit maximisation amd cost minimisation, 6 six objectives of firms

1c) state six (6) contents of partnership deed

Answer 1

Solution

1.A country is said to have a Comparative advantage over an other country in a product if it's opportunity cost of producing that good is less when compared to the opportunity cost of producing the same good by the other country.

Here,Liberia has comparative advantage over and above Gambia in the production of COFFEE because Liberia has to sacrifice 1 tonne of COCOA in order to produce 1 tonne of COFFEE whereas Gambia needs sacrifice 2 tonnes of COCOA in order to produce the 1 tonne of COFFEE

Gambia has comparative advantage over and above Liberia in the production of COCOA because Gambia has to sacrifice 0.5 tonne of COFFEE in order to produce 1 tonne of COCOA whereas Liberia needs sacrifice 1 tonne of COFFEE in order to produce 1 tonne of COCOA

1.b)The six obejectives of firms apart from Profit maximization and cost minimization is :

1.Sales Maximization - The focus should be on the top line. Because it is the starting head in the profit and loss statement and is also indicates the relevance of the products' demand with the target consumers.

2.Reaching the right consumers - It is very important as they cater to the needs of particular needs of the consumers

3.Stay ahead in competition - Companies should build strategy to stay ahead in competition so that they are not crushed / come in control of their competitors.

4.Sustainable Growth - The companies should plan to stay sustainable because they are impacting the lives of huge number of people and resources around them.

5.Productivity of people and resources - Example - The " TATA" company makes sure in the process of achieving one of it's goal of profit maximization ,the other important goals are not compromised like this one i.e., improvement in the productivity of people and resources.This if achieved will ultimately lead to employee retention and employee satisfaction which will help in cost minimization and also flow of new ideas in to the company.

6.Mission ,Vision and Core values - Example : The company named "TATA" is known in the corporate world for it's corporate ethics,work culture.

1.c) 1.Name of the Firm and Names of the partners

2.Nature of the business and Place of the business

3.Amount of capital to be contributed by each of the partners

4.Profit sharing ratios between the partners

5.Loans and advances taken from partners and interest charged on those

6.Drawings allowed by the partners and rate of interest charged thereon

7.Amount of salary and commission if any payable to the partners

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