Question

21. In the U.S. many firms that publicly trade stocks are under tremendous pressure each quarter (every three months) to report higher profits, sales, and/or growth. If they can’t, then their stock price often will get hit hard and go down as investors dump those stocks. Question: What kind of executive decision making will this type of business environment encourage?

1. Executives will be encouraged to make good long-run cost choices like investing in new machinery and retraining workers to give them better skills.

2. Executives will be encouraged to make hasty short-run cost choices like laying off people & outsourcing their operations to countries that have lower wages and regulations.  

3. Executives will be discouraged from dealing with any cost issues until the stock prices go back up

4. Executives will be discouraged from dealing with managing their MC = MR.

22. 3D printers are a new technology. Basically, the user simply pours powder into the machine, then the software will tell the machine what to produce. Some 3D printers can make simple things like small food containers, while the more sophisticated ones can even make human artificial ears and hearts! Question: Once these 3D printers become so common that almost everyone will own one (perhaps 15 years from now), then which cost factor(s) listed below should go down?  

1. Labor costs such as wages  

2. Transportation costs

3. The Long-run Average Total Cost curve should shift down for many industries

4. All of the above are correct responses

23. Do most government agencies actively use the formula MC =MR?

A) Yes – They routinely do this to reduce cost and maximize tax revenues

B) Yes – But they normally concentrate on the MC because tax revenues are already steady.

C) No – Government does not use this formula and there is no formula or graph in modern

            day economics that can explain the logic of how government operates.
D) All of the responses above are wrong.

24. The clever politicians in Sacramento, California have started a new ballot proposal that will probably be voted on in the 2020 election. They want to raise property taxes on any CA commercial property such as office buildings, warehouses, and even wineries that have a value of $3 million or more. There is no question that this will cost small, medium, and large businesses much more. The Sacramento politicians are claiming that the money will be used to help K-12 schools but history shows that new money from higher taxes often gets siphoned off into something else. Yet many voters fall for these political tricks every election.

Question: How will California businesses react if this new property tax law is approved by the voters in 2020?

   

1. Many will try to move their facilities out of the state and in the process kill CA jobs.

2. Those with inelastic demand curves will raise their prices.

3. Many will try to sell their commercial properties to escape this taxation, but if too many properties are put onto the market (increase in supply), then the values might go down.    

4. All four of these scenarios listed above will probably happen with the passage of this major property tax increase.

25. On a short-run cost curve graph, if the market price, the Marginal Cost, and Average Total Cost curve all intersected at one point, then what would that mean?

1. The business is making a high level of economic profit.

2. The business has done an excellent job at cutting costs.

3. The business is breaking even and the economic profit is either zero or very low.

4. The business is ready for bankruptcy and we can definitely say there is no hope
   for this firm to turn things around in order to become more profitable.

Answer 1