Concepts_-_ECP

Concepts_-_ECP - Multiple Plants and Joint If a firm has...

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Multiple Plants and Joint… If a firm has two plants and all fixed costs are already sunk, the firm should produce only in the plant with the lower fixed cost. ----- False If combining production of two different goods reduces marginal costs, cost complementarities exist. ------ True If a firm has two plants and all fixed costs are already sunk, the firm should produce only in the plant with the lower fixed cost. False If combining production of two different goods reduces marginal costs, more should be produced to maximize profits. TRUE. Suppose two plants are available for production. In one, all fixed costs are sunk. In the other, they are not. When producing a very small amount, a firm should first produce only in the plant where costs are not yet sunk. False If combining production of two different goods reduces total fixed costs, more should be produced to maximize profits. False Finance Stuff. To find the future value, multiply the initial principal by one plus the interest rate raised to a power corresponding to the number of compounding periods. ------ True “Expected value” may be thought of as the average that would emerge if a particular gamble was taken a large number of times. ------ True Someone who prefers \$55,000 for certain to a gamble with a 60% chance at \$100,000 and a 40% chance at \$0 is risk averse . ----- True

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Assuming risk neutrality, the value of a firm can be modeled as the expected present value of profits. ----- True A dollar tomorrow is worth more than one dollar today because of inflation. False “Expected value” is calculated by adding each possible outcome and dividing by the number of outcomes. False Risk neutrality refers to the tendency for risk to neutralize financial gains.
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