Your Boss Is Trying to Decide Whether to Buy Out

question 36

True/False

Your boss is trying to decide whether to buy out a rival company and asks for your advice.The boss says that the rival will be bought if there is evidence that the rival is operating inefficiently.(Your company will then improve its efficiency and increase profits.) The rival will not be bought if there is evidence that the rival is already operating efficiently.Your boss gives you the following data on the rival's operations: The average product of labor equals 4, the marginal product of labor equals 10, the wage equals $20, and the price of output equals $5.Based on this information, you should tell your boss to buy the rival.False

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Definitions:

APC

Average Propensity to Consume, which measures the fraction of income spent on consumption out of the total income.

Disposable Income

Financial endowment to households for the purpose of spending and saving after mandatory tax deductions.

Consumption

The use of goods and services by households. It represents the end-use of products and is a primary component of aggregate demand in an economy.

Disposable Income

The allocation of funds households have to spend and save, after income tax adjustments.