Your Boss Is Trying to Decide Whether to Buy Out

question 248

True/False

Your boss is trying to decide whether to buy out a rival company and asks for your advice.The boss says that she will buy the rival if there is evidence that the rival is operating inefficiently.(Your company will then improve its efficiency and increase profits. )She will not buy the rival 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 is 4,the marginal product of the last worker hired is 10,the wage is $20,and the price of output is $5.Based on this information,you should tell your boss to buy the rival.

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Definitions:

Accounting Practices

The systematic process of recording, reporting, and analyzing financial transactions of a business, according to established conventions, principles, and standards.

Financial Accounting Standards Board

An independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the United States.

Certified Public Accountants

Licensed professionals who offer financial services such as auditing, tax preparation, and financial planning, and must adhere to professional standards.

Accounting Principles

The rules and guidelines that companies must follow when reporting financial data and accounting information.