A Competitive, Profit-Maximizing Firm Uses Two Inputs a and B

question 28

Multiple Choice

A competitive, profit-maximizing firm uses two inputs a and b.Its production function is F(a, b) = a1/2 +a1/2.Its output sells for $5 per unit.The price of input a is $1 per unit.If the price of output rises to $6 per unit but factor prices do not change.

• A)it will increase its purchases of factor a by 11/4 units.
• B)it will increase its purchases of factor a by 9/4 units.
• C)it will increase its purchases of factor a by 3/4 units.
• D)we need to know the price of factor b to be able to determine the change in demand for a.
• E)None of the above.

Evaluate a company's efficiency through accounts receivable turnover, inventory turnover, and the operating cycle.

Assess a company's profitability using ratios such as net profit margin, gross margin percentage, return on total assets, and return on equity.

Determine a company's leverage and risk through debt-to-equity ratio, equity multiplier, and times interest earned ratio.

Understand the implications of earnings per share, price-earnings ratio, dividend payout ratio, and dividend yield ratio.

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Definitions:

Eschar

A dry, dark scab or falling away of dead skin, typically resulting from a burn or by the action of certain skin diseases.

Partial-thickness Burn

A type of burn that affects the first and second layers of skin, causing pain, swelling, and blistering, but not as severe as a full-thickness burn.

Dermis

The thick layer of living tissue below the epidermis that forms the true skin, containing sweat glands, hair follicles, and other structures.

Epidermis

The outermost layer of the skin that provides a waterproof barrier and creates our skin tone.