Notes, summaries, assignments, exams, and problems for Economy

Multiple Choice Questions

1. The optimal use of a variable input occurs when the marginal revenue product equals marginal factor cost.

2. In which range of market share is a firm typically considered dominant? 30% to 85%

3. Which of the following is usually not a source of sustainable competitive advantage? A firm may have a large marketing budget.

4. Before launching a new type of product, what should a company do? Sensitivity analysis

5. The type of economic indicator used to predict future economic activity is a leading indicator.

6. Which of the following is not part of the four-step forecasting process? Developing internal controls

7. In which model is the new forecast equal to the old forecast plus some proportion of the last observed forecast error? First-order

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4. Sell Products Online

E-commerce platforms like Amazon and eBay make it easy to sell products online. You can start with little overhead and focus on minimizing your exposure... Continue reading "10 Easy Ways to Make Extra Money on the Side" »

Understanding Economic Activities

3S: A group of economic activities that consist of offering services.

• Public services (offered by the state): Healthcare, Education
• Distribution services (change the position of something): Transport, Telecommunications, Trade
• Business services (company to company): Repairs, Installations, Professional services
• Customer services (company to people): Repairs, Installations, Personal services, Trade, Travels, Tourism

Quaternary Sector: A group of economic activities classified within the 3S. Commonly, services require a lot of training and formation. Includes mostly scientific and technological research, such as Biomedicine.

TransNet: A combination of nodes and pathways.

• Nodes (N): Points of departure and arrival for

Leases

• Operating lease: a shorter-term lease under which the lessor is responsible for insurance, taxes, and upkeep, cancelable by lessee on short notice.
• Financial lease: a longer-term, fully amortized lease which the lessee is responsible for maintenance, taxes, and insurance. Not cancelable without penalty.
• Leveraged lease: a tax-oriented lease in which the lessor borrows a substantial portion of the purchase price of the leased asset on a nonrecourse basis.
• Sale and leaseback: occurs when a company sells an asset it owns to another party and simultaneously leases it back.
• Capital lease: transfer ownership to lessee by the end of the term, lesses purchase the asset at a price below fair market value when lease expires, >75% economic life,

The Foundation of Segregation in Levittown

Originally, the Levitts’ racist policy was enshrined in the lease itself, which stipulated that “the tenant agrees not to permit the premises to be used or occupied by any person other than members of the Caucasian race.”

Although that provision was later struck down in court as unconstitutional, Bill Levitt continued to enforce racial homogeneity in practice by rejecting prospective Black buyers.

Activism and the NAACP Lawsuit

Activist groups across the U.S., and even individuals within Levittown who united under the Committee to End Discrimination in Levittown, protested the Levitts’ racist policies.

In 1955, the National Association for the Advancement of Colored People (NAACP) sued federal mortgage... Continue reading "Suburban Segregation: The Battle for Racial Equality in Levittown" »

The Liquidity Preference Theory of Interest

The Liquidity Preference Theory, presented by J.M. Keynes in 1936, is a highly regarded theory. According to Keynes, the rate of interest is a purely monetary phenomenon. It represents the reward for relinquishing liquidity for a specific period.

Thus, similar to the price of a commodity, the rate of interest is determined by the demand for and the supply of money. Therefore, it is necessary to introduce the concepts of demand for money and supply of money.

The supply of money refers to the stock of money in circulation and is a fixed quantity at a particular point in time. It is the sum of currency (notes and coins) and commercial bank deposits. It remains fixed in the short run because it is determined... Continue reading "Liquidity Preference Theory: Keynes' Interest Rate Model" »

CH:3 Term: Balance Sheet: The balance sheet is a snapshot of the firm’s assets and liabilities at a given point in time. Assets are usually listed in descending order of liquidity, or the ability to convert to cash. While the assets depict what is owned, liabilities and equity represent what is owed or who provided the funding for the assets. Balance Sheet Identity: {Assets = Liabilities + Stockholders’ Equity}

Net Working Capital: The difference between current assets and current liabilities. It is positive when the cash that will be received over the next 12 months exceeds the cash that will be paid out. Usually, it is positive in a healthy firm.

Market Value vs. Book Value: The balance sheet provides the book value of the assets, liabilities,... Continue reading "Understanding Balance Sheets and Income Statements in Finance" »

Effective Segmentation

MEASURABLE: The size, purchasing power, and profiles of the segments can be measured.

ACCESSIBLE: The market segments can be effectively reached and served.

SUBSTANTIAL: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.

DIFFERENTIABLE: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.

ACTIONABLE: Effective programs can be designed for attracting and serving the segments.

Important:

The difference delivers a highly valued benefit to target buyers.

Differences to Promote

DISTINCTIVE: Competitors do not offer the difference, or the company can... Continue reading "Principles of Marketing" »

1. What are the differences between micro and macroeconomics?

Microeconomics is concerned with:

• Supply and demand in individual markets
• Individual consumer behavior. E.g., Consumer choice theory

Macroeconomics is concerned with:

• Monetary/fiscal policy, e.g., what effect do interest rates have on the whole economy?
• International trade and globalization

2. Briefly explain how countries gain from international trade.

The comparative advantage provided by differing opportunity costs of various goods in two countries allows both to benefit from mutual trade. This occurs if they specialize in producing (and exporting) those goods that have relatively low opportunity costs compared to another country.

E.g., Canada exports minerals to Spain, and Spain exports... Continue reading "Microeconomics vs. Macroeconomics, International Trade, and Key Economic Concepts" »

Sizing Capacity Cushions

Capacity cushion is the amount of reserve capacity a process uses to handle sudden increases in demand or temporary losses of production capacity.

Capacity cushion = 100% - average utilization rate (%)

Timing and Sizing Expansion

Expansionist Strategy: Timing and sizing of expansion are related if demand is increasing and the time between increments increase

Wait-and-See Strategy: The conservative wait strategy is to expand in smaller increments, such as renovating existing facilities.

Combination of Strategies

Project

An interrelated set of activities with a definite starting and ending point, which results in a unique outcome from a specific allocation of resources.

The Three Main Goals

Complete the project on time, Do not... Continue reading "Project Management Strategies and Techniques" »