Answer:
A U.S.-based MNC has just established a subsidiary in Algeria. Shortly after the plant was built, the MNC determines that its exchange rate forecasts, which had previously indicated a slight appreciation in the Algerian dinar, were probably false. Instead of a slight appreciation, the MNC now expects that the dinar will depreciate substantially due to political turmoil in Algeria. This new development would likely cause the MNC to reduce its estimate of the previously computed net present value.
Explanation:
The difference between the present value of cash inflows and the present value of cash outflows over a period is referred to as the net present value (NPV).
NPV is used In capital budgeting and investment planning, NPV is used to analyze the profitability of a projected investment or project.
The company should therefore reduce the estimates because it will increase the discount rate which would, in turn, impact the net present value (NPV) and drag it down to lower value.
Answer:
This new development would likely cause the MNC to LOWER its estimate of the previously computed net present value.
Explanation:
All companies making foreign direct investments are face currency exchange risks. In this case, the Algerian dinar was expected to appreciate against the US dollar, which meant that nay calculations regarding the future cash flows could be carried out considering a strong dinar.
But now, due to internal turmoil the dinar is expected to depreciate heavily and that will reduce the future cash flows and negatively affect the NVP.
Imagine that a product has an initial investment of $1 million, and you needed 10 dinars to purchase $1. Then the future cash flows for the following 5 years were 3 million dinars per year, and the company required a 10% rate of return.
Since the company is based in the US it had to calculate the cash flows in US dollars, each cash flow = $300,000.
But if the dinar depreciates 15% against the US dollar, then each cash flow will equal $255,000.
We can use an excel spreadsheet and the NPV function to calculate the NPVs for both estimated and actual scenarios.
b. provide open opportunity
c. meet government regulations.
d. encourage innovation
The market failures can result in overproduction, underproduction, misallocation of resources, and negative externalities (such as pollution) address these failures and promote economic efficiency and societal well-being, governments may intervene through policies and regulations, such as taxes, subsidies, antitrust laws, and public provision of certain goods and services.
**Market failure occurs when a free market is unable to:**
**a. distribute resources efficiently.**
Explanation:
Market failure refers to a situation in which the free market system, left to its own devices without government intervention, fails to allocate resources efficiently.
Here's a breakdown of the options:
- **a. Distribute resources efficiently:** This is the correct statement. Market failure occurs when resources, such as goods and services, are not allocated in a way that maximizes societal welfare or efficiency.
Examples of market failure include externalities (positive or negative), public goods, information asymmetry, and monopolies, all of which can lead to inefficient resource allocation.
- **b. Provide open opportunity:** While providing open opportunity is an important aspect of a free market system, market failure is specifically related to inefficiencies in resource allocation, not necessarily a lack of opportunity.
- **c. Meet government regulations:** Market failure can occur in the presence of government regulations or in their absence.
Government regulations are often put in place to address market failures or prevent them, but market failures can still occur despite regulations.
- **d. Encourage innovation:** The role of market failure is not directly related to innovation.
However, innovation can be influenced by market conditions, and market failures may hinder or distort incentives for innovation.
For similar questions on Market failures
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In economics, market failure is a situation in which the allocation of goods and services by a free market is not efficient, often it leads to a net social welfare loss. (Wikipedia definition)
The answer is A. Distribute resources efficiently.
c. a settlement will be more costly for the agency.
d. a settlement is less costly than litigation.
Answer:
d. a settlement is less costly than litigation.
Explanation:
Able Baker Co clearly did not consider the SEC securities regulations when it sold shares. Since they are at a disadvantage it will be better for them to settle than go through the litigation.
Settlements are quicker to resolve and less complicated than litigation. Legal fees during a drawn out court case and likelihood of paying judgement sum makes litigation more expensive.
Therefore it is cheaper for ABC to settle.
b. how much to supply, how to produce output, and how much of each input to demand
c. how much to demand, how to produce input, and how much of each output to demand
d. how much to supply, how to market supplied goods, and how to advertise supplied goods
Fixed-cost pricing
Incremental analysis
Breakeven analysis
Ratio analysis
Question: Sharice just accepted a job offer from an intriguing company. It encourages video game play on breaks to build camaraderie among co-workers, happy hours to get to know team members, and emphasizes "giving back" through community service once a month in their neighborhood. Based on this information, and what you know from this chapter, you would conclude that Sharice is employed ___________.
a. at a great workplace
b. at a positive institution
c. in her career
d. at a job
Answer: At a positive institution.