Which of the following is a common mistake managers make?
A. Treating implicit opportunity costs as part of the total costs of using resources.
B. Maximizing the value of the firm instead of maximizing the firm's profits.
C. Using marginal analysis to make output decisions.
D. Reducing price to increase the firm's share of total market sales.
E. all of the above.
Answer: D
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The market interest rate
a. represents the opportunity cost of investing with borrowed funds b. has no impact on the firm's investment decision if the firm uses borrowed funds c. represents the opportunity cost of investing with savings d. has no impact on the firm's investment decision if the firm uses savings e. represents the opportunity cost of investing with either borrowed funds or savings
(Exhibit: IS-LM Fiscal Policy) Based on the graph, starting from equilibrium at interest rate r1 and income Y1, an increase in government spending would generate the new equilibrium combination of interest rate and income:
What will be an ideal response?