A firm has current assets that could be sold for their book value of $32 million. The book value of its fixed assets is $70 million, but they could be sold for $100 million today. The firm has total debt with a book value of $50 million, but interest rate declines have caused the market value of the debt to increase to $60 million. What is the ratio of the market value of equity to its book value?

Answers

Answer 1

Answer:

Market value of equity / book value of equity   72/52 = 1.38

The company is a little overvalued.

It means that the assets they have because the rate is declining, have a higher yield than the market, that's why their market value increase, therefore the investor will pay more to acquire the company or shares of the company because their profits will be above the common of the industry.

Explanation:

concept                book value       market value          diference

current assets     32 millons          32 millons                        0

long term assets 70 millons         100 millons     +30,000,000

liabilities               50 millons         60 millons        -10,000,000

TOTALS           70+32  - 50= 52    32+100-60=72     +20,000,000

Market value of equity / book value of equity   72/52 = 1.38

This ratio tries to determinate if a company is being undervalued or overvalued.

It is usually good to help a third party at the task of  determinate whether or not a company's market value is suffering from speculation (when extremely overvalued)

When the ratio is below 1 It will mean that it is undervalued. The manager may interpret this that third parties see the company cheap while trading.

When it is above 1, it is overvalued, this means an investor will pay more for a portion of the company than it really has.  This can lead to thinking that forecast profit is rising and because of that the investors are paying a premium. But if it gets really high, then it is saying that the company is subject to speculation and the price bubble may explode anytime.


Related Questions

White truffles are a very prized and rare edible fungus that grow naturally in the countryside near Alba, Italy. Suppose that it costs $200 per day to search for white truffles. On an average day, the total number of white truffles (T) found in Alba is T = 20x − x 2 , where x is the number of people searching for white truffles on that day. White Truffles can be sold for $100 each. If there is no regulation, how many more people will be searching for white truffles than the socially optimal number?

Answers

Explanation: Take (t), if white truffles is $100 to sell, as x is the amount of people searching for truffles. you divide 100 by 20, that leaves, 5, x-x2 is x, so the answer would be, x equals 5.

Final answer:

If there is no regulation, any number of people searching for white truffles will be more than the socially optimal number of 0. This analysis is based on the private cost of searching for truffles and the marginal cost of each additional person searching.

Explanation:

To determine how many more people will be searching for white truffles than the socially optimal number, we need to compare the individual's private cost with the social cost. The individual's private cost is $200 per day, while the social cost includes the private cost plus the cost to society from each additional person searching. The socially optimal number is the point where the social cost equals the private cost.

To find the socially optimal number, we need to determine the marginal cost of each additional person searching. The marginal cost is the change in the total cost divided by the change in the number of people searching. The equation for the total number of truffles found is T = 20x - x^2, so the marginal cost is the derivative of this equation, which is dT/dx = 20 - 2x.

Setting the marginal cost equal to the private cost of $200, we have 20 - 2x = 200. Solving for x, we get x = -90. Since we can't have a negative number of people searching, the socially optimal number is 0. This means that no one should be searching for truffles.

Therefore, if there is no regulation, any number of people searching for truffles will be more than the socially optimal number. However, it's important to note that this analysis assumes that the social cost of an additional person searching is constant and does not take into account any potential benefits or externalities.

According to the _____ ethics tradition, people act out of habit than out of deliberations. a. Kantianb. virtuec. utilitariand. principle-based

Answers

Answer:

The answer is virtue ethics.

Explanation:

Virtue ethics were conceptualized and popularized by Socrates, broadly describing ethical theories that emphasize what are considered as good morals and characters. Because of its focus on good character, it is generally agreed that how a person usually behaves – thus, the individual’s habit – illustrates the type of individual they are.  

Determine whether or not traditional financial and management evaluation ratios such as return on assets (ROA), return on equity (ROE), economic value added (EVA), and market value added (MVA) apply to nonprofits. Support your response with at least two (2) examples of these instances.

Answers

• Propose two applications of knowledge that you have learned in this course that you could apply to your current or future career.

• Rate the three most important concepts that you learned in this course in order of importance (one being the most important). Provide a rationale for your ratings.

Which of the following are good opportunities to use clustering? (Select all that apply) a. An airline would like to use customer demographic data to predict which customers are likely to “no-show” for its flights, i.e., buy a ticket but not actually show up to the airport. b. After running a survey asking customers what services they would like to see, an insurance company wants to design 4-5 personalized products to market to new customers. c. A marketing consulting firm would like to segment consumers into a small number of groups to help its clients understand consumer needs. d. A university would like to identify small number of metrics to track to ensure they are progressing towards their strategic goals.

Answers

Answer: the correct answer is c. A marketing consulting firm would like to segment consumers into a small number of groups to help its clients understand consumer needs.

Explanation:

Cluster analysis is an exploratory analysis that tries to identify structures within the data.  Cluster analysis is also called segmentation analysis or taxonomy analysis.  More specifically, it tries to identify homogenous groups of cases if the grouping is not previously known.

Which of the following situations suggests the acceptance of an investment​ proposal? A. The cash inflows are lesser than the initial investment. B. The IRR is lower than the hurdle rate. C. The investment will have a residual value. D. The present value of the net cash inflows exceeds the initial investment.

Answers

Hello there!

Your question asks which situation suggests the acceptance of an investment proposal.

Answer: D). The present value of the net cash inflows exceeds the initial investment

The reason why "D). The present value of the net cash inflows exceeds the initial investment" would be  the correct answer is because this would show investors that they should invest in a group or company.

An investment proposal is a way of "motivating" / "attract" / or "persuade" investors to invest in a company. When investors look for businesses to invest in, they want to see that the business will make more than what they invested in. And answer choice "D" clearly shows that.

When it says "The present value of the net cash inflows exceeds the initial investment", it means that the net cash flow that the business is receiving is exceeding, or higher, than the investment that was put, meaning that the people who invested in it will make profit off of the investment. And that's what investors want, profit or a surplus that is higher than the price they've invested for.

I hope this helps!Best regards,MasterInvestor

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Answers

Answer:

The answer is aging of accounts receivable method.

Explanation:

This method helps accountants in determining how much of a company’s account receivables would not be collected. This is related to unpaid invoices of a company’s customers. Though invoices usually have due dates, according to the company, customers who haven’t paid even after the due date has passed must be calculated using this method for more accurate accounting reporting.

You bought one of Lambert Sandblasting Company's 15-year bonds one year ago for $960. These bonds pay 7 percent annually, have a face value of $1,000, and mature 14 years from now. Suppose you decide to sell your bond today when the required return on the bonds is 8 percent. The inflation rate over the past year was 2.7 percent. What was your total real return on this investment?

Answers

Answer:

Real return on investment: 22.9465%

Explanation:

Okay let's explain each concept we have given:

Face Value                                         $1,000

This is the ammount Lambert will pay at maturity

Purchase Value                                   $  960

This is the Ammount we pay for the bond

Market Value of the bond today         $   ???

This is what we need to determinate to see the return we got

Once we got the market Value we will do:

Market Value / Purchase Value   - 1 = rate of return

Now the market value today will be the present value of the bond, and the bond has the following data:

Mature in 14 yearbond rate 7% annualy.

So each year we receive the 7% of the face value ($1,000) = $70

And at the end of the bond life we receive 1,000

We need to bring this numbers at present day using the real market rate, because the economy is having inflation:

market rate  8%

inflation rate 2.7%

real rate:  

(1+rate)/(1+inflation) -1 = real rate

[tex]\frac{1.08}{1.027} -1 = real rate[/tex]

real rate = 5.16%

To know the present value of the bond we will have to consider:

present value of an annuity of 70$ during 14 year at a rate of 5.16% = present value of the 1,000 that will be pay at maturity at a rate of 5.16%

The annuity will be

[tex]70 * \frac{1-(1+0.0516)^-14}{0.0516} = 685.87[/tex]

[tex]C * \frac{1-(1+rate)^-time}{rate} = present value[/tex]

$685,87

The present value of the 1,000 will be  

face value/(1+rate)^time

1,000/(1+0.0516)^14 = $494,42

for a total of $1.180,29

Now we will calculate the real return on the investment:

we receive 1.180,29 for 960 so the rate is

1.180,29 /960 - 1 = 0.229465 =  22.9465%

What is a union? An organization of obstetricians that collectively decides what the best practices for delivering babies should be. An organization of workers that negotiates with employers over working conditions, but not over wages. An organization of firms that negotiates with workers over working conditions. Any group demonstrating with picket signs. An organization of workers that negotiates with employers over wages, but not over working conditions. An organization of workers that negotiates with employers, as a group, over wages and working conditions.

Answers

Answer:

An organization of workers that negotiates with employers, as a group, over wages and working conditions. ‌‎­‍­­‌‍​​‍​‍​‌​᠎​‌‌‍​​‌⁠​​‎‎‎‎‎‎‎‎

Explanation:

All Rite Manufacturing reported the​ following:
Revenue $ 460,000
Beginning inventory of direct​ materials, January​ 1, 2015 26,000
Purchases of direct materials 157,000
Ending inventory of direct​ materials, December​ 31, 2015 10,000
Direct manufacturing labor 28,000
Indirect manufacturing costs 44,000
Beginning inventory of finished​ goods, January​ 1, 2015 46,000
Cost of goods manufactured 245,000
Ending inventory of finished​ goods, December​ 31, 2015 50,000
Operating costs 154,000

What is​ Leslie's cost of goods​ sold?

A. $84,000
B. $239,000
C. $234,000
D. $79,000

Answers

I think the answer is c

Final answer:

The cost of goods sold is calculated by adding the beginning inventory of finished goods to the cost of goods manufactured and then subtracting the ending inventory of finished goods. In this scenario, the COGS would be $241,000, but since this option is not available in the choices provided, there may be an error in the question or answer choices.

Explanation:

Calculation of Cost of Goods Sold

To calculate Leslie's cost of goods sold (COGS), we need to consider several components from the information provided:

Beginning inventory of finished goodsCost of goods manufacturedEnding inventory of finished goods

The formula to calculate COGS is:

COGS = Beginning Inventory of Finished Goods + Cost of Goods Manufactured - Ending Inventory of Finished Goods

Let's input the values:

COGS = $46,000 + $245,000 - $50,000

Therefore:

COGS = $241,000

However, this answer isn't one of the offered choices. It appears there may have been a typographical error in the question or the answer choices. Double-checking the provided values and calculations is crucial to ensure accuracy. Assuming the provided values are correct and complete, the calculated COGS does not align with any of the given answer choices. It is recommended to clarify this with the student or reevaluate the provided data.

What do you call of a scanner data where panel members are identified by an ID card allowing each panel members purchases to be stored with respect to the individual shopper?
A) scanner panels with cable TV
B) scanner panels
C) volume tracking data
D) none of the above

Answers

Answer: I belive it is volume tracking data.

Sorry if it is wrong.

Explanation:

Scanner panel data are only the information that checkout scanners that keep tabs on panelists' purchases record.

What do you mean by scanner panels?

The panel is made up of various consumers who consent to have their purchasing habits monitored. This purchase is noted when they check out at the store, creating a vast amount of data that aids in our understanding of consumer behavior. Big data is frequently assumed to be generated by scanner panels. Huge volumes of data and information that are tracked through technology, such as scanner panels, are referred to as "big data". Scanner panel data has another benefit in that it might clarify what co-purchasing is. Thus, it not only alerts us when someone purchases our goods. It reveals other purchases people make at the same time.

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By which distribution system is more than 90 percent of U.S. coal shipped?A. pipelinesB. trucksC. waterwaysD. railroadsE. None of the above

Answers

Hello there!

Your question asks which distribution system shipped more than 90% of the U.S coal.

Answer: D). Railroads

The reason why answer choice "D). Railroads" is the correct answer is because this was the distribution method that was used when shipping coal around the U.S.

Railroads were a very reliable source of distribution/transportation/and etc. in the United States. Railroads were especially impactful when it came to distributing things around the country. Railroads were quick, could hold a lot of things, and get their safely. That's why businesses who sold coal used railroads since they could get a lot across the country quickly and safely.

Trains on the railroads could hold a lot of things, and businesses sold coal in huge volumes, in which they needed something to transport the huge volume of coal, and that's where the rail roads came in handy. If they didn't use railroads, then there would be a lack of sales since they can't get their products across the country in a timely manner.

I hope this helps!Best regards, MasterInvestor

What is the main difference between ballon mortgage and arm

Answers

Answer:

A balloon mortgage is a type of a loan that requires the borrower to make the payment as a lump-sum at the maturity period while under the ARM the borrower is allowed to choose the small periodic payments suitable for both the lender and the borrower.  

ARM is the abbreviation for Adjustable Rate Mortgage. therefore the loan repayment changes according to agreement between the lender and the  borrower.

Explanation:

Mortgages is a legal document between the lender and the borrower. Lender can be a bank or a financial institution which takes the borrower's property as a collateral and charge a percentage of interest on the money. A Balloon mortgage is a loan in which the borrower has to pay the lump sum amount to fulfill repayment. Balloon loans are short term duration loans. These are interest only installment payments. ARM Mortgage is the Adjustable Rate mortgage in which the percentage of interest is adjusted periodically on the basis of index

Please help!!! I need the answer today! Explain how inflation can be built into the system

Answers

Answer:

inflation cause an increase in the overall price level within an economy. Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy's productive capacity. ... Rising energy prices caused the cost of producing and transporting goods to rise.

How can the Federal Reserve raise interest rates? use open market operations to reduce the money supply. increase the opportunity cost of holding money by raising the rate of inflation. raise fees for automatic teller machines (ATMs). use open market operations to increase the money supply. increase the velocity of money

Answers

The correct answer is: "use open market operations to reduce the money supply"

The interest rate can be defined as the "price of money" as it determines the amount charged for borrowed money. Therefore, if the money supply should be decreased, as the relative scarcity of money will incrase its price, the interest rate.

The Federal Reserve can use open market operations to either increase or reduce the money supply, depending on its needs. These operations consist on selling/buying US debt, so that the amount earned/paid is removed from/put into circulation.  

If US debt is sold through open market operations, the total amount paid by the buyer to the Fed will be kept by the Fed and taken out from circulation. As a result, the money supply will decrease and the interest rate levels will rise.

Answer:

use open market operations to reduce the money supply

Explanation:

Hope this helps

Which element of an organization is defined by shared experiences, stories, beliefs, and norms? A)its mission statementB) Its corporate cultureC) its product philosophyD)its human resourcesE) its organizational structure

Answers

Answer:

The answer is (B) its corporate culture.

Explanation:

Corporate culture, or organizational culture, is defined as a set of values and behaviors that members of the organizations embody, engage, and influence in their working environment, especially in a social context. Organizational culture is both top-down and bottom-up; or in other words, both stakeholders and employees have the capability to influence the organizational culture through their own ways.  

Who is responsible for designing and implementing systems to gather, organize, and distribute facts essential for the running of the company

Answers

Answer:

information managers

Explanation:

helpful?

You, Student B. Success have been hired to start on February 1, 2017, as the new accounting clerk. Your employee number is B-XXXXX, where “B” denotes that you are an office worker and “XXXXX” is the first five letters of your last name. Your Social Security number is 555-55-5555, and you are full-time, nonexempt, and paid at a rate of $34,000 per year. You have elected to contribute 2% of your gross pay to your 401(k). Complete the W-4 and the I-9 to start your own employee file. You are single with only one job (claiming two exemptions). You live at 1644 Smitten Road, Woodstock, VT 05001. Your phone number is (555) 555-5555. Your date of birth is 01/01/1991. You are a citizen of the United States and provide a Vermont driver's license #88110009 expiring 1/1/2020 in addition to your Social Security card for verification of your identity.

Answers

what is the question actually asking?

What is the proper adjusted cash balance per bank? (Round answers to 2 decimal places, e.g. 52.75.) The proper adjusted cash balance per bank $Enter a dollar amount rounded to 2 decimal places (b) What is the proper adjusted cash balance per books? (Round answers to 2 decimal places, e.g. 52.75.) The proper adjusted cash balance per books

Answers

Final answer:

The proper adjusted cash balance per bank is the amount of cash that the bank statement should show after making necessary adjustments. The proper adjusted cash balance per books is the amount of cash that the company's books should show after making necessary adjustments.

Explanation:

The proper adjusted cash balance per bank is the amount of cash that the bank statement should show after making necessary adjustments. This balance can be calculated by taking the beginning cash balance, adding any deposits in transit, subtracting any outstanding checks, adding or subtracting any bank errors, and adding or subtracting any other adjustments such as bank service charges or interest.

The proper adjusted cash balance per books is the amount of cash that the company's books should show after making necessary adjustments. This balance can be calculated by taking the beginning cash balance, adding any cash receipts or other credits, subtracting any cash disbursements or other debits, and adding or subtracting any other adjustments such as reconciling items or corrections of errors.

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Products or services that may be sought as alternative solutions-such as purchasing tax planning software rather than paying a CPA to assist with preparing your taxes-are referred to as:
A) buyers products.
B) rivalry products.
C) substitute products.
D) competitive alternatives

Answers

Answer:

The answer is substitute products.

Explanation:

Substitute products are defined as two or more products that can be used for the same function for the same consumer. We can say that the tax planning software is a form of substitute product since it provides the same function that a certified public accountant also does. Buyers product refer to good made by manufacturers that are sourced by buyers to be sold by a distribution company. Competitive alternatives have no specific meaning exclusive to the term; the same applies to rivalry products.

What additional information about the numbers used to compute this ratio might be useful in helping you assess liquidity? (Select all that apply) (a) The maturity schedule of current liabilities (b) The average stock price for the industry (c) The average current ratio for the industry (d) The amount of current assets that is concentrated in relatively illiquid inventories

Answers

c i think ...................

The ____ model of ecommerce is an extension of traditional marketing media such as radio and television

Answers

Hello There!

The "ADVERTISING MODEL" of e-commerce is an extension of traditional marketing media such as radio and television

Final answer:

Mass media advertising is the ecommerce model extending traditional marketing channels like radio and TV. It faces challenges due to consumer behavior changes, but new models like the long tail theory and distributed ecosystem approach are shaping modern ecommerce strategies.

Explanation:

The model of ecommerce that is an extension of traditional marketing media such as radio and television is known as mass media advertising. This model of advertising is considered by companies as a way to address the downturn in traditional advertising revenue that has occurred due to the advent of technologies allowing consumers to bypass conventional adverts. However, the world of ecommerce and digital marketing has evolved, with the long tail theory suggesting a shift from mass-marketing to more niche marketing opportunities, thanks to the digitization of commerce and communication. Furthermore, the shift to an environment where hardware and software producers collaborate in a distributed ecosystem model is indicative of the changes in how products and services are marketed in the modern world.

A company that has a marketing strategy driven by a social marketing concept would most likely promote its _____ in its marketing messages.
a frequent sales
b superiority over the competition
c sustainability efforts
d role as a trendsetter

Answers

D- role as a trendsetter. Social media is all about influencing people. Company’s are effective when they can set themselves apart from the competition

Answer: A company that has a marketing strategy driven by a social marketing concept would most likely promote its sustainability efforts  in its marketing messages.

Explanation:

C. sustainability efforts

Imagine that a high school junior sold her old car at the end of the summer and now has the funds from the sale in her bank. She decides to purchase a much needed new automobile instead of saving that money to pay for her senior trip coming up next year. From an economist’s perspective, which of the following statements about this decision is likely to be true?a) The decision must have been made haphazardly and is therefore irrational.b) The decision is irrational because anyone can see that choosing a new automobile over a once in a lifetime senior trip is an improper use of scarce resources.c) The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

Answers

C. is the correct answer. The high school student has the right to choose either the car or the trip, and she decided the car was more valuable.

c) The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip  statements about this decision is likely to be true.

What's a good car for a senior citizen?

Safety is a key concern for any driver, but especially for older adults, who tend to be more fragile and prone to injuries. The Insurance Institute for Highway Safety (IIHS) says that in 2020, the Kia Forte, Hyundai Sonata, Toyota Camry, Subaru Legacy, and Acura RDX are some of the safest cars to drive.

What is the most comfortable and reliable car?

The best of reliable cars, the 2021 Honda Accord

Starting at $24,770, the Accord offers a lot of tech and features for the price. Keep everyone cool with dual-zone climate control, and don't worry about long drives due to the solid fuel economy. The Accord is a comfortable car that isn't going to disappoint.

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Distributors of beer earn some monopoly profits in their local markets but see them slowly erode as substitutes enter the market. Suppose Nebraska has scheduled a vote on the legalization of marijuana. Additionally, suppose that marijuana and beer are substitutes and that the legalization of marijuana would lead to a decrease in the price of marijuana. Given the relationship between marijuana and beer, the legalization of marijuana would lead to _______(a decrease/an increase) in demand for beer. Thus, distributors of beer would likely _______ (support/oppose) the legalization of marijuana.

Answers

Decrease, oppose. Because they want there beer to sell not someone’s marijuana

Answer:

Decrease, oppose. Because they want there beer to sell not someone’s marijuana

Explanation:

Which of the following statements is true of the methods for allocating joint costs? The sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production. The sales value at splitoff method always results in the same gross-margin percentage for all products. The net realizable value method uses the sales value of the units sold during the accounting period to allocate joint costs. The net realizable value method results in the same joint production cost per unit for all products.

Answers

Answer:

nothing

Explanation:

Final answer:

The sales value at splitoff method allocates joint costs based on proportionate sales value at splitoff, but does not guarantee uniform gross-margin percentages. The net realizable value method allocates costs based on estimated final sales value minus additional costs, without equalizing production cost per unit across products.

Explanation:

The subject of this question is the methods for allocating joint costs in a production process where multiple products are produced simultaneously. The sales value at splitoff method allocates joint costs to products based on the proportion of their sales value at the point of separation. However, this method does not always result in the same gross-margin percentage for all products, as the sales value may differ significantly among them. On the other hand, the net realizable value method does not use the sales value of the units sold during the accounting period to allocate joint costs but rather the estimated final sales value minus any additional costs required to make the sale. Moreover, this method does not lead to the same joint production cost per unit for all products, as the final net realizable value can vary for different products.

Alma sells her car to Ervin. Since she still has four months left on her automobile insurance policy, she tells Ervin he will be covered for this four-month period under the policy. This purported assignment of her policy is effective as long as she notifies her insurance company about the change of insureds.(T/F)

Answers

Answer:

False would be your answer :)

A _____ is typically used to support decisions related to managing an organizations cash flows

Answers

Answer:

financial information system :)

Explanation:

Answer:

A financial information system

Explanation:

A financial information system is used to collect, accumulate and analyse financial data as related to a business or a project. a Financial information system informs the business manager on how to plan and run a business efficiently.

A financial information system helps in the forecasting of  business decisions and its potential outcomes. a financial information system is usually carried out by financial experts/managers and the outcome is implemented to ensure business success. it is stored electronically because the best way to keep hold of documents like this is to store them electronically.

Which of the following statements describes a scenario when management should consider dropping a business​ division? A. The​ division's avoidable fixed costs are greater than its contribution margin. B. The​ division's avoidable fixed costs are less than its contribution margin. C. The​ division's unavoidable fixed costs are greater than its operating loss. D. The division has been reporting an operating loss consistently.

Answers

Answer:

The correct answer would be option D, The division has been reporting an operating loss consistently.

Explanation:

A company will make profit only when the cost it incurred on the manufacturing of the product is less than the amount the sales of that product generates. So when a company opens a new division, it hopes to cover its expenses from the manufacturing of the product in that new division, but when consistently the division has been reporting the operating loss, then the company can think of dropping that business division, because company can bear new division expenses for an estimated period of time, but when the progress of the division is consistently down, the management can think of dropping off that division.

You currently have $7,500 to invest. You can invest the full amount now for a period of 9 years at which time you want to have $15,000. Approximately what rate of return is needed to accomplish this investment goal? 8.01% 7.59% 9.65% 8.50%

Answers

the approximate rate of return that is needed to accomplish the investment goal is 8.50%

1. Economic systems An economic system consists of a set of institutional arrangements and a method of coordinating economic activity. The two polar extremes of economic systems are the command system and the market system. Which of the following are characteristics of the market system? Check all that apply. Production goals or targets are transmitted from top authorities to the individual producing units. The independent decisions of individuals in the marketplace determine the answers to the fundamental economic questions. A dictator or a group of central planners answers the fundamental economic questions.\\

Answers

Answer:

The independent decisions of individuals in the marketplace determine the answers to the fundamental economic questions.

Explanation:

The study of Economic Science allows us to understand the fundamental premises that govern the functioning of market economies. A market economy operates freely - the decisions of the economic agents are independent - which leads us to understand determining questions, such as how much to produce and how much to employ.

A market economy operates under the logic of the interaction between supply and demand of goods and services, so that companies act in a system of competition, via prices, for market share. Thus, consumers benefit from competition and the role of government is only to ensure the right environment for economic transactions.

In a market system, independent decisions of individuals in the marketplace determine the fundamental economic questions, with limited government intervention. In contrast, a command economy relies on centralized decision-making by a government authority.

The characteristics of a market system are markedly different from those of a command system. In a market economy, production goals are not transmitted from top authorities to the producing units. Instead, the independent decisions of individuals in the marketplace determine answers to fundamental economic questions such as "what to produce?", "how to produce?", and "for whom to produce?". The operation of a market system is based on the private ownership of resources and the coordination of economic activity through decentralized decision-making. Governments may have limited roles, primarily to enforce private property rights and maintain the rule of law. In contrast, a command economy relies on a dictator or a group of central planners to answer these fundamental economic questions. Resource ownership and decision making in a command system are centralized and dictated by government policies.

Other Questions
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