Business Studies Questions & Answers

  Q1. How does opportunity cost relate to comparative advantage? In a short essay, explain the connection between the two terms and provide an example for illustration. Answer: Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages. The trick to understanding comparative advantage is in the phrase "lower cost." What it costs someone to produce something is the opportunity cost the value of what is given up. Someone may have an absolute advantage at producing every single thing, but he has a comparative advantage at many fewer things, and probably only one or two things.   Comparative advantage is a condition of a producer where it is better suited for  the  production of one good than another go...

A.                        Describe some of the attributes of an ideal risk indicator for stock market investors. B.          On the Internet, go to Yahoo! Finance (or msnMoney) and download weekly price information over the past year (52 observations) for GOOG and the Nasdaq market.   Then, enter this information in a spreadsheet like Table 16.6 and use these data to estimate GOOG = s beta.   Describe any similarities or dissimilarities between your estimation results and the results depicted in Figure 16.8. C.                        Estimates of stock-price beta are known to vary according to the time frame analyzed; length of the daily, weekly, monthly, or annual return period; choice of market index; bul...

A.                Was Paramount ’s above-market offer for Ti me , Inc. consistent with the notion that the prevailing market price for common stock is an accurate reflection of the discounted net present value of future cash flows?   Was manage me nt’s rejection of Paramount ’s above-market offer for Ti me , Inc. consistent with the value-maximization concept? B.               Assu me that a Ti me Warner shareholder could buy additional shares at a market price of $90 or participate in the company’s rights offering.   Construct the payoff the matrix that corresponds to a $90 per share purchase decision versus a decision to participate in the rights offering with subsequent 100%, 80%, and 60% participation by all Ti me Warner shareholders. C.                Describe the secure ga me theory...

A.                Describe the overall explanatory power of this regression model, as well as the relative importance of each continuous variable. B.                Based on the importance of the binary or dummy variable that indicates superstore competition, do superstores pose a serious threat to Columbia ’s profitability? C.                What factors might Columbia consider in developing an effective competitive strategy to combat the superstore influence? CASE STUDY SOLUTION A.                The coefficient of determination R 2 = 77.7% me ans that 77.7% of the total variation in Columbia ’s profit‑margins can be explained by the regression model.   This is a relatively high...

A.                Explain how any intangible capital effects of R&D intensity can reflect the effects of market power and/or superior efficiency. B.                A multiple regression analysis based upon the data contained in Table 12.3 revealed the following (t statistics in parentheses):                                q   =   1.740 + 0.041 Profit Margin + 0.018 Growth - 0.421 Beta + 0.057 R&D/S                                          (2.33)    (1.74)  ...