# on 20-Nov-2017 (Mon)

#### Flashcard 1425646161164

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Question
The terms of trade capture the [...] of imports in terms of exports.
relative cost

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The terms of trade capture the relative cost of imports in terms of exports.

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2.1. Basic Terminology
e to a South African diamond exporter, Britain would classify the cost of the insurance as an export of services to South Africa. Other examples of services exported/imported include engineering, consulting, and medical services. <span>The terms of trade are defined as the ratio of the price of exports to the price of imports, representing those prices by export and import price indices, respectively. The terms of trade capture the relative cost of imports in terms of exports. If the prices of exports increase relative to the prices of imports, the terms of trade have improved because the country will be able to purchase more imports with the same amount of exports.2 For example, when oil prices increased during 2007–2008, major oil exporting countries experienced an improvement in their terms of trade because they had to export less oil in order to purchase the same amount of imported goods. In contrast, if the price of exports decreases relative to the price of imports, the terms of trade have deteriorated because the country will be able to purchase fewer imports with the same amount of exports. Because each country exports and imports a large number of goods and services, the terms of trade of a country are usually measured as an index number (normalized to 100 in some base year) that represents a ratio of the average price of exported goods and services to the average price of imported goods and services. Exhibit 1shows the terms of trade reported in Salvatore (2010). A value over (under) 100 indicates that the country, or group of countries, experienced better (worse) terms of trade rel

#### Flashcard 1431633530124

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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4
Question
The negative slope in the indifference curve simply represents that both goods are wanted; in order to maintain indifference, a [...] must be compensated for by [...]
decrease in one

an increase in the other

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pan>The indifference curve represents our consumer’s unique preferences over the two goods wine and bread. Its negative slope simply represents that both wine and bread are seen as “good” to this consumer; in order to maintain indifference, a <span>decrease in the quantity of wine must be compensated for by an increase in the quantity of bread.<span><body><html>

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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
n below and to the left of the indifference curve. Exhibit 2. An Indifference Curve Note: An indifference curve shows all combinations of two goods such that the consumer is indifferent between them. <span>The indifference curve represents our consumer’s unique preferences over the two goods wine and bread. Its negative slope simply represents that both wine and bread are seen as “good” to this consumer; in order to maintain indifference, a decrease in the quantity of wine must be compensated for by an increase in the quantity of bread. Its curvature tells us something about the strength of his willingness to trade off one good for the other. The indifference curve in Exhibit 2 is characteristically drawn to be convex

#### Flashcard 1435787726092

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#cfa-level-1 #economics #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit #study-session-4
Question
Marginal revenue (MR)[...]
Change in total revenue divided by change in quantity; (∆TR ÷ ∆Q)

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Marginal revenue (MR)Change in total revenue divided by change in quantity; (∆TR ÷ ∆Q)

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3. ANALYSIS OF REVENUE, COSTS, AND PROFITS
umber of time periods). For example, average revenue is calculated by dividing total revenue by the number of items sold. To calculate a marginal term, take the change in the total and divide by the change in the quantity number. <span>Exhibit 3 shows a summary of the terminology and formulas pertaining to profit maximization, where profit is defined as total revenue minus total economic costs. Note that the definition of profit is the economic version, which recognizes that the implicit opportunity costs of equity capital, in addition to explicit accounting costs, are economic costs. The first main category consists of terms pertaining to the revenue side of the profit equation: total revenue, average revenue, and marginal revenue. Cost terms follow with an overview of the different types of costs—total, average, and marginal. Exhibit 3. Summary of Profit, Revenue, and Cost Terms Term Calculation Profit (Economic) profit Total revenue minus total economic cost; (TR – TC) Revenue Total revenue (TR) Price times quantity (P × Q), or the sum of individual units sold times their respective prices; ∑(P i × Q i ) Average revenue (AR) Total revenue divided by quantity; (TR ÷ Q) Marginal revenue (MR) Change in total revenue divided by change in quantity; (∆TR ÷ ∆Q) Costs Total fixed cost (TFC) Sum of all fixed expenses; here defined to include all opportunity costs Total variable cost (TVC) Sum of all variable expenses, or per unit variable cost times quantity; (per unit VC × Q) Total costs (TC) Total fixed cost plus total variable cost; (TFC + TVC) Average fixed cost (AFC) Total fixed cost divided by quantity; (TFC ÷ Q) Average variable cost (AVC) Total variable cost divided by quantity; (TVC ÷ Q) Average total cost (ATC) Total cost divided by quantity; (TC ÷ Q) or (AFC + AVC) Marginal cost (MC) Change in total cost divided by change in quantity; (∆TC ÷ ∆Q) 3.1. Profit Maximization In free markets—and even in regulated market economies—profit maximization tends to promote economic welfare and a hig

#### Flashcard 1438520839436

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#analyst-notes #cfa-level-1 #corporate-finance #reading-35-capital-budgeting #study-session-10 #subject-2-basic-principles-of-capital-budgeting
Question

Using the company cost of capital to evaluate a project is ______.

A. always correct
B. always incorrect
C. correct for projects that are about as risky as the average of the firm's other assets

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ties create costs for other parts of the firm. For example, if the bookstore is considering opening a branch two blocks away, some customers who buy books at the old store will switch to the new branch. The customers lost by the old store are <span>a negative externality. The primary type of negative externality is cannibalization, which occurs when the introduction of a new product causes sales of existing products to decline. &#13

#### Original toplevel document

Subject 2. Basic Principles of Capital Budgeting

#### Annotation 1711611186444

 #language_greek κούω hear, aor. ήκουςα; έλπίζω hope, impf. ήλπιζον; οικτίρω pity, impf. ωκτΓρον; ώδίνω be in labour,

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#### Annotation 1712992423180

 #economia #mises A mo- eda não é mais do que um meio de troca interpessoal. Mas devemos prevenir-nos cautelosamente contra os erros a que esta construção de um mercado de troca direta pode facilmente conduzir

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#### Annotation 1712994258188

 #economia #mises preciso que se compreenda que valorar significa preferir a a b. Só existe – do ponto de vista do lógico, epistemológico e praxeoló- gico – uma maneira de preferir

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#### Annotation 1712995831052

 #economia #mises Da mesma maneira como não existe padrão de medida para a atração sexual, ou para a amizade e simpatia, ou para o prazer estético, também não existe medida de valor das mercadorias. Se al- guém troca um quilo de manteiga por uma camisa, o que podemos dizer desta transação é que – no instante da transação e nas circuns- tâncias específicas daquele instante – esse alguém prefere uma camisa a um quilo de manteiga

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