Intro

Question 1

What are the 5 industry forces?

Answer 1

• Entry
• Power of Buyers
• Substitutes and Complements
• Industry Rivalry
• Power of Input Suppliers

Question 2

What is the PV of a single future value?

Answer 2

• The amount that would have to be invested today at the prevailing rate to generate the given future value
• PV = FV/(1+i)^n

Question 3

What is the PV of a stream of future values?

Answer 3

PV = ∑ FV/(1+i)^n

Question 4

What is the PV of Indefinitely Lived Assets?

Answer 4

• Present value of decision that indefinitely generate cash flows
• PVasset = CF0 + CF/(1+i)^n
• Present value of this perpetual income stream when the same cash flow is generated with CF0 = 0 and CF1 = CF2 = CF
• PVperpetuity = CF/i

Question 5

What is economic profit?

Answer 5

the difference between total revenue and total opportunity cost

Question 6

How is market equilibrium determined?

Answer 6

• 1. Substitute given figures into demand and supply functions
• 2. Set equal to each other