Which of the following is a primary difference between a privately held corporation and a public corporation?(1 point)

Question

2. If a firm's fixed costs are larger than its variable costs, does this mean the firm should shut down operation in the short run? Explain.
3.If income levels of consumers within a given economy increase, what would happen to the demand curve for cell phones, a normal good, and the demand curve for instant noodles, an inferior good?(
4.If a section of a demand curve is elastic, what will happen to the quantity demanded if there is an increase in price?(1 point)

Answer 1

1. Primary Difference Between a Privately Held Corporation and a Public Corporation: The primary difference between a privately held corporation and a public corporation is how their shares are traded. A privately held corporation does not offer its shares to the general public and typically has a limited number of shareholders, often consisting of family, friends, or private investors. In contrast, a public corporation sells its shares on a stock exchange, allowing anyone to buy and sell its stock. Public corporations are subject to stricter regulatory requirements and must disclose financial information, while privately held corporations have fewer disclosure obligations.

2. Fixed Costs Larger Than Variable Costs and Short-Run Decisions: If a firm's fixed costs are larger than its variable costs, this alone does not indicate whether the firm should shut down operations in the short run. In the short run, a firm should continue to operate if it can cover its variable costs even if it cannot cover its fixed costs. As long as the revenue from sales is greater than or equal to the variable costs, the firm can contribute something toward the fixed costs and reduce its losses. Therefore, the decision to shut down would depend on whether the firm's revenue can cover variable costs, not just on the relationship between fixed and variable costs.

3. Effect of Income Increase on Demand for Normal and Inferior Goods: If income levels of consumers within a given economy increase, the demand curve for cell phones, which are considered normal goods, would shift to the right (increase), as consumers typically buy more of these goods when they have higher incomes. Conversely, the demand curve for instant noodles, considered an inferior good, would shift to the left (decrease) since consumers tend to buy less of these goods when their income rises and they can afford to purchase more expensive substitutes.

4. Effect of Price Increase on Quantity Demanded in the Elastic Section: If a section of a demand curve is elastic, an increase in price will lead to a proportionally larger decrease in the quantity demanded. In other words, consumers are sensitive to price changes in this range, so a rise in price will result in a significant drop in the quantity demanded. This relationship is characterized by a price elasticity of demand greater than 1.