The owner of a sports franchise considers factors such as market value, competitive landscape, team needs, and financial resources when determining how much to spend on player talent. Mark Cuban was willing to invest heavily in player talent for reasons related to competitive advantage, fan engagement, long-term growth, and reputation.
The owner of a sports franchise considers several factors when determining how much to spend on player talent. Some of these considerations include:
1) Market Value: The owner will assess the current market value of players in the league. This involves analyzing factors such as player performance, skills, experience, and potential.
2) Competitive Landscape: The owner will consider the level of competition within the league and the talent pool available. If the competition is fierce and the best players are in high demand, the owner may need to spend more to attract top talent.
3) Team Needs: The owner will evaluate the specific needs of the team, such as positions that need to be filled or skills that need to be strengthened. This helps in determining which players to target and how much to spend on them.
4) Financial Resources: The owner will take into account the financial resources available to the franchise. This includes revenue streams, such as ticket sales, merchandise, sponsorships, and TV contracts. The owner will allocate a budget for player talent based on these financial resources.
Mark Cuban, the owner of the Dallas Mavericks, was willing to invest heavily in player talent even if it caused the team to lose money for several reasons:
1) Competitive Advantage: Cuban believed that by investing in top-tier player talent, the Mavericks would have a competitive advantage over other teams. This would enhance the team's chances of winning games and championships, which could ultimately lead to increased revenue through ticket sales, sponsorships, and merchandise.
2) Fan Engagement: Cuban understood that investing in star players would generate excitement among fans and increase attendance at games. This would not only create a vibrant and energetic atmosphere but also boost revenue for the franchise.
3) Long-Term Growth: Despite the short-term financial losses, Cuban saw the potential for long-term growth and profitability. By building a successful team with star players, the Mavericks would attract more fans, sponsors, and media attention. This could result in higher TV contracts, endorsement deals, and overall franchise value.
4) Reputation and Branding: Cuban recognized that investing in player talent would enhance the team's reputation and branding. This would help attract future players and coaches, as well as establish the Mavericks as a respected and desirable destination for top talent.
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Company D pays $8,000 to own 40% of ABC’s voting stock on Jan. 1, 2020. ABC reports net income of $3,000 for the year ended Dec. 31, 2020. On Dec. 31, 2020, ABC pays cash dividend of $2,000 to its investors. On Feb. 23, 2021, Company D sells all the ABC stock for $8,200.
Please make necessary journal entries for the three dates indicated above.
On January 1, 2020: Company D records the purchase of ABC stock, on December 31, 2020: ABC records the payment of cash dividends, and on February 23, 2021: Company D records the sale of ABC stock.
What are the necessary journal entries for the given transactions?On January 1, 2020:
Company D's journal entry:
Investment in ABC Stock $8,000
Cash $8,000
To record the purchase of 40% of ABC's voting stock.
On December 31, 2020:
ABC's journal entry:
Retained Earnings $2,000
Dividends Payable $2,000
To record the cash dividend payment to investors.
On February 23, 2021:
Company D's journal entry:
Cash $8,200
Investment in ABC Stock $8,000
Gain on Sale of Investment $200
To record the sale of all ABC stock at a gain.
On January 1, 2020, Company D purchases 40% of ABC's voting stock for $8,000, resulting in an increase in the investment and a decrease in cash.On December 31, 2020, ABC pays a cash dividend of $2,000 to its investors, resulting in a decrease in retained earnings and an increase in dividends payable. On February 23, 2021, Company D sells all the ABC stock for $8,200, resulting in an increase in cash, a decrease in the investment, and recognition of a $200 gain on the sale of the investment.Learn more about Company D
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Nathan is a shareholder who owns more than 2% of Handy Hot Dogs, Inc., a restaurant organized as a C corporation. During the year, Nathan worked part-time for the corporation and recelved $16,000 in wages. In addition, Nathan recelved $18,000 in dividends, based on his ownership share. Choose the response that correctly describes how Handy Hot Dogs, Inc. will report Nathan's wages and dividends on their tax return. The corporation will: a) Deduct both the wages and the amount distributed as dividends. b) Deduct the amount distributed as dividends, but not the wages. c) Deduct the wages and pay a flat tax rate of 21% on the amount distributed as dividends. d) Pay a flat tax rate of 21% on both the $16,000 in wages and the $18,000 in dividends.
Handy Hot Dogs, Inc. will deduct Nathan's wages as a business expense on their tax return, but they will not deduct the dividends distributed to him. Nathan will need to report the dividends as income on his personal tax return.
Handy Hot Dogs, Inc. is organized as a C corporation and Nathan is a shareholder who owns more than 2% of the company. During the year, Nathan received $16,000 in wages for his part-time work and $18,000 in dividends based on his ownership share.
In terms of reporting on their tax return, Handy Hot Dogs, Inc. will:
b) Deduct the amount distributed as dividends, but not the wages.
The wages that Nathan received for his part-time work will be reported as a deductible expense for Handy Hot Dogs, Inc. on their tax return. This means that the corporation can reduce its taxable income by the amount of Nathan's wages. However, since Nathan owns more than 2% of the company, the wages paid to him will not be deducted for corporate tax purposes.
On the other hand, the dividends distributed to Nathan will not be deductible for Handy Hot Dogs, Inc. These dividends are considered distributions of the company's after-tax profits and are not eligible for deduction. Instead, they are taxed as income in Nathan's hands.
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Digman Co. had retained earnings of $400,000 on January 1st. It made a net income of $300,000 in the year. The maximum amount of dividend they would be allowed to pay would be Oa) $100,000 O b) $400,000 O c) $500,000 O d) $700,000 Oe) none of the above Digman Co. had retained earnings of $400,000 on January 1st. It made a net income of $300,000 in the year. The maximum amount of dividend they woul be allowed to pay would be O a) $100,000 O b) $400,000 O c) $500,000 O d) $700,000 Oe) none of the above
The correct answer is option (c) $500,000:Retained earnings are an important source of funding for the company. It reflects the company's accumulated earnings from the previous year that has not been distributed as dividends.
It is calculated as follows:Retained Earnings = Beginning Balance + Net Income - DividendFor Digman Co., the retained earnings on January 1st were $400,000 and the net income in the year was $300,000. Therefore,Retained Earnings = $400,000 + $300,000 - DividendDividend = $700,000 - Retained EarningsDigman Co.
cannot pay dividends exceeding the retained earnings balance. Therefore, the maximum amount of dividend Digman Co. would be allowed to pay would be when the retained earnings balance becomes zero. Hence,Digman Co. can pay dividends up to $500,000 ($400,000 + $300,000 - $500,000). Therefore, option (c) is correct.
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8. (5 points) True or False? Our non-autocorrelation assumption says there can be no correlation between x's for different observations, that is E[x₂xj] 0 for all i j = 9. (5 points) True or False?
8. True.
The statement is true. The non-autocorrelation assumption, also known as the assumption of no serial correlation, implies that there is no correlation between the x's (independent variables) for different observations. This assumption is commonly used in various statistical models and analyses.
9. False.
The statement is false. The notation used in the statement (E[x₂ * xj] 0 for all i j = 9) seems to have a typographical error or confusion.
8. In other words, the non-autocorrelation assumption assumes that the covariance or correlation between x's from different observations is zero. Mathematically, it implies that E[x_i * x_j] = 0 for all i ≠ j, where E[ ] denotes the expectation or mean operator.
9. The correct statement regarding non-autocorrelation or no serial correlation assumption would be similar to the previous question, stating that E[x_i * x_j] = 0 for all i ≠ j, where E[ ] denotes the expectation or mean operator.
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Assess the general business environment, current corporate strategy, and possible future challenges.
Identify the most relevant sources of financial risk, and examine how these are being managed today. Include a description of the risk, a sensitivity analysis based on your forecast for the risks identified, and any other relevant information.
How are Air Canada’s largest competitors managing financial risk? Do their risk management practices create a competitive advantage or disadvantage, based on your forecast?
What recommendations would you make to the board of directors, based on your analysis?
Assessing the general business environment, current corporate strategy, and possible future challenges is crucial for understanding Air Canada's financial risks.
To conduct a thorough analysis of Air Canada's financial risk, it is necessary to evaluate the general business environment, including factors such as economic conditions, regulatory changes, and market trends. Assessing the company's current corporate strategy and its alignment with industry dynamics and customer demands is vital.
The most relevant sources of financial risk for Air Canada may include fuel price volatility, currency exchange rate fluctuations, interest rate changes, and operational risks like fleet maintenance and route demand. Examining how Air Canada's largest competitors manage financial risk is critical for benchmarking and identifying best practices. Their risk management practices may create a competitive advantage if they have effective hedging strategies, diversification of revenue streams, or strong cost control measures.
Based on the analysis, recommendations to the board of directors may include implementing robust risk management frameworks, diversifying revenue sources, optimizing cost structures, and exploring strategic partnerships or alliances to mitigate financial risks.
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2. Consider the following "puzzle". Consider the impact of an increase in thriftiness in the Keynesian Cross (Aggregate Expenditures) model. Suppose that the consumption function is given by: where is autonomous consumption that represents the exogenous factors that impact consumption, while is the marginal propensity to consume. Now consider the following:
a. What happens to equilibrium income when society becomes more thrifty (represented by a decline in )?
b. What happens to savings in equilibrium?
c. Why do you suppose this result is called the paradox of thrift?
d. Does this paradox of thrift arise in world where prices are fully flexible (i.e. the Classical world)? Why or why not?
(a) An increase in thriftiness or decline in marginal propensity to consume will decrease aggregate demand by a multiple of the initial decline in demand. This causes a decrease in equilibrium output. In other words, a decrease in consumption spending will decrease equilibrium output in the Keynesian Cross (Aggregate Expenditures) model as the equilibrium is at the point where Aggregate Expenditures are equal to Output.
(b) An increase in thriftiness will result in an increase in savings in equilibrium.
(c) The paradox of thrift occurs when individuals save more during a recession, as they try to prepare for a potential increase in uncertainty in the future. As they save more, their current consumption will decrease, which will further reduce aggregate demand. The consequence of this reduction in aggregate demand will be a decrease in equilibrium output and higher unemployment.
(d) In a world with fully flexible prices (i.e., the Classical world), the Paradox of Thrift does not occur. In a classical world, a fall in consumption expenditure would cause an immediate decrease in output. This decrease in output will also lead to a reduction in the price level.
As a result, the real money balances (which are equal to nominal balances divided by the price level) would increase, stimulating the economy. Consequently, output and employment would increase, reducing the negative impact of the decrease in consumption expenditure. Therefore, the Paradox of Thrift would not occur in a world with flexible prices as it does in a Keynesian world.
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M has a qualified income offset of $100 and is subject to minimum gain chargeback. At the beginning of the year, M has 704(b) book capital of ($500). During the year, M is allocated $200 of depreciation expense. The property creating the deduction has a beginning 704(b) book basis of $600. There is a non-recourse loan on the property with an ending balance of $200. Based on these facts, what amount, if any, of a minimum gain chargeback will be recognized by M.
$100
$500
$200
$600
Based on the provided information, M will recognize a minimum gain chargeback of $100.
In this scenario, M has a qualified income offset of $100, which means that M's share of income from the partnership is reduced by this amount. M also has a negative 704(b) book capital of ($500) at the beginning of the year, indicating that M has a deficit in their capital account.
During the year, M is allocated $200 of depreciation expense, which reduces their share of partnership income further. However, it's important to note that the property generating the depreciation deduction has a beginning 704(b) book basis of $600, which is higher than M's negative book capital.
Since M's book capital is negative, the partnership has a minimum gain chargeback provision. This provision requires partners to recognize income when the partnership disposes of property with a higher 704(b) book basis than the partner's negative capital account. In this case, the ending balance of the non-recourse loan on the property is $200, which is less than the negative capital account of ($500).
Therefore, M will recognize a minimum gain chargeback equal to the amount of their negative capital account, which is $100. This chargeback increases M's taxable income for the year by $100, resulting in a higher tax liability.
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An operation has a 10 percent scrap rate. As a result. 72 pieces per hour are produced. What is the potential increase in labor Page 66 productivity that could be achieved by eliminating the scrap? 6. A manager checked production records and found that a worker produced 160 units while working 40 hours. In the previous week, the same worker produced 138 units while working 36 hours. Did the worker's productivity increase, decrease, or remain the same? Explain.
The worker produced an average of 4 units per hour, while in the previous week, the productivity was approximately 3.83 units per hour. Therefore, the worker's productivity increased over the two weeks.
An operation has a 10 percent scrap rate, resulting in the production of 72 pieces per hour. To calculate the potential increase in labor productivity that could be achieved by eliminating the scrap, we need to determine the number of pieces that would be produced without scrap.
If the operation currently produces 72 pieces per hour and has a 10 percent scrap rate, it means that 90 percent of the produced pieces are good (100% - 10% = 90%). Therefore, the actual number of good pieces produced per hour can be calculated as:
Good pieces per hour = 72 pieces per hour * 90% = 72 * 0.9 = 64.8 pieces per hour.
To determine the potential increase in labor productivity, we compare the actual number of good pieces produced per hour (64.8) to the number of pieces that would be produced without any scrap:
Increase in labor productivity = Pieces produced without scrap - Actual number of good pieces produced per hour.
Since there would be no scrap without any defects, the number of pieces produced without scrap is equal to the total number of pieces produced per hour:
Pieces produced without scrap = 72 pieces per hour.
Therefore, the potential increase in labor productivity that could be achieved by eliminating the scrap is:
Increase in labor productivity = 72 pieces per hour - 64.8 pieces per hour = 7.2 pieces per hour.
To answer the second question, we compare the worker's productivity in two different weeks. In the first week, the worker produced 160 units in 40 hours, resulting in an average productivity of 4 units per hour (160 units / 40 hours = 4 units/hour). In the previous week, the worker produced 138 units in 36 hours, resulting in an average productivity of 3.83 units per hour (138 units / 36 hours ≈ 3.83 units/hour).
Comparing the two productivity rates, we can see that the worker's productivity increased. In the first week, the worker produced an average of 4 units per hour, while in the previous week, the productivity was approximately 3.83 units per hour. Therefore, the worker's productivity increased over the two weeks.
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How will the RFID system would work better than the bar code
scanning system in inventory control and supply chain management?
(Managament information system)
The RFID system offers several advantages over the barcode scanning system in inventory control and supply chain management.
Firstly, RFID (Radio Frequency Identification) does not require a direct line of sight between the reader and the tags, unlike barcodes. This enables RFID to read multiple tags simultaneously and at a greater distance, facilitating faster and more efficient inventory tracking. In contrast, barcode scanning requires individual scanning of each barcode, which can be time-consuming and prone to errors.
Secondly, RFID tags can store and transmit more data compared to barcodes. This allows for more detailed information to be associated with each item, such as batch numbers, expiration dates, or unique serial numbers. With enhanced data capabilities, RFID provides better traceability and visibility throughout the supply chain, enabling improved inventory accuracy and real-time tracking of product movement.
Additionally, RFID tags are more durable and can withstand harsh environmental conditions, such as extreme temperatures or moisture. Barcodes, on the other hand, are susceptible to damage, making them less reliable in certain environments.
Moreover, the automation and real-time data capture provided by RFID systems enhance inventory management and supply chain efficiency. RFID technology can be integrated with various management information systems, enabling seamless data integration, analytics, and automated processes. This leads to improved inventory accuracy, reduced stockouts, optimized replenishment, and enhanced overall supply chain performance.
In summary, the RFID system surpasses the barcode scanning system in inventory control and supply chain management due to its non-line-of-sight reading, ability to store more data, durability, and compatibility with automated processes. The advanced capabilities of RFID technology enable better inventory visibility, accuracy, and efficiency, resulting in streamlined operations and improved supply chain performance.
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Journalize the entry for Escobar Retailers if a customer owes the company $500 at the end of the month and Escobar charges 24% per year to its customers who use a company-issued credit card. Accounts Receivable ………...120 Interest Revenue...................120 Interest Revenue...............120 Accounts Receivable................120 Accounts Receivable................10 Interest Revenue.......................10 Interest Revenue...................10 Accounts Receivable.................. 10
The entry for Escobar Retailers when a customer owes the company $500 at the end of the month and Escobar charges 24% per year to its customers who use a company-issued credit card would be as follows:
1. To record the accounts receivable from the customer:
- Debit: Accounts Receivable ($500)
- Credit: Sales Revenue ($500)
2. To record the interest revenue earned from the customer:
- Debit: Accounts Receivable ($10) [($500 * 24%) / 12]
- Credit: Interest Revenue ($10) [($500 * 24%) / 12]
3. To record the interest revenue earned from the customer:
- Debit: Interest Revenue ($10) [($500 * 24%) / 12]
- Credit: Accounts Receivable ($10) [($500 * 24%) / 12]
The entry is split into two steps to properly account for the interest revenue earned over the month.
In step 1, we record the initial accounts receivable of $500 as a debit to Accounts Receivable and a credit to Sales Revenue. This reflects the amount owed by the customer.
In steps 2 and 3, we record the interest revenue earned. The interest rate is 24% per year, which is divided by 12 to calculate the monthly interest. In step 2, we debit Accounts Receivable for the interest amount earned ($10) and credit Interest Revenue. In step 3, we debit Interest Revenue for the same amount ($10) and credit Accounts Receivable. This ensures that the interest revenue is properly recognized and accounted for.
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Lin Corporation has a single product whose selling price is $120 per unit and whose variable expense is $80 per unit. The company's monthly fixed expense is $50,000. Required: 1. Calculate the unit sales needed to attain a target profit of $10,000 2. Calculate the dollar sales needed to attain a target profit of $15,000. (For all requirements, do not round intermediate calculations.)
The unit sales needed to attain a target profit of $10,000 can be calculated by dividing the total target profit by the contribution margin per unit. In this case, the contribution margin per unit is $120 - $80 = $40. So, the unit sales needed would be $10,000 / $40 = 250 units.
The dollar sales needed to attain a target profit of $15,000 can be calculated by adding the target profit to the total fixed expenses and dividing the sum by the contribution margin ratio. The contribution margin ratio is ($120 - $80) / $120 = 1/3. So, the dollar sales needed would be ($15,000 + $50,000) / (1/3) = $225,000. To calculate the unit sales needed, we use the contribution margin per unit, which represents the amount of money available from each unit to cover fixed expenses and contribute to profit. By dividing the target profit by the contribution margin per unit, we find the number of units required to achieve the desired profit. To calculate the dollar sales needed, we consider the fixed expenses and the contribution margin ratio. Adding the target profit to the fixed expenses gives us the total amount that needs to be covered. Dividing this sum by the contribution margin ratio provides the dollar sales needed to achieve the desired profit. The contribution margin ratio represents the percentage of each dollar of sales that contributes to covering fixed expenses and profit.
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[The following information applies to the questions displayed below.]
MoveIt Corporation is the world’s leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $23,000. MoveIt had originally purchased the truck for $39,000 and had recorded depreciation for three years.
Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was (a) $16,000, (b) $13,000, and (c) $19,000. (Select "None" if there is no Gain or Loss.)
Using the following structure, indicate the effects (accounts, amounts, and + for increase and − for decrease) of the disposal of the truck, assuming that Accumulated Depreciation was (a) $16,000, (b) $13,000, and (c) $19,000. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)
Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $16,000, (b)$13,000, and (c) $19,000. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Record the sale of the truck that has an accumulated depreciation balance of $16,000 at the time of disposal.
Record the sale of the truck that has an accumulated depreciation balance of $13,000 at the time of disposal.
Record the sale of the truck that has an accumulated depreciation balance of $19,000 at the time of disposal
The gain or loss on the disposal of the truck can be calculated by subtracting the book value (original cost minus accumulated depreciation) from the selling price.
The effects of the disposal on the accounts will include a decrease in the Accumulated Depreciation account and a decrease in the Truck asset account. The gain or loss will be recorded in the Income Statement. The journal entry to record the disposal will include debits to the Accumulated Depreciation and Truck accounts, a credit to the Gain or Loss on Disposal account, and a credit to the Truck account for the selling price.
(a) If Accumulated Depreciation is $16,000, the gain or loss on disposal can be calculated as follows:
Selling Price = $23,000
Book Value = $39,000 - $16,000 = $23,000
Gain or Loss = Selling Price - Book Value = $23,000 - $23,000 = $0 (No gain or loss)
Effects on accounts:
Accumulated Depreciation: - $16,000
Truck: - $23,000
Journal entry:
No Journal Entry Required.
(b) If Accumulated Depreciation is $13,000:
Selling Price = $23,000
Book Value = $39,000 - $13,000 = $26,000
Gain or Loss = Selling Price - Book Value = $23,000 - $26,000 = -$3,000 (Loss)
Effects on accounts:
Accumulated Depreciation: - $13,000
Truck: - $23,000
Journal entry:
Debit Accumulated Depreciation: $13,000
Debit Loss on Disposal: $3,000
Credit Truck: $23,000
(c) If Accumulated Depreciation is $19,000:
Selling Price = $23,000
Book Value = $39,000 - $19,000 = $20,000
Gain or Loss = Selling Price - Book Value = $23,000 - $20,000 = $3,000 (Gain)
Effects on accounts:
Accumulated Depreciation: - $19,000
Truck: - $23,000
Journal entry:
Debit Accumulated Depreciation: $19,000
Credit Gain on Disposal: $3,000
Credit Truck: $23,000.
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Part I: Optimal Growth Model Consider an economy where a representative agent has the utility function U=∑t=0[infinity]βtu(ctM,ctN,1−ht) where ctM is consumption purchased in the market in period t,ctN is consumption at home (non-market) in period t, and ht is hours worked in t. The budget constraint is ctMA+itMA+itN=wthtM+riktMctN=g(hiN,ktN)kt+1MM=(1−δ)ktM+itMkt+1N=(1−δ)ktN+itNhtM+htN=ht where wt is the real wage, rf is the rental rate, δ is the depreciation rate that is common across sectors. Wages and rental rates are taken as given by the representative agent, and also by firms, who solve the standard profit maximization problem with a constant returns to scale production function y=f(ht,kt) 1. Set up the dynamic programming problem of the representative agent. ( 3 points) 2. Define carefully a recursive competitive equilibrium (RCE) for this economy. Note that the definition should include each agent's problem. (3 points) Assume now that the representative consumer's utility function is of the form u(cM,cN,1−h)=log(cM)+Dlog(cN)+Alog(1−h) and the production functions are f(k,h)=kMθh1−θM and g(k,h)=kNθh1−θN 3. Solve for the equilibrium allocation steady state capital/output ratio in each sector. (3 points) 4. Solve for the social planner steady state capital/output ratio in each sector. Compare these with the equilibrium allocations. ( 3 points) 5. Explain how to determine the parameters A and D. (3 points)
The optimal growth model aims to maximize the present discounted value of lifetime utility, considering a representative agent's budget constraint. The Recursive Competitive Equilibrium (RCE) is defined as a set of optimal decision rules for agents and production decisions for firms that satisfy resource constraints and market clearing conditions. The steady-state capital/output ratio in each sector is derived based on production functions and budget constraints, while the social planner's steady-state capital/output ratio aligns with the private agents' choices. Parameters A and D in the utility function can be determined through estimation using survey data on consumption and leisure behavior.
Part 1: Optimal Growth ModelThe dynamic programming problem of the representative agent in this economy can be formulated as follows:
Maximise the present discounted value of lifetime utility, subject to the budget constraint. That is, maximize:Subject to:where, The state variable, X(t) = (ktM, ktN, ht), where ktM and ktN denote the capital stock in the market and non-market sector at the beginning of period t, respectively. ht denotes hours worked in period t. The control variable, u(t) = (ctM, ctN), where ctM and ctN denote consumption purchased in the market and consumption at home in period t, respectively. The value function V(ktM, ktN, ht) denotes the maximum lifetime expected discounted utility that can be attained with capital stocks ktM, ktN, and hours worked ht.
The Recursive Competitive Equilibrium (RCE) is defined as a set of sequences of agents' optimal decision rules and firms' optimal production decisions, which satisfy all of the following conditions:
For the market and non-market sectors, the optimal decisions of agents imply that the sum of their optimal decisions solves the corresponding sector's resource constraints.
For each agent, the optimal decision rule maximizes lifetime expected discounted utility subject to the lifetime budget constraint, given the production decisions of firms.
The optimal production decisions of firms maximize the present discounted value of profits, given the optimal decisions of agents.
The resulting sequences of prices, wages, and rental rates satisfy market clearing conditions at each point in time.
The equilibrium allocation steady-state capital/output ratio in each sector is as follows:
The production function for sector M is: f(k,h)=kMθh1−θMAnd, the budget constraint for the market sector can be written as:
ctM + itMA + itN = wt ht M + r ktM −1 − itM
So, the steady-state capital/output ratio in the market sector is: kM / yM = [θ/(1/β − (1−δ))]1/1−θ where yM is the output of the market sector.
Similarly, for the non-market sector, we have:
g(k,h) = kNθh1−θN
And, the budget constraint for the non-market sector can be written as:
ctN = (1 − ht)
And, the steady-state capital/output ratio in the non-market sector is: kN / yN = [θ / (D/β − (1−δ))]1/1−θ where yN is the output of the non-market sector.
The social planner solves the problem of maximising the welfare of all the agents in the economy. This means that the planner maximizes the lifetime expected discounted utility of all agents subject to the resource constraints and given the optimal production decisions of firms. Thus, the social planner's problem is given by:
where, V is the lifetime expected discounted utility of all agents.
Using the Lagrange method, we obtain the following first-order conditions for the maximization problem:
Where, λtM, λtN, λtH are the Lagrange multipliers that arise from the constraints, and δV / δktM and δV / δktN are the shadow prices of the capital stocks in the market and non-market sectors respectively. Setting the partial derivatives equal to zero, we get:
and
Comparing these to the expressions for the private agents, we can see that the social planner chooses the same level of capital stocks in each sector as the private agents. Thus, the steady-state capital/output ratio for each sector is the same as that derived for the RCE.
The parameters A and D in the utility function can be determined by estimating the utility function from survey data. In particular, we can estimate the elasticity of substitution between consumption in the home and market sectors as well as the elasticity of substitution between leisure and consumption in the market sector from survey data. These estimates can then be used to back out the values of A and D that would be consistent with the observed behavior of households.
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Suppose the demand for wheat is = 28 − 2P, and the supply function is = 4 + 4P,
where P is the price of wheat in $/bushel, and Q is the quantity in billions of bushels.
a) Find the equilibrium price and quantity if wheat is bought and sold in a competitive market.
b) Suppose that in an effort to help wheat farmers, the government introduces a price support – the new supported price is $5/bushel. How much will farmers want to produce under the $5/bushel price support? Will the market clear without further government intervention?
c) How much wheat will consumers purchase under the price support, assuming that the government can prevent re-selling below the $5 price? Are consumers better off or worse off relative to the free market? By how much?
d) If the government purchases the surplus, how much will it need to spend? Does the government purchase affect how you think about the net effects of the price support on consumers?
e) What will be the benefit to farmers from the price support + surplus purchase, relative to the free market?
a) To find the equilibrium price and quantity in a competitive market, we need to set the demand equal to the supply and solve for P and Q.
Demand function: Qd = 28 - 2P
Supply function: Qs = 4 + 4P
Setting Qd equal to Qs:
28 - 2P = 4 + 4P
Simplifying the equation:
24 = 6PbP = 4
Substituting the value of P back into either the demand or supply function, we can find the equilibrium quantity:
Q = Qd = Qs
Q = 28 - 2P
Q = 28 - 2(4)
Q = 20
Therefore, the equilibrium price is $4/bushel and the equilibrium quantity is 20 billion bushels.
b) With a price support of $5/bushel, farmers will want to produce the quantity that corresponds to the price support level according to the supply function:
Qs = 4 + 4P
Qs = 4 + 4(5)
Qs = 24 billion bushels
The market will not clear without further government intervention because the quantity supplied (24 billion bushels) exceeds the quantity demanded at the price support level.
c) Assuming the government can prevent re-selling below the $5 price, consumers will purchase the quantity that corresponds to the price support level according to the demand function:
Qd = 28 - 2P
Qd = 28 - 2(5)
Qd = 18 billion bushels
In the free market, consumers would have purchased 20 billion bushels. Therefore, under the price support, consumers are worse off by 2 billion bushels.
d) The surplus is the quantity supplied (24 billion bushels) minus the quantity demanded (18 billion bushels) at the price support level:
Surplus = Qs - Qd
Surplus = 24 - 18
Surplus = 6 billion bushels
If the government purchases the surplus, it will need to spend the surplus quantity multiplied by the price support level:
Government spending = Surplus * Price support
Government spending = 6 * 5
Government spending = $30 billion
The government purchase does not affect how we think about the net effects of the price support on consumers.
e) The benefit to farmers from the price support and surplus purchase, relative to the free market, is the difference between the price support and the equilibrium price, multiplied by the quantity purchased by the government:
Benefit to farmers = (Price support - Equilibrium price) * Surplus
Benefit to farmers = (5 - 4) * 6
Benefit to farmers = $6 billion
Therefore, farmers benefit by $6 billion from the price support and surplus purchase, relative to the free market.
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True or False:
37. Grievance Arbitrators normally have powers in equity to make changes in collective bargaining agreement provisions that they deem are unfair.
38. The President of the United States and not the National Labor Relations Board appoints the General Counsel to oversee the prosecution of cases that allege violations of the National Labor Relations Act.
37. Grievance Arbitrators normally have powers in equity to make changes in collective bargaining agreement provisions that they deem unfair. This statement is false. 38. The President of the United States and not the National Labor Relations Board appoints the General Counsel to oversee the prosecution of cases that allege violations of the National Labor Relations Act. This statement is true.
37. False. Grievance Arbitrators do not have powers in equity to make changes in collective bargaining agreement provisions that they deem unfair. Their role is to interpret and apply the provisions of the existing agreement, rather than making changes to it.
Grievance Arbitrators are typically neutral third parties who help resolve disputes between employers and unions regarding the interpretation or application of the collective bargaining agreement. They do not have the authority to unilaterally modify the agreement.
38. True. The President of the United States appoints the General Counsel of the National Labor Relations Board (NLRB). The General Counsel is responsible for overseeing the prosecution of cases that allege violations of the National Labor Relations Act (NLRA).
The General Counsel has the authority to investigate and prosecute unfair labor practice charges, conduct representation elections, and provide legal advice to the NLRB. The General Counsel's appointment is subject to Senate confirmation, and their term typically lasts for four years.
It is important to note that the NLRB is an independent federal agency that administers and enforces the NLRA, which protects the rights of employees to organize and engage in collective bargaining.
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1. In terms of raising funds to conduct operations, or to start a business there are more choices today than there were even five years ago. A large part of this variety is due to the creation of "crowdfunding" platforms. As is usually the case with Investopedia.com they offer a useful definition https://www.investopedia.com/terms/c/crowdfunding.asp If have developed answers that rely on the work of others, you must cite them - citations do not have to be in "traditional style" but they should at least be a url that the instructor can find and check. a. How might the problem of adverse selectin arise in crowdfunding? Explain at least 1 instance that confronts either/or the lender and/or borrower. b. How might the problem of moral hazard arise in crowdfunding? Explain at least I. instance that confronts either/or the lender and/or the borrower.
Crowdfunding platforms have increased the choices for raising funds for operations or starting a business.
However, they also pose certain challenges such as adverse selection and moral hazard.
a. Adverse selection refers to the problem of attracting borrowers who are riskier than the average borrower.
In crowdfunding, this can arise when lenders are unable to distinguish between high-quality and low-quality borrowers.
For example, a borrower may misrepresent their project's potential or hide critical information, leading lenders to invest in projects that are more likely to fail.
b. Moral hazard is the risk that borrowers may take excessive risks or behave irresponsibly once they have received the funds.
In crowdfunding, this can occur when borrowers have little or no personal investment in the project.
For instance, if a borrower receives the funds upfront without any accountability, they may not put in the necessary effort to ensure project success.
In both cases, adverse selection and moral hazard can result in lenders losing their investments or borrowers receiving funds without fulfilling their obligations.
Crowdfunding platforms need to implement mechanisms to address these issues, such as conducting due diligence on borrowers, requiring borrowers to have some personal investment, or establishing transparent reporting mechanisms.
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The biggest disadvantage of secondary data is: That they cannot be used for forecasting purposes. That it is generally more expensive to collect secondary data than primary data. That they are generally qualitative in nature. That they not meeting the specific needs of the particular situation or setting
The statement "That they not meeting the specific needs of the particular situation or setting" is the biggest disadvantage of secondary data.
One major drawback of secondary data is that it may not align with the specific needs of a particular situation or setting. Since secondary data is collected for purposes other than the current research or analysis, it may lack the necessary details, variables, or specific context required for a particular study.
The data may not be comprehensive enough or may not cover the specific geographical or temporal scope needed. This limitation can affect the accuracy and relevance of the analysis and can lead to biased or incomplete findings.
Furthermore, secondary data may also suffer from issues of reliability and validity. The original data source may have limitations in terms of data quality, data collection methods, or the representativeness of the sample. Researchers have limited control over the data collection process and may not have access to information about potential biases or limitations in the original study.
In contrast, primary data collected specifically for the research purpose allows researchers to design data collection methods that meet their specific needs, ensuring relevance and accuracy. Primary data collection methods, such as surveys or experiments, provide more control over data collection and can be tailored to capture the required information accurately.
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Which of the following are common critiques of cost-benefit analysis (CBA)? (Select all that apply.)
a. Putting a value on the environment "cheapens" it.
b. CBA values are derived only from what humans value.
c. Because CBA doesn't measure costs and benefits in dollar terms, it is difficult to compare them.
d. CBAs cannot account for benefits and costs that occur at different points in time
e. CBA implicitly assumes some sort of social welfare function.
The common critiques of cost-benefit analysis (CBA) include: Putting a value on the environment "cheapens" it, CBA values are derived only from what humans value.
CBAs cannot account for benefits and costs that occur at different points in time. CBA implicitly assumes some sort of social welfare function.
Option A , B , D, E are correct.
This critique suggests that CBA may not adequately capture the full range of impacts and values associated with a particular decision or policy. Because CBA doesn't measure costs and benefits in dollar terms, it is difficult to compare them: CBA relies on the monetization of costs and benefits, which means that all impacts are converted into monetary values for comparison.
This approach is criticized because it assumes that all costs and benefits can be quantified in dollar terms, which may not always be accurate or feasible. d. CBAs cannot account for benefits and costs that occur at different points in time: Time inconsistency is another critique of CBA.
CBAs often struggle to accurately account for the timing of costs and benefits, especially when they occur over long time horizons. Some impacts may have significant consequences in the future, but CBA might not fully consider or appropriately discount these future impacts.
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Supply Chain Management (SCM) and Logistics may overlap at times. There are, however, some key differences between the two.
i. Differentiate SCM and Logistics through their objectives. (4 marks)
ii. Identify any TWO (2) types of party logistic provider with its respective definition.
Warehouse 3PL providers help companies optimize their distribution centers, improve inventory accuracy, and enhance order fulfillment processes. They enable businesses to leverage shared warehouse spaces and expertise, reducing operational costs and improving overall supply chain efficiency.
i. Differentiating SCM and Logistics through their objectives:
Supply Chain Management (SCM) Objectives: SCM focuses on the efficient coordination and integration of various activities involved in the entire supply chain network, from raw material sourcing to final product delivery. The key objectives of SCM include:
Maximizing customer satisfaction by ensuring product availability, quality, and timely delivery.
Optimizing inventory levels to minimize holding costs while meeting demand.
Streamlining communication and collaboration between suppliers, manufacturers, distributors, and retailers.
Minimizing overall supply chain costs while maintaining quality and service levels.
Enhancing supply chain visibility and responsiveness to market changes.
Logistics Objectives: Logistics primarily focuses on the physical movement and management of goods from one location to another within the supply chain. The key objectives of logistics include:
Ensuring the timely and accurate delivery of products to customers.
Optimizing transportation routes, modes, and networks to minimize costs and transit times.
Efficiently managing warehousing and inventory to facilitate order fulfillment.
Providing effective packaging, labeling, and handling of goods to prevent damage and loss.
Managing reverse logistics processes such as returns and repairs.
ii. Two types of third-party logistics (3PL) providers:
Transportation 3PL Provider: A transportation 3PL provider specializes in managing and executing transportation-related activities within the supply chain. They handle tasks such as freight forwarding, carrier selection and negotiation, route optimization, and shipment tracking. These providers ensure efficient and cost-effective movement of goods from one point to another, utilizing their expertise, network, and resources in transportation management.
Warehouse 3PL Provider: A warehouse 3PL provider focuses on the management of warehousing and distribution operations. They offer services such as storage, inventory management, order fulfillment, pick and pack, and value-added services like kitting or labeling. Warehouse 3PL providers help companies optimize their distribution centers, improve inventory accuracy, and enhance order fulfillment processes. They enable businesses to leverage shared warehouse spaces and expertise, reducing operational costs and improving overall supply chain efficiency.
Please note that the definitions provided here are general and serve as examples. The actual scope and services offered by 3PL providers can vary based on their capabilities and specific industry requirements.
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Jess and Herbert work in the LEAP Lab and are paid $200 per week. The earnings of tutors rise to $300 per week and Iris and Jake decide to also work in the LEAP lab. By how much has total producer surplus risen following the raise?
Less than $100
Between $100 and $200
Between $200 and $300
More than $300
The total producer surplus has risen by more than $300 following the raise for the given earning $200 per week . The correct option is "More than $300".
To understand why, let's break down the steps. Initially, Jess and Herbert were the only tutors working in the LEAP Lab and were earning $200 per week. The total producer surplus at that time was $200.
When the earnings of tutors rise to $300 per week, Iris and Jake decide to join the LEAP Lab as well. Now, there are four tutors in total, with each earning $300 per week.
To calculate the new total producer surplus, we need to find the difference between the new earnings of all tutors and their initial earnings, and then add them up.
For Jess and Herbert, their earnings have increased by $100 per week each (from $200 to $300), so the increase in their producer surplus is
$100 + $100 = $200.
For Iris and Jake, their earnings are entirely new, so their producer surplus increase is
$300 + $300 = $600.
Finally, we add up all the individual increases in producer surplus:
$200 (Jess and Herbert) + $600 (Iris and Jake)
= $800. The correct option is "More than $300".
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The most widely used method for determining the duties and responsibilities of a job is:
a. Interview
b. Direct observation
c. Participation diary/log
d. The PAQ
The correct answer is option d. The most widely used method for determining the duties and responsibilities of a job is the Position Analysis Questionnaire (PAQ). The PAQ is a standardized job analysis instrument that consists of a series of questions used to collect information about various aspects of a job.
The PAQ is designed to provide a detailed and comprehensive description of a job by collecting data on job characteristics such as physical demands, skill requirements, decision-making authority, and communication requirements. It helps to ensure that all important aspects of a job are considered and accurately represented.
The PAQ consists of 194 items that cover six major job dimensions: information input, mental processes, work output, relationships with other people, job context, and other job characteristics. Each item is rated on a scale that measures the extent to which it applies to the job being analyzed.
By using the PAQ, organizations can ensure that job descriptions are accurate, reliable, and consistent. This helps in various HR functions such as recruitment, selection, performance evaluation, and compensation. The PAQ provides a systematic and structured approach to job analysis, making it the most widely used method in determining the duties and responsibilities of a job.
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Assume that the consumption function is given by C = 200 + 0, 75(Y − T ). Investment is 100; government purchases and taxes are both 100.
a)This economy has TODAY a GDP of 1700, is this an equilibrium level of GDP? (HINT: Find the AS the AD and compare them).
b)Will the GDP NEXT WEEK increase or decrease? (HINT: looking to your previous answer see if AS is lower or higher than AD, then think what will happen to production in order to bring the economy back to equilibrium)
c)What is the equilibrium level of income (GDP)? ii) Describe the process that brings the economy back to equilibrium (using the MAGIC of words).
d)If government purchases increase to 125, what is the new equilibrium income?. E)What level of government purchases is needed to achieve an income of 1,600?
a) The consumption function C = 200 + 0.75(Y - T) represents the relationship between consumption and income (GDP). Given investment of 100, government purchases and taxes of 100 each, we can calculate the equilibrium GDP. Substituting the values into the aggregate demand equation Y = C + I + G, we find Y = 1,300.
b) With a current GDP of 1,700 above the equilibrium level of 1,300, there is an excess of demand (inflationary gap).
Consequently, GDP will decrease in the next week as prices increase due to the higher spending levels, bringing the economy back to equilibrium.
c) The equilibrium level of income is 1,300, where aggregate demand (AD) and aggregate supply (AS) intersect.
The process that returns the economy to equilibrium is known as the multiplier process, with a multiplier of 4 in this case.
d) If government purchases increase to 125, the new equilibrium GDP becomes 1,800.
e) Achieving an income of 1,600 is not possible in this economy, as the calculation results in a negative value for government purchases (G).
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Sheridan Company has 1,760 pounds of raw materials in its December 31, 2021, ending inventory. Required production for January and February of 2022 are 3.520 and 4,400 units, respectively. Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 25% of next month's materials requirements.
Prepare the direct materal budget for January.
To prepare the direct material budget for January, we need to calculate the raw materials required for production and the desired ending inventory.
First, calculate the total pounds of raw materials required for production in January. Multiply the required units (3,520) by the pounds of raw materials needed per unit (2). This gives us a total of 7,040 pounds of raw materials required.
Next, calculate the desired ending inventory. This is equal to 25% of the next month's material requirements (February).
Multiply the material requirements for February (4,400 units) by the pounds of raw materials needed per unit (2), then multiply by 25% (0.25). This gives us a desired ending inventory of 2,200 pounds. Now, calculate the total raw materials needed for January. Add the raw materials required for production (7,040 pounds) to the desired ending inventory (2,200 pounds). This gives us a total of 9,240 pounds of raw materials needed for January.
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The following question will require you to upload an attachment for some of your answers. Consider an economy with two producers, Sidney and Connor. Each allocates 8 hours per day between the production of chocolate and bananas. Given 8 hours of labour, Sidney can produce 80 kg of chocolate or 16 kg of bananas. Connor can produce either 2 kg of chocolate or 4 kg of bananas per hour. a) No Trade i) In separate diagrams, show the production possibilities frontier for both Sidney and Connor. Put bananas on the horizontal axis and chocolate on the vertical axis. (4 points) ii)What is the opportunity cost of bananas for both Sidney and Connor if there is no trade? (2 points) b) Introducing Trade i) Suppose production capacity does not change. Do we expect there to be trade between Sidney and Connor? Why or why not? (2 points) ii) What are the bounds on the price of bananas (in terms of chocolate) if there is trade? In other words, what range must the price of bananas fall within? (1 point) iii) Assume a price of 4. In other words, 1 kg of bananas cost 4 kg of chocolate. Explain why trade is likely to make both Sidney and Connor better off in this case. (1 point)
Trade is the exchange of goods or services between individuals, businesses, or countries. It plays a fundamental role in the global economy, facilitating economic growth, specialization, and improved living standards.
a) No Trade:
i) The production possibilities frontiers for Sidney and Connor without trade can be represented in separate diagrams, with bananas on the horizontal axis and chocolate on the vertical axis.
ii) The opportunity cost of bananas for Sidney is 5 kg of chocolate (80 kg of chocolate divided by 16 kg of bananas) and for Connor is 0.5 kg of chocolate (2 kg of chocolate divided by 4 kg of bananas).
b) Introducing Trade:
i) With unchanged production capacity, trade between Sidney and Connor is expected. Since their opportunity costs for producing bananas differ, both producers can benefit from specializing in the production of the good in which they have a comparative advantage and engaging in trade.
ii) The price of bananas in terms of chocolate must fall within the range of 0.5 kg to 5 kg of chocolate, as these represent the opportunity costs of bananas for Connor and Sidney, respectively.
iii) Assuming a price of 4 (1 kg of bananas costs 4 kg of chocolate), trade is likely to make both Sidney and Connor better off. Sidney's opportunity cost of producing 1 kg of bananas is 5 kg of chocolate, but through trade, they can acquire 1 kg of bananas by giving up only 4 kg of chocolate. Similarly, Connor's opportunity cost of 1 kg of bananas is 0.5 kg of chocolate, and through trade, they can obtain 1 kg of bananas by sacrificing only 4 kg of chocolate. Therefore, both producers can gain more of the other good by engaging in trade.
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There is a 25% chance that Seattle will build a new basketball stadium in the next five years. If the stadium is built, there is a 60% chance that Seattle will get a new expansion NBA team. If the stadium is not built, there is only a 15% chance that Seattle will get a new expansion NBA team. Using a probability tree, determine the probability that Seattle will get a new expansion NBA team.
There is a 21% chance that Seattle will get a new expansion NBA team based on the given probabilities.
To determine the probability that Seattle will get a new expansion NBA team, we can use a probability tree. Let's break it down step by step:
1. Start by drawing a tree diagram. Label the first branch as "Stadium built" and the second branch as "Stadium not built".
2. Assign the probabilities to each branch. The probability of the stadium being built is 25% or 0.25, and the probability of the stadium not being built is 75% or 0.75.
3. Now, focus on the "Stadium built" branch. Label the next branches as "New NBA team" and "No new NBA team".
4. Assign the probabilities to each branch. The probability of getting a new NBA team, given that the stadium is built, is 60% or 0.6. The probability of not getting a new NBA team, given that the stadium is built, is 40% or 0.4.
5. Next, focus on the "Stadium not built" branch. Label the next branches as "New NBA team" and "No new NBA team".
6. Assign the probabilities to each branch. The probability of getting a new NBA team, given that the stadium is not built, is 15% or 0.15. The probability of not getting a new NBA team, given that the stadium is not built, is 85% or 0.85.
7. Finally, multiply the probabilities along each path to find the overall probability. Multiply the probabilities along the path "Stadium built" → "New NBA team" (0.25 * 0.6) and the path "Stadium not built" → "New NBA team" (0.75 * 0.15). Then, add the results: (0.25 * 0.6) + (0.75 * 0.15).
By calculating the expression above, we find that the probability of Seattle getting a new expansion NBA team is 0.21 or 21%.
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Your grandmother bought an annuity from Manulife Financial for
$467 462 when she retired. In exchange for the $467 462, Manulife
will pay her $30,000 per year until she dies. The interest rate is
5%.
If she receives payments for 10 years, the present value of the annuity remaining at the end of the tenth year would be $349,907.67. If she dies after receiving payments for 10 years, the remaining amount in the annuity would be $467,462- $349,907.67 = $117,554.33.
Your grandmother has bought an annuity from Manulife Financial for 467 462 when she retired. For that amount, Manulife will pay her 30,000 per year until she dies. The interest rate is 5%. Now, we need to determine how much is left in the annuity at the time of her death after she has been receiving payments for a certain number of years. In order to find out how much is left in the annuity after a certain number of years, we will use the present value of an annuity formula given below: PV = \frac{A(1 - (1 + r)^{-n})}{r} Here, PV is the present value of annuity A is the amount of the annuity, which is $30,000 per year n is the number of years the annuity is paid r is the interest rate per period, which is 5% Converting 5% into decimal form, we get r = 0.05 For example, if she receives payments for 10 years, the present value of the annuity remaining at the end of the tenth year would be:$$PV = \frac{30000(1 - (1 + 0.05)^{-10})}{0.05} \implies PV = \frac{30000(1 - 0.37689)}{0.05}$$The value of PV is $349,907.67. This means that at the end of the tenth year, the value of the annuity would be $349,907.67. Now, to find the amount left in the annuity at the time of her death after she has been receiving payments for a certain number of years, we just need to use the present value of annuity formula again and put the remaining years in place of n in the formula and subtract the answer we get from $467,462 to get the remaining amount in the annuity.
If she receives payments for 10 years, the present value of the annuity remaining at the end of the tenth year would be $349,907.67. If she dies after receiving payments for 10 years, the remaining amount in the annuity would be $467,462- $349,907.67 = $117,554.33.
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Suppose a monopolist has a production function given by Q=L¹/2K¹/2. Therefore, MPL = K¹/2 2[¹/2, and MPK: = [¹/2 2K¹/2 The monopolist can purchase labor, L at a price w = 16, and capital, K at a price of r = 9. The demand curve facing the monopolist is P = 360 - 2Q. a) (8 points) What is the monopolist's total cost function? b) (4 points) How much output should the monopolist produce in order to maximize profit? c) (6 points) How much labor should the firm hire to produce this output? d) (4 points) How Much Capital should the firm hire? e) (4 points) What price should the monopolist charge? f) (4 points) What is the deadweight loss? g) (4 points) What is the Price Elasticity of Demand at the profit-maximizing price and quantity?
The monopolist should produce 112.5K^(1/2) units of output in order to maximize profit.
The monopolist's total cost function is given by
TC = wL + rK.
Here, w = 16 and r = 9.
Thus, TC = 16L + 9K.
The monopolist aims to maximize profit by producing where MR = MC.
MR is the marginal revenue curve, which can be found by taking the derivative of the demand curve:
MR = d(PQ)/dQ = 360 - 4Q.
MC is the marginal cost curve, which is the derivative of the total cost function:
MC = dTC/dQ = 8L/K.
Setting MR = MC and solving for Q, we get:
360 - 4Q = 8L/KQ = 90 - 2L/K.
Substituting Q into the production function, we get:
Y = (K/2)^(1/2)(90 - 2L/K)^(1/2) = 3K^(1/2)(90 - 2L/K)^(1/2).
Now we can solve for L that maximizes profit. The profit function is given by:
π = PY - TC = (360 - 2Q)Q - (16L + 9K).
Substituting Q, we get:
π = (360 - 2(90 - 2L/K))(90 - 2L/K) - 16L - 9K = 4L^(3/2)(5K - L)/K^(1/2) - 16L - 9K.
To maximize profit, we take the derivative of the profit function with respect to L and set it equal to zero:
π' = 6L^(1/2)(5K - L)/K^(1/2) - 4L^(3/2)/K^(1/2) - 16 = 0.
Solving for L, we get:
L = 15K/4.
Substituting L back into the production function, we get:
Q = 112.5K^(1/2).
Therefore, the monopolist should produce 112.5K^(1/2) units of output in order to maximize profit.
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please full explanation Problem:State preference theory Mr.BEn has initial wealth Wo-$12,000 and faces an uncertain future that he partitions into three states,S=1,S=2,and S=3.He can invest in three securities,J,K,L,with initial prices of P=$5.2,Pk=$4,and P=$4,and the following payoffs table: Payoffs Security S=1 S=2 S=3 $6 $2 $8 $10 K $8 $o 7 $5 $5 $5 1.Form a portfolio including securities J,K,and Lthat can achieve the /$15,680 following payoff structure $1,680 Compute its price.Could Mr. $23.300 BEn buy this portfolio? 2.Form all the pure securities using the traded assets 3.Find the price of pure securities and compute the risk free rate. 4. YY is a new company considering offering their shares to the market. $1 Each YY stock will achieve the following payoffs$10 Are there any $25 arbitrage profits that can be realized if the offering price is S11? If yes present the arbitrage strategy and its outcome.
To form a portfolio with a desired payoff structure, find the pure securities, compute the risk-free rate, and determine the possibility of arbitrage profits in the case of YY offering their shares to the market.
State preference theory to form a portfolio with the desired payoff structure, we need to determine the weights to allocate to securities J, K, and L. Let's assume the weights as x, y, and z, respectively.
1. To form a portfolio including securities J, K, and L that can achieve a payoff structure of $15,680, we need to determine the number of shares of each security to buy.
Let's assume Mr. Ben buys x shares of security J, y shares of security K, and z shares of security L.
The payoff of security J
in state S=1 is $6,
in state S=2 is $2, and
in state S=3 is $8.
So the total payoff from security J
in the portfolio is 6x + 2x + 8x = 16x. Similarly, the total payoff from security K in the portfolio is 8y + 0y + 7y = 15y.
And the total payoff from security L in the portfolio is 5z + 5z + 5z = 15z.
To achieve a payoff structure of $15,680, we set up the following equation:
16x + 15y + 15z = 15,680
Now, we need to compute the price of the portfolio. The price of security J is $5.2, the price of security K is $4, and the price of security L is $4. So the price of the portfolio would be:
Price of the portfolio = (5.2x) + (4y) + (4z)
To determine if Mr. Ben can buy this portfolio, we need to check if his initial wealth of $12,000 is sufficient. If the price of the portfolio is less than or equal to his initial wealth, he can buy it. Otherwise, he cannot.
2.To find the price of pure securities and compute the risk-free rate, we need to compare their payoffs with the risk-free payoff. Let's assume the risk-free payoff is R.
For security J, the payoff is $6(1) + $2(0) + $8(0)
= $6.
For security K, the payoff is $2(0) + $0(1) + $7(0)
= $0.
For security L, the payoff is $8(0) + $7(0) + $5(1)
= $5.
3.To find the price of pure securities and compute the risk-free rate, we need more information about the payoffs of the pure securities. The question does not provide the payoffs for individual securities, so we cannot calculate the price or risk-free rate in this case.
4.For the new company YY offering their shares to the market, we need to determine if there are any arbitrage profits that can be realized if the offering price is S11. To determine this, we need to compare the payoff of YY stock with the other securities in the market. If the payoff of YY stock is higher than the other securities, there could be an arbitrage opportunity.
we discussed the steps to form a portfolio with a desired payoff structure, find the pure securities, compute the risk-free rate, and determine the possibility of arbitrage profits in the case of YY offering their shares to the market.
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The following information relates to a company's accounts receivable: gross accounts receivable balance at the beginning of the year, $490,000; allowance for uncollectible accounts at the beginning of the year, $38,000 (credit balance); credit sales during the year, $1,900,000; accounts receivable written off during the year, $29,000; cash collections from customers, $2,050,000. Assuming the company estimates that future bad debts will equal 11% of the year-end balance in accounts receivable. 1. Calculate bad debt expense for the year. 2. Calculate the year-end balance in the allowance for uncollectible accounts. Answer is not complete. $ 209,000 Bad debt expense Ending balance 2.
To calculate the bad debt expense for the year, we need to determine the year-end balance in the allowance for uncollectible accounts.
1. To calculate the bad debt expense, we can use the percentage of the year-end balance in accounts receivable. The credit sales during the year were $1,900,000. Since the company estimates future bad debts to be 11% of the year-end balance in accounts receivable, we can calculate the year-end balance as follows:
Year-end balance in accounts receivable = Beginning balance + Credit sales - Accounts receivable written off - Cash collections from customers
Year-end balance in accounts receivable = $490,000 + $1,900,000 - $29,000 - $2,050,000
2. After calculating the year-end balance in accounts receivable, we can determine the bad debt expense for the year by multiplying it by the estimated percentage of future bad debts:
Bad debt expense = Year-end balance in accounts receivable * Estimated percentage of future bad debts
Bad debt expense = Year-end balance in accounts receivable * 11%
The year-end balance in the allowance for uncollectible accounts is not provided in the given information. It can be calculated by subtracting the beginning balance from the bad debt expense:
Ending balance in the allowance for uncollectible accounts = Bad debt expense - Beginning balance of the allowance for uncollectible accounts
Please provide the beginning balance of the allowance for uncollectible accounts in order to calculate the year-end balance.
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The demand and supply for headphones are given as:
Qd= 60- 4P
Qs =4P-20
If the government imposes a $6 price ceiling, what would be the full economic price? What would be the non-pecuniary price? what is the consumer surplus? what is the deadweight loss?
1. Full economic price $:
2. Non-pecuniary price $:
3. CS $:
4. DWL $:
1. Full economic price $: $10
2. Non-pecuniary price $: $6
3. CS $: $72
4. DWL $: $32
Stepwise calculation is given below:
1. To find the full economic price, we need to determine the price at which the quantity demanded (Qd) equals the quantity supplied (Qs).
Given:
Qd = 60 - 4P
Qs = 4P - 20
2. To find the equilibrium price, we set Qd equal to Qs:
60 - 4P = 4P - 20
Simplifying the equation, we get:
80 = 8P
Dividing both sides by 8, we find:
P = 10
So, the equilibrium price without any government intervention is $10.
3. Now, let's consider the case where the government imposes a price ceiling of $6.
If the price is capped at $6, we substitute this value into the demand and supply equations to find the corresponding quantities:
Qd = 60 - 4(6) = 60 - 24 = 36
Qs = 4(6) - 20 = 24 - 20 = 4
4. The full economic price refers to the equilibrium price, which is $10. However, with the price ceiling, the price is limited to $6, which is the non-pecuniary price.
1. Full economic price $: $10
2. Non-pecuniary price $: $6
5. To find the consumer surplus, we calculate the area between the demand curve and the price line. In this case, it is the area of the triangle with base 36 and height (10-6=4), divided by 2:
CS = (1/2) * base * height = (1/2) * 36 * 4 = 72
Therefore, the consumer surplus is $72.
3. CS $: $72
6. To find the deadweight loss (DWL), we need to compare the quantity exchanged at the non-pecuniary price ($6) with the quantity exchanged at the equilibrium price ($10). The difference represents the loss in efficiency caused by the price ceiling.
At the non-pecuniary price:
Qs = 4(6) - 20 = 4
At the equilibrium price:
Qs = 4(10) - 20 = 20
The difference is 20 - 4 = 16.
7. DWL is the triangle formed by the reduction in quantity (16) and the difference between the non-pecuniary price and the equilibrium price (10-6=4), divided by 2:
DWL = (1/2) * base * height = (1/2) * 16 * 4 = 32
Therefore, the deadweight loss is $32.
4. DWL $: $32
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