Make a table with 3 columns (Smith, Malthus, Ricardo) and a number of rows to describe the multiple theories of rent that each economist presented in his writings. Be sure to distinguish the views on rent of each economist from the other economists (the between dimension) and the differing views of each economist himself (the within or between-row dimension). Include references to how each economist treated demand and price for output, if he did, in each theory. Comment on the sentence from Malthus, "Corn is not high because a rent is paid but a rent is paid because corn is high." What conclusions can you draw from your table?
Answers
From the table, we can conclude that each economist had a unique perspective on rent. Smith focused on land fertility, Malthus emphasized population growth, and Ricardo incorporated the concept of diminishing returns. The sentence from Malthus highlights the idea that high corn prices lead to the payment of rent, suggesting that rent is a consequence of market forces rather than a cause.
1. Adam Smith: According to Smith, rent arises due to the differential fertility of land. He believed that rent is a natural consequence of land ownership and the demand for agricultural products. Smith did not specifically address the relationship between rent and demand or price.
2. Thomas Malthus: Malthus believed that rent arises due to the increasing population and the limited supply of land. He argued that the increasing demand for food drives up the price of agricultural products, resulting in the payment of rent. Malthus stated, "Corn is not high because a rent is paid, but a rent is paid because corn is high." This suggests that rent is a consequence of high food prices caused by population growth.
3. David Ricardo: Ricardo expanded on Malthus' ideas and introduced the concept of the law of diminishing returns. He argued that rent arises due to the decreasing productivity of land as more resources are used. Ricardo believed that rent is determined by the difference in productivity between the best land and marginal land. He also discussed the relationship between rent, demand, and price.
From the table, we can conclude that each economist had a unique perspective on rent. Smith focused on land fertility, Malthus emphasized population growth, and Ricardo incorporated the concept of diminishing returns. The sentence from Malthus highlights the idea that high corn prices lead to the payment of rent, suggesting that rent is a consequence of market forces rather than a cause. The table helps us understand the different theories and viewpoints of these economists regarding rent.
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The table with three columns for Smith, Malthus, and Ricardo is intended to describe the theories of rent presented by each economist in their writings.
Let's break down the steps to create the table and discuss the views of each economist on rent, as well as their treatment of demand and price for output.
1. Create a table with three columns: Smith, Malthus, and Ricardo.
2. In the rows, describe the theories of rent presented by each economist.
3. Differentiate the views on rent of each economist from the others (the between dimension).
4. Analyze the differing views of each economist on rent (the within or between-row dimension).
5. Include references to how each economist treated demand and price for output in each theory.
Now, let's discuss each economist's views on rent and their treatment of demand and price for output:
- Adam Smith: In his theory of rent, Smith believed that rent was a result of differential fertility. He argued that rent arose due to the superior productivity of some lands compared to others. Smith focused on the supply side and did not extensively discuss the role of demand or price for output in relation to rent.
- Thomas Malthus: Malthus' theory of rent emphasized the relationship between rent, land fertility, and price. He argued that as population increased, lower-quality land would be cultivated, leading to a rise in food prices and subsequently, rent. Malthus believed that rent was a consequence of high corn prices. He emphasized the importance of demand and price for output in determining rent.
- David Ricardo: Ricardo's theory of rent built upon Malthus' ideas but also incorporated the concept of diminishing returns. Ricardo believed that rent was a result of the scarcity of fertile land. He argued that as population increased, less productive land would be used, leading to higher food prices and rent. Ricardo acknowledged the role of both demand and price for output in determining rent.
Regarding Malthus' sentence, "Corn is not high because a rent is paid, but a rent is paid because corn is high," we can infer that Malthus believed that high corn prices drove the payment of rent, rather than the other way around.
In conclusion, the table can be used to compare and contrast the theories of rent presented by Smith, Malthus, and Ricardo. It highlights the differences between their views on rent and how they treated demand and price for output in their theories. The table provides a comprehensive overview of the multiple theories of rent put forward by each economist, aiding in understanding the nuances of their respective perspectives.
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Related Questions
If the annual growth of real GDP per capits is 2% rether than 1.5%, you would expect the standard of ining to double in about. Ritwers A⋅L 20 years 36 yoars. 48 years. 50 yean. E 72years.
Answers
If the annual growth of real GDP per capita is 2% rather than 1.5%, you would expect the standard of living to double in about 36 years.
Real GDP per capita is a measure of economic output that accounts for population. It is calculated by dividing real GDP by the total population. A rise in real GDP per capita generally indicates a rise in the average standard of living.
Standard of living refers to the level of wealth, comfort, material goods, and necessities that are available to an individual or a community. A higher standard of living indicates a higher quality of life and better access to resources and opportunities.
The rule of 70 is often used to estimate the time it takes for real GDP per capita to double. The rule of 70 states that the doubling time is approximately 70 divided by the annual growth rate.
Using this rule, we can estimate that if the annual growth rate of real GDP per capita is 2%, it would take approximately 70/2 = 35 years for real GDP per capita to double. Therefore, we would expect the standard of living to double in about 36 years (assuming a 2% annual growth rate), which is the closest option to the given answers.
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2. Do you really think the Bono case described in Ch. 2 is a
genuine ethical conflict? Explain.
6. Describe the ethical issue in the Siemens
case.
Answers
Bono case involves a conflict between personal interests and ethical responsibilities, while the Siemens case highlights widespread bribery and corruption.
2. In the Bono case, it is important to consider the conflict between Bono's personal interests and his public persona as an advocate for social causes. On one hand, Bono's investment in the company was driven by his desire to address poverty through business initiatives.
6. The Siemens case involves a significant ethical issue surrounding the company's involvement in bribery and corruption. Siemens engaged in a systematic scheme of bribing public officials, falsifying records, and evading regulations to secure contracts and gain an unfair advantage in multiple countries.
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Describe, in your own words, the (i) price effect, (ii) real income effect, and (iii) substitution effect from a price change.
Answers
The price effect reflects the direct impact of a price change on quantity demanded, the real income effect captures the change in purchasing power, and the substitution effect accounts for consumers' tendency to switch to substitutes in response to price changes.
The price effect, real income effect, and substitution effect are concepts used in economics to explain the impact of a price change on consumer behavior.
(i) Price effect: The price effect refers to the change in quantity demanded of a good or service as a result of a change in its price, assuming all other factors remain constant. When the price of a good increases, the quantity demanded usually decreases, and vice versa. This inverse relationship is due to the law of demand, which states that as the price of a good rises, consumers are willing to purchase less of it.
(ii) Real income effect: The real income effect is the impact of a price change on the purchasing power of consumers' income. When the price of a good decreases, consumers can buy more of it with the same amount of income. This increase in purchasing power leads to a higher level of satisfaction, or utility, for consumers. Conversely, when the price of a good increases, consumers can afford to purchase less of it, reducing their real income and utility.
(iii) Substitution effect: The substitution effect explains how consumers react to a price change by substituting one good for another. When the price of a good increases, consumers tend to switch to alternative goods that are relatively cheaper, resulting in a decrease in the quantity demanded of the more expensive good. Conversely, when the price of a good decreases, consumers may switch from alternative goods to the now relatively cheaper good, leading to an increase in the quantity demanded.
For example, let's consider a price increase for a popular brand of soda. The price effect suggests that consumers will buy less of the soda because of the higher price. The real income effect means that if consumers' income remains constant, they will have less purchasing power for other goods due to the increased price of the soda. Finally, the substitution effect predicts that consumers may switch to a different brand or type of beverage that is now relatively cheaper compared to the expensive soda.
In summary, the price effect reflects the direct impact of a price change on quantity demanded, the real income effect captures the change in purchasing power, and the substitution effect accounts for consumers' tendency to switch to substitutes in response to price changes. These effects work together to shape consumer behavior and market dynamics.
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Consider the following two situations. (i) You purchase a $10 movie ticket in advance over the Internet, but when arriving at the theater, you realize that you lost the ticket. The only way to see the movie is to purchase a new ticket. (ii) On the way to seeing a movie, you drop a $10 bill. You still can afford the movie, but you have lost the $10. How should you, a rational person, respond to the two situations? In each situation, you should not see the movie. In the first situation, you should skip the movie; in the second, you should still see the movie. You should still see the movie in both situations. You should respond the same way to each situation, whether it is to see the movie or not.
Answers
In summary, the rational response would be to skip the movie in situation (i) and still see the movie in situation (ii). The decision is based on the financial implications of each situation and the cost-benefit analysis of spending additional money on the movie ticket.
In situation (i), where you purchased a $10 movie ticket in advance but lost it, the rational response would be to skip the movie. This is because you have already spent $10 on the ticket and purchasing a new one would be an additional expense. It would be financially prudent to forgo the movie in this situation.
In situation (ii), where you dropped a $10 bill on the way to the movie, the rational response would be to still see the movie. While you have lost $10, you can still afford the movie ticket. Seeing the movie would not result in any additional expenses, as you have already budgeted for it.
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Explain why the more inelastic side (supply or demand) of the market faces the largest burden deriving from the imposition of a tax. B. Who is facing the burden in each case?
Answers
The more inelastic side of the market, whether it is supply or demand, faces the largest burden from the imposition of a tax. The burden of the tax falls on the side that is less responsive to price changes.
When a tax is imposed on a market, the burden of the tax refers to the impact of the tax on the market participants. The more inelastic side of the market, whether it is supply or demand, faces a larger burden because it is less responsive to price changes.
Inelastic side: If the demand or supply is relatively inelastic, it means that the quantity demanded or supplied does not change significantly in response to price changes. In this case, the burden of the tax falls more heavily on the inelastic side because it is less able to adjust its behavior and is more likely to bear the majority of the tax burden.
Elastic side: On the other hand, if the demand or supply is relatively elastic, it means that the quantity demanded or supplied is highly responsive to price changes. In this case, the burden of the tax falls more lightly on the elastic side because it can more easily adjust its behavior by reducing quantity demanded or supplied to avoid the burden of the tax.
The more inelastic side of the market faces the largest burden from the imposition of a tax. The burden falls on the side that is less responsive to price changes, as it is less able to adjust its behavior and is more likely to bear the majority of the tax burden.
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"Trade usages" play an important role in the business and commercial world. If a trader alleges that a trade usage exists, what must the trader prove? (5) 1.2 Discuss the following statement and indicate whether you agree with the statement. "The right of ownership confers the most complete power over property. An owner can do what he or she likes with his or her property." (5) 1.3 Judgments of superior courts are an important source of South African law. Distinguish between ratio decidendi and obiter dictum of court judgments. (8) 1.4 In your own words discuss the term "law". In your answer also refer to the main division in law.
Answers
1. To prove trade usage, a trader must show a consistent, widely accepted practice in their industry. 2. Ownership and power over property depend on legal restrictions. 3. Ratio decidendi is a binding legal principle, obiter dictum is non-binding. 4. Law governs human conduct, divided into substantive and procedural law.
1. When alleging that a trade usage exists, a trader must prove the following:
- The existence of a consistent and regular practice or custom within a particular trade or industry.
- The practice or custom is widely known and accepted by those involved in the trade.
- The practice or custom is reasonable and fair.
- The trader has adhered to the trade usage in their dealings.
1.2. The statement "The right of ownership confers the most complete power over property. An owner can do what he or she likes with his or her property" is a subjective statement that may vary depending on legal jurisdictions. While ownership generally grants certain rights and powers over property, there are legal limitations and restrictions that can impact an owner's ability to do anything they want with their property. For example, zoning regulations, environmental laws, and other legal restrictions may limit the use or disposal of property.
1.3. In court judgments, the ratio decidendi refers to the legal reasoning or the principle of law upon which the decision is based. It is the binding part of the judgment and sets a precedent for future cases. On the other hand, obiter dictum refers to statements or remarks made by the court that are not directly relevant to the decision or necessary for the judgment. Obiter dicta are persuasive but not binding in subsequent cases.
1.4. Law can be defined as a set of rules and regulations that govern human conduct and relationships within a society. It provides a framework for maintaining order, resolving disputes, and protecting individual rights. The main division in law is between substantive law and procedural law. Substantive law establishes rights, duties, and legal obligations, while procedural law outlines the process and rules for enforcing those rights and resolving disputes through legal procedures. Both divisions work together to ensure the proper functioning of the legal system.
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cash $ 7,440 $ 8,000 accounts receivable 54,000 18,000 equipment, net 44,000 40,000 land 91,680 66,000 total assets $ 197,120 $ 132,000
Answers
Based on the provided information, we can observe changes in the company's assets. The cash has increased, accounts receivable and land values have decreased, and the equipment, net value has also decreased. These changes have resulted in a decrease in the total assets value from 197,120 to 132,000.
Based on the information provided, we have two sets of financial data for a company's assets. Let's compare the two sets of data to understand any changes that may have occurred.
The first set of data shows the assets as follows:
- Cash: 7,440
- Accounts Receivable: 54,000
- Equipment, net: 44,000
- Land: 91,680
- Total Assets: 197,120
The second set of data shows the assets as follows:
- Cash: 8,000
- Accounts Receivable: 18,000
- Equipment, net: 40,000
- Land: 66,000
- Total Assets: 132,000
Comparing the two sets of data, we can see that there have been changes in the values of the assets. Let's analyze these changes step by step:
1. Cash:
- The cash value has increased from 7,440 to 8,000. The increase in cash indicates that the company has received more cash inflow during the specified period.
2. Accounts Receivable:
- The accounts receivable value has decreased from 54,000 to 18,000. This decrease suggests that the company has collected some of the outstanding payments from its customers.
3. Equipment, net:
- The equipment, net value has decreased from 44,000 to 40,000. This decrease may indicate that the company has either sold some equipment or depreciated its value over time.
4. Land:
- The land value has decreased from 91,680 to 66,000. This decrease could mean that the company has either sold some land or revalued its worth.
5. Total Assets:
- The total assets value has decreased from 197,120 to 132,000. This decrease reflects the combined effect of the changes in the individual asset values mentioned above.
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Suppose the following info was taken from the 2022 financial statements of pharma giant Merck and Co (all dollar amounts in millions).
Retained Earnings, January 1, 2022- $42,845.9
Cost of Goods Sold- 8,996.6
Selling/Administration- 8,314.3
Dividends- 3,479.8
Sales Revenue- 41,823.0
Research/Development Expense- 5,960.5
Income Tax Expense- 3,155.2
After analyzing the data, prepare an income statement for the year ending in December 31, 2022. (Enter amounts in millions to one decimal place.)
Answers
Income Statement for the Year Ending December 31, 2022. Sales Revenue: $41,823.0, Cost of Goods Sold: $8,996.6, Gross Profit: $32,826.4 (Sales Revenue - Cost of Goods Sold), Selling/Administration Expense: $8,314.3, Research/Development Expense: $5,960.5, Operating Income: $18,551.6 (Gross Profit - Selling/Administration Expense - Research/Development Expense), Income Tax Expense: $3,155.2, Net Income: $15,396.4 (Operating Income - Income Tax Expense).
The income statement summarizes the financial performance of a company over a specific period, in this case, the year ending December 31, 2022. It shows the company's revenues, expenses, and net income. The sales revenue for Merck and Co in 2022 was $41,823.0 million. The cost of goods sold, which includes the direct costs associated with producing the goods sold, amounted to $8,996.6 million. Subtracting the cost of goods sold from the sales revenue gives us the gross profit of $32,826.4 million. Selling and administration expenses, which include costs related to marketing, distribution, and general administrative functions, were $8,314.3 million. Research and development expenses, incurred to develop new products and improve existing ones, amounted to $5,960.5 million. Subtracting the selling/administration expense and research/development expense from the gross profit gives us the operating income of $18,551.6 million. Income tax expense for the year was $3,155.2 million. Finally, by subtracting the income tax expense from the operating income, we calculate the net income of $15,396.4 million. Net income represents the company's profit after accounting for all expenses and taxes.
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The Spot gold price is $1,700/oz. If it costs $5 a year to store gold (payable in advance) and the 12-month risk-free rate is 3.5%, where should one-year gold futures be priced?
Answers
The one-year gold futures should be priced at $1,695.17 per ounce. The cost of storing gold is $5 per year, which is payable in advance. The risk-free rate for a 12-month period is 3.5%.
The price of one-year gold futures can be calculated using the cost of storage and the risk-free rate. The cost of storing gold for one year is $5, and the risk-free rate is 3.5%. We can calculate the present value of this cost using the formula:
PV = FV / (1 + r)ⁿ
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.
Using the formula, the present value of the storage cost is:
PV = $5 / (1 + 3.5%)¹
PV = $5 / (1.035)¹
PV = $4.83
To find the price of one-year gold futures, we subtract the present value of the storage cost from the spot price of gold:
Price of one-year gold futures = Spot price - Present value of storage cost
Price of one-year gold futures = $1,700/oz - $4.83
Price of one-year gold futures = $1,695.17/oz
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Social welfare functions: A society consisting of two individuals has to choose between two alternative allocations. The first allocation would lead to utilities u
1
=15,000,u
2
=2,000; and the second allocation would lead to utilities u
1
=6,000,u
2
=5,000. Which of these allocations maximizes the utilitarian social welfare function W=∑
i
u
i
=u
1
+u
2
? Illustrate your answer using social indifference curves. (b) Which of these allocations maximizes the Rawlsian social welfare function W=min
i
u
i
=min(u
1
,u
2
) ? Illustrate your answer using social indifference curves.
Answers
For the first allocation, the total utility is 17,000. For the second allocation, the total utility is 11,000. For the first allocation, the minimum utility is 2000. For the second allocation, the minimum utility is 5000.
To determine which allocation maximizes the utilitarian social welfare function W=∑ui=ui1+ui2, we need to compare the total utilities of the two allocations. The second allocation maximizes the Rawlsian social welfare function as it has a higher minimum utility.
For the first allocation, the total utility is W1 = 15,000 + 2,000 = 17,000.
For the second allocation, the total utility is W2 = 6,000 + 5,000 = 11,000.
Therefore, the first allocation maximizes the utilitarian social welfare function as it has a higher total utility.
To determine which allocation maximizes the Rawlsian social welfare function W=minui=min(ui1,ui2), we need to compare the minimum utility of the two allocations.
For the first allocation, the minimum utility is W1 = min(15,000, 2,000) = 2,000.
For the second allocation, the minimum utility is W2 = min(6,000, 5,000) = 5,000.
Social indifference curves can be used to illustrate these allocations. For the utilitarian social welfare function, the curve would be steeper for the first allocation, indicating a higher total utility. For the Rawlsian social welfare function, the curve would be flatter for the second allocation, indicating a higher minimum utility.
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Required information [The following information applies to the questions displayed below.] a. M\&R Company provided $2,000 in services to customers in December, which are not yet recorded. Those customers are expected to pay the company in January following the company's year-end. b. Wage expenses of $1,000 have been incurred but are not paid as of December 31. c. M\&R Company has a $5,000 bank loan and has incurred (but not recorded) 8% interest expense of $400 for the year ended December 31. The company will pay the $400 interest in cash on January 2 following the company's year-end. d. M\&R Company hired a firm that provided lawn services during December for $500. M\&R will pay for December lawn services on January 15 following the company's year-end. e. M\&R Company has earned $200 in interest revenue from investments for the year ended December 31 . The interest revenue will be received on January 15 following the company's year-end. f. Salary expenses of $900 have been earned by supervisors but not paid as of December 31 . repare year-end adjusting journal entries for M\&R Company as of December 31 for each of the above separate cases. Journal entry worksheet M\&R Company provided $2,000 in services to customers in December. Those customers are expected to pay the company sometime in January following the company's year-end. Note: Enter debits before credits.
Answers
Credit Interest revenue $200
f. Salary expenses of $900 have been earned by supervisors but not paid as of December 31.
Debit Salary expense $900
Adjusting entries are journal entries made at the end of an accounting period to alter the ledger accounts and make sure that they reflect the earned revenue and expenses incurred in the accurate accounting period.
Those customers are expected to pay the company in January following the company's year-end.
Debit Accounts receivable $2,000Credit Services revenue $2,000
b. Wage expenses of $1,000 have been incurred but are not paid as of December 31.
Debit Wage expense $1,000Credit Wages payable $1,000
c. M\&R Company has a $5,000 bank loan and has incurred (but not recorded) 8% interest expense of $400 for the year ended December 31.
The company will pay the $400 interest in cash on January 2 following the company's year-end.
Debit Interest expense $400Credit Interest payable $400
d. M\&R Company hired a firm that provided lawn services during December for $500.
M\&R will pay for December lawn services on January 15 following the company's year-end.
Debit Lawn expense $500Credit Accounts payable $500
e. M\&R Company has earned $200 in interest revenue from investments for the year ended December 31.
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AT&T just paid an $8 dividend this year, and dividends are expected to grow at a 10% rate for the next three years and at a 4% rate after that. What is the value of the stock if investors require a 13% return to purcahse the stock?
Answers
The value of the stock, based on the given information and a required return of 13%, is approximately $30.90.
To calculate the value of a stock using the dividend discount model (DDM), we need to discount the expected future dividends to their present value.
Given:
Current dividend: $8
Dividend growth rate for the next three years: 10%
Dividend growth rate after three years: 4%
Required return: 13%
To calculate the present value of the dividends, we can use the formula for the DDM:
Stock Value = (D1 / (1 + r)^1) + (D2 / (1 + r)^2) + ... + (Dn / (1 + r)^n)
Where:
D1, D2, ..., Dn = Expected dividends for each year
r = Required return
First, let's calculate the expected dividends for each year:
Year 1: $8 x (1 + 10%) = $8.80
Year 2: $8.80 x (1 + 10%) = $9.68
Year 3: $9.68 x (1 + 10%) = $10.65
Year 4 onwards: $10.65 x (1 + 4%) = $11.06
Now, we can calculate the present value of the dividends:
Stock Value = ($8.80 / (1 + 13%)^1) + ($9.68 / (1 + 13%)^2) + ($10.65 / (1 + 13%)^3) + ($11.06 / (1 + 13%)^4)
Performing the calculations, we find:
Stock Value ≈ $7.76 + $7.68 + $7.40 + $7.06 ≈ $30.90
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Based on the followiru information, current assets are Based on the following information, current liabilities are. ? Pizza restaurant has two powerful refrigerators. Costco sells a number of refrigerators in its store. Where would refrigerators go on a classified balance sheet of those companies? Keep in mind, that the classification depends on the asset USE by the company Restaurant: In Property, plant and equipment section Costco: Investments Restaurant: In Property, plant and equipment section Costco: Current asset section Restaurant: Current asset section Costco: Current asset section Restaurant: In Property, plant and equipment section Costco: In Property, plant and equipment section
Answers
They would be classified as current assets on Costco's balance sheet.
Based on the information provided, the refrigerators would be classified differently on the balance sheets of the two companies.
For the pizza restaurant, the refrigerators would be considered as part of the property, plant, and equipment section. This section includes long-term assets that are used in the operations of the business. Since the refrigerators are owned by the restaurant and are essential for its daily operations, they would be classified as property, plant, and equipment.
On the other hand, for Costco, the refrigerators would be classified as current assets. Current assets are short-term assets that are expected to be converted into cash or used up within a year. Since Costco sells a number of refrigerators in its store, these refrigerators are considered as inventory that will be sold to customers. Therefore, they would be classified as current assets on Costco's balance sheet.
To summarize:
- For the pizza restaurant, the refrigerators would be classified in the property, plant, and equipment section.
- For Costco, the refrigerators would be classified in the current asset section.
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For the pizza restaurant, the refrigerators would be classified as property, plant, and equipment. Therefore, on the classified balance sheet of the restaurant, the refrigerators would go in the "Property, plant, and equipment" section.
For Costco, since they sell refrigerators as part of their inventory, the refrigerators would be classified as current assets. Therefore, on the classified balance sheet of Costco, the refrigerators would go in the "Current asset" section.
To summarize:
Pizza restaurant: Refrigerators would be classified under "Property, plant, and equipment" section.
Costco: Refrigerators would be classified under "Current asset" section.
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P5–6 Time value As part of your financial planning, you wish to purchase a new car exactly 5 years from today. The car you wish to purchase costs $14,000 today, and your research indicates that its price will increase by 2% to 4% per year over the next 5 years.
a. Estimate the price of the car at the end of 5 years if inflation is (1) 2% per year and (2) 4% per year.
b. How much more expensive will the car be if the rate of inflation is 4% rather than 2%?
c. Estimate the price of the car if inflation is 2% for the next 2 years and 4% for 3 years after that.
a. N I PV Solve for FV
1 5 2% $ 14,000 2 5 4% $ 14,000
b How much more expensive will the car be if the rate of inflation is 4% rather than 2%? c. N I PV Solve for FV
End of year 2 2 2% $ 14,000 End of year 5 3 4% * You may use either formulas or Excel, but you must show your work. If you use the Excel financial functions, I will be able to see your work by clicking on the cell. Note: you should use your solution for FV at end of year 2 for PV when calculating end of year 5.
Answers
a. The estimated price of the car at the end of 5 years with a 2% inflation rate is approximately $14,829.28. The estimated price of the car at the end of 5 years with a 4% inflation rate is approximately $15,714.66.
To estimate the price of the car at the end of 5 years, we can use the future value formula. For an inflation rate of 2% per year, the calculation is as follows:
N = 5 (number of years)
I = 2% (inflation rate per year)
PV = $14,000 (initial price of the car)
Using the future value formula (FV = PV * (1 + I/100)^N), we can calculate:
FV = $14,000 * (1 + 2/100)^5
FV ≈ $14,829.28
For an inflation rate of 4% per year, the calculation is similar:
FV = $14,000 * (1 + 4/100)^5
FV ≈ $15,714.66
b. To calculate how much more expensive the car will be with a 4% inflation rate compared to a 2% inflation rate, we subtract the FV with a 2% inflation rate from the FV with a 4% inflation rate:
Difference = FV (4% inflation) - FV (2% inflation)
Difference ≈ $15,714.66 - $14,829.28
Difference ≈ $885.38
Therefore, the car will be approximately $885.38 more expensive with a 4% inflation rate compared to a 2% inflation rate.
c. To estimate the price of the car if inflation is 2% for the next 2 years and 4% for the following 3 years, we can calculate the future value at the end of each period.
For the first 2 years:
FV = $14,000 * (1 + 2/100)^2
FV ≈ $14,560.80
For the next 3 years:
FV = $14,560.80 * (1 + 4/100)^3
FV ≈ $16,112.10
Therefore, the estimated price of the car after 5 years with 2% inflation for 2 years and 4% inflation for 3 years is approximately $16,112.10.
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You need a loan of $135,000, but want to pay it off as soon as possible. For a 6.25% rate, and 30 year term, what will your required monthly payment be? If you choose to pay $1750 per month on this loan, how fast will you be able to pay if off?
Answers
The required monthly payment for a $135,000 loan at a 6.25% interest rate and 30-year term is $791.17. If you choose to pay $1750 per month, you will be able to pay off the loan in approximately 214 months (17 years and 10 months).
To calculate the required monthly payment for a loan, we can use the loan amortization formula. The formula for calculating the monthly payment is:
Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate) ^ (-Number of Payments))
For a loan amount of $135,000, a 6.25% interest rate, and a 30-year term, we can calculate the monthly payment as follows:
Monthly Interest Rate = Annual Interest Rate / 12
= 6.25% / 12
= 0.0625 / 12
= 0.00521
Number of Payments = Number of Years * 12
= 30 * 12
= 360
Plugging these values into the formula, we get:
Monthly Payment = ($135,000 * 0.00521) / (1 - (1 + 0.00521) ^ (-360))
= $791.17
Therefore, the required monthly payment for the loan is $791.17.
If you choose to pay $1750 per month on this loan, we can calculate how fast you will be able to pay it off by rearranging the loan amortization formula:
Number of Payments = -(Log(1 - (Loan Amount * Monthly Interest Rate) / Monthly Payment) / Log(1 + Monthly Interest Rate))
Plugging in the values, we have:
Number of Payments = -(Log(1 - ($135,000 * 0.00521) / $1750) / Log(1 + 0.00521))
= 213.84
Therefore, if you choose to pay $1750 per month on this loan, you will be able to pay it off in approximately 214 months, or 17 years and 10 months.
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On January 1, 2019, MNO Corporation issued 8% bonds with a face amount of $4 million. The bonds mature in 8 years. For bonds of similar risk and maturity, the market yield is 6 %. Interest is paid on June 30 and December 31 . The company fiscal year is the calendar year. Required: 1. Determine the price of the bonds at January 1, 2019. 2. Prepare ALL the necessary journal entries about those bonds for 2019. 3. Prepare an amortization schedule showing the effective rate for 2019. (Optional) 4. What is the amount related to the bonds that the company will report on its Dec. 31 , 2019 balance sheet? 5. What is the amount related to the bonds that the company will report on its Dec 31 , 2019 income statement? 6. Prepare the required journal entry if the company retires the bonds on March 1,2020. for a price of $3,800,000. Show your computations for each answer.
Answers
1. The price of the bonds at January 1, 2019, is $4,276,100. to determine the price of the bonds, we need to calculate the present value of the future cash flows (interest payments and principal repayment) using the market yield of 6%.
Using the present value formula, the price of the bonds is calculated as $4,276,100.Journal entries for 2019: january 1, 2019: Dr. Cash $4,276,100; Cr. Bonds Payable $4,276,100 (to record issuance of bonds) june 30, 2019: Dr. Interest Expense $128,283 ($4,276,100 × 6% × 6/12); Cr. Cash $128,283 (to record semi-annual interest payment) december 31, 2019: Dr. Interest Expense $128,283 ($4,276,100 × 6% × 6/12); Cr. Cash $128,283 (to record semi-annual interest payment amortization schedule for 2019: beginning Carrying Value: $4,276,100 Interest Expense: $128,283 cash Payment: $128,28 ending Carrying Value: $4,147,517 effective Interest Rate: (Interest Expense / Beginning Carrying Value) = 3%
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You are saving for retirement. To live comfortably, you decide you will need to save $1,000,000 by the time you are 65 . Today is your 23rd birthday, and you decide, starting today and continuing on every birthday up to and including your 65 th birthday, that you will put the same amount into a savings account. If the interest rate is 8%, how much must you set aside each year to make sure that you will have $1,000,000 in the account on your 65 th birthday? The amount to deposit each year is $ (Round to the nearest dollar.)
Answers
To ensure you have $1,000,000 in your savings account by your 65th birthday, you should set aside approximately $5,684.63 each year, starting from your 23rd birthday.
To calculate the amount you need to set aside each year, we can use the concept of present value and the formula for calculating the future value of an annuity. The formula is:
FV = PMT × ((1 + r)ⁿ⁻¹) / r
Where FV is the future value, PMT is the annual payment, r is the interest rate, and n is the number of years.
In this case, we know that the future value (FV) is $1,000,000, the interest rate (r) is 8%, and the number of years (n) is 65 - 23 = 42.
To find the annual payment (PMT), we can rearrange the formula:
PMT = FV × r / ((1 + r)ⁿ⁻¹)
Substituting the values, we get:
PMT = $1,000,000 × 0.08 / ((1 + 0.08)⁴²⁻¹)
Calculating this, the amount you need to set aside each year is approximately $5,684.63.
In summary, to ensure you have $1,000,000 in your savings account by your 65th birthday, you should set aside approximately $5,684.63 each year, starting from your 23rd birthday.
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Apple and Samsung. (25 marks) Consider the price competition between Apple and Samsung in the U.S. market for smartphones. Assume that the demand for iPhones is determined by the following equation: Q
A
(P
A
,P
S
)=5000−3P
A
+2P
S
, where P
A
is Apple's price for an iPhone, and P
S
is Samsung's price for a Galaxy. The demand for Samsung Galaxy phones is Q
S
(P
A
,P
S
)=5000−3P
S
+2P
A
. Each firm has a constant marginal cost of $1000 : MC
A
=MC
S
=1000. (a) (4 marks) Determine the optimal pricing strategy for each firm. (b) (2 marks) Calculate the equilibrium profits for each firm. Next consider the following two scenarios independently. Scenario I. Tariff. Suppose the U.S. imposes a tariff on imports of Chinese goods, which increases the marginal cost of the iPhone by $100. On the other hand, we assume that the tariff has no impacts on Samsung Galaxy. (c) (5 marks) Redo (a) and (b). (d) (3 marks) Based on your answers in (a)-(c), discuss how the tariff affects (i) the prices of smartphones, (ii) the market share of each firm, and (iii) the profits of each firm. Scenario II. Research and Development. Suppose now each firm can make an investment in R\&D to enhance its product features and differentiate the product from its rival. Denote by I
A
the amount of money Apple spends on R\&D, and I
S
the amount of money Samsung spends on R\&D. For simplicity, assume I
A
and I
S
admit the following two values: $0 and $500,000. Given (I
A
,I
S
), the demand for iPhones is determined by the following equation: Q
A
(P
A
,P
S
,I
A
,I
S
)=5000+
500
I
A
−I
S
−3P
A
+2P
S
, and the demand for Samsung Galaxy phones is Q
S
(P
A
,P
S
,I
A
,I
S
)=5000+
500
I
S
−I
A
−3P
S
+2P
A
. Consider the following two-stage game. In the first stage, Apple and Samsung simultaneously choose R\&D spending I
A
and I
S
, respectively. In the second stage, after observing each other's investment in R\&D in the first stage, Apple and Samsung simultaneously choose prices P
A
and P
S
, respectively. (e) (8 marks) Find the subgame perfect Nash equilibrium of this two-stage game. (f) (3 marks) Based on your answer in (e), discuss whether the R\&D race on product differentiation leads to the Prisoner's dilemma between Apple and Samsung
Answers
(a) Taking the derivative of the total revenue with respect to Pˢ and setting it equal to zero, we can find the optimal price for Samsung.
(b) The equilibrium profits for each firm is:
[tex]Profitˢ = (5000 - 3Pˢ + 2Pᴬ) * Pˢ - MCˢ[/tex]
(a) To determine the optimal pricing strategy for each firm, we need to maximize their profits.
The profit for each firm can be calculated by subtracting the marginal cost from the total revenue.
For Apple, the total revenue is equal to the demand equation multiplied by the price (Pᴬ):
[tex]TRᴬ = (5000 - 3Pᴬ + 2Pˢ) * Pᴬ[/tex]
Taking the derivative of the total revenue with respect to Pᴬ and setting it equal to zero, we can find the optimal price for Apple.
For Samsung, the total revenue is equal to the demand equation multiplied by the price (Pˢ):
[tex]TRˢ = (5000 - 3Pˢ + 2Pᴬ) * Pˢ[/tex]
Taking the derivative of the total revenue with respect to Pˢ and setting it equal to zero, we can find the optimal price for Samsung.
(b) To calculate the equilibrium profits for each firm, we need to substitute the optimal prices found in part (a) into the demand equations and subtract the marginal cost.
The profit for Apple is equal to:
[tex]Profitᴬ = (5000 - 3Pᴬ + 2Pˢ) * Pᴬ - MCᴬ[/tex]
The profit for Samsung is equal to:
[tex]Profitˢ = (5000 - 3Pˢ + 2Pᴬ) * Pˢ - MCˢ[/tex]
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The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred. what will the accountant do to find the error?
Answers
If the trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred, the accountant can Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
Determine the difference between the debit and credit totals of the trial balance. Divide the difference by 9. If the result is an integer, then the accountant is likely dealing with a transposition or slide error.
Compare the debit and credit amounts of each account in the trial balance to see if there are any pairs of numbers that differ by the integer that was calculated in step 2.
If the accountant finds a pair of numbers that differ by the integer, then they have found the transposition or slide error.
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Discuss and explain the difference between problem as opposed to problem system as it relates to Systems Analysis.
Answers
A problem refers to a specific issue or challenge that needs to be addressed or resolved, while a problem system relates to a broader perspective that considers the interconnected elements and relationships within a system.
In the context of Systems Analysis, a problem is a specific manifestation of an undesirable situation or discrepancy within a system. It is often identified as a symptom or outcome of underlying issues. Systems Analysis involves analyzing the problem system, which encompasses the entire system or organization in which the problem exists. It aims to understand the relationships, dependencies, and interactions between various components within the system that contribute to the problem.
By focusing on the problem system, Systems Analysis goes beyond solely addressing the immediate problem at hand and delves into the underlying causes and interdependencies within the system. This approach recognizes that problems are often interconnected and can have ripple effects on other aspects of the system. It involves examining the system's structure, processes, resources, stakeholders, and external factors to gain a comprehensive understanding of the problem's context and implications. Through Systems Analysis, practitioners can identify systemic issues, propose holistic solutions, and design interventions that address the root causes of the problem, rather than merely treating the symptoms.
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Smit 2004 argues that a business can be any individual or group of individuals that satisfy the needs of people. The problem with this definition is that its implies....
A. Eskom can then be said to be a business
B. Even a local bakery can be said to be a business
C. That a stokvel is a business
D. Even a spaza shop is a business.
Answers
The option D is correct. Smit 2004 argues that a business can be any individual or group of individuals that satisfy the needs of people. The problem with this definition is that it implies even a spaza shop is a business.
What is Smit's argument on the definition of a business?
In Smit's opinion, a business can be any person or group of individuals who meet people's needs. The issue with this definition is that it broadens the definition of what constitutes a business to the extent that any company, regardless of its size or characteristics, can be classified as a business.
What are some examples of businesses?
A business is an entity that is engaged in commercial, professional, or industrial activities with the goal of earning a profit. Eskom, a local bakery, a stokvel, and even a spaza shop are all examples of businesses.
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Article: "Market Concentration in Pakistan’s Cement Industry by "Saira Hannan, Syeda Zehra Abbas, Syyeda Farwah Naqvi"
Requirements:
Mention the formulas, study location, time frame, data sources, methodology, results and conclusion only.
Answers
"Market Concentration in Pakistan’s Cement Industry by "Saira Hannan, Syeda Zehra Abbas, Syeda Farwah Naqvi" are formulas,study location,time frame,data sources,methodology.
Formulas: It was reported that various formulas, such as the HHI, the CR4, and the CR8, were used to assess market concentration. These formulas are based on a mathematical calculation of concentration and are widely used in different markets for a similar assessment.
Study location: The research focused on the cement industry in Pakistan, which is regarded as one of the country's most crucial industries. Pakistan is the world's fifth-largest cement producer, and the cement industry is a significant contributor to the country's economy.
Time frame: Data from 2008 to 2017 were analyzed to assess the changes in market concentration over time. Data sources: The study used various sources of data such as the financial reports of the top 10 cement companies, and the Pakistan Bureau of Statistics (PBS) publications.
Methodology: The researchers utilized a quantitative approach that relied on secondary data. The study analysed market concentration and competitiveness using the concentration ratio and the Hirschman-Herfindahl Index.
Results: The results of the research indicated that the Pakistani cement market was moderately concentrated. Conclusion: the study provided evidence of the concentration level of the Pakistani cement market. The four largest companies controlled the market share, and the market was moderately concentrated. This could have significant effects on the pricing strategy and market competitiveness of cement products in Pakistan.
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What is the amount for which Al-Amal Company sold its shares in the Aqaba Company?
2- Explain why both the shareholder Ayman and the chairman of the board of directors think that he is right? Referring to the accounting restrictions that are related to investment according to the above situation?
Answers
For 1,300,000 dinars more than anticipated, Al-Amal Company sold its stake in Akaba Company.
Due to the numerous accounting techniques used, both the chairman of the board of administrators and the share owner Ayman believe he is correct.
According to the information offered, Al-Amal Company sold 240,000 shares on December 31st, which represents 30% of the capital of the Aqaba Company. We are unable to calculate the precise sum for which Al-Amal Company sold its shares in the Aqaba Company because the query does not specify the price at which the shares were sold.
The chairman of the board of directors and Ayman have different perspectives on the matter because the chairman is only concerned with the investment's price, whereas Ayman is also thinking about the profits and dividends the Aqaba Company has earned over the years and during the Al-Amal Company's investment period.
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Webster world has sales of 13800, costs of 5800, depreciation expense of 1100, and interest expense of 700. What is the operating cash flow if the tax rate is 32 percent?
Answers
The operating cash flow for Webster World is $9,284 if the tax rate is 32%.the operating cash flow for Webster World is $9,284 if the tax rate is 32%.
To calculate the operating cash flow, we need to start with the net income and make adjustments for non-cash expenses and changes in working capital.
Given:
Sales: $13,800
Costs: $5,800
Depreciation expense: $1,100
Interest expense: $700
Tax rate: 32%
First, we calculate the earnings before interest and taxes (EBIT) by subtracting costs from sales:
EBIT = Sales - Costs
EBIT = $13,800 - $5,800
EBIT = $8,000
Next, we calculate the earnings before taxes (EBT) by subtracting the interest expense from EBIT:
EBT = EBIT - Interest Expense
EBT = $8,000 - $700
EBT = $7,300
To calculate the taxable income, we subtract the depreciation expense from EBT:
Taxable Income = EBT - Depreciation Expense
Taxable Income = $7,300 - $1,100
Taxable Income = $6,200
Now we can calculate the tax expense by multiplying the taxable income by the tax rate:
Tax Expense = Taxable Income * Tax Rate
Tax Expense = $6,200 * 0.32
Tax Expense = $1,984
Finally, we calculate the operating cash flow by subtracting the tax expense from the net income and adding back the depreciation expense:
Operating Cash Flow = Net Income + Tax Expense + Depreciation Expense
Operating Cash Flow = $6,200 + $1,984 + $1,100
Operating Cash Flow = $9,284
Therefore, the operating cash flow for Webster World is $9,284 if the tax rate is 32%.
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What type of unemployment is linked to each of the following? (a) Firms engage in race, gender and sex discrimination in their hiring practices. (1 mark) (b) Some individuals do not have marketable job skills. (1 mark) (c) The level of overall economic activity fluctuates. (1 mark) (d) Workers voluntarily quit a job to look for a better job. (1 mark) (e) A musician who is out of work because electronic equipment replaced live musicians.
Answers
(a) The type of unemployment linked to firms engaging in race, gender, and sex discrimination in their hiring practices is Structural Unemployment. Structural unemployment is the result of a mismatch between the skills that workers in the economy can offer and the skills demanded by employers.
(b) The type of unemployment linked to some individuals not having marketable job skills is Frictional Unemployment. Frictional unemployment is a temporary form of unemployment that arises when workers leave their jobs to find better ones. It can be thought of as a type of job search unemployment.
(c) The type of unemployment linked to the level of overall economic activity fluctuating is Cyclical Unemployment. Cyclical unemployment is a type of unemployment that arises as a result of fluctuations in the business cycle. When the economy is in a recession, businesses reduce their output and lay off workers, resulting in increased unemployment.
(d) The type of unemployment linked to workers voluntarily quitting a job to look for a better job is Frictional Unemployment. Frictional unemployment is a temporary form of unemployment that arises when workers leave their jobs to find better ones. It can be thought of as a type of job search unemployment.
(e) The type of unemployment linked to a musician who is out of work because electronic equipment replaced live musicians is Technological Unemployment. Technological unemployment occurs when new technology or automation replaces workers. Advances in technology can replace workers, and those who can't adapt to the new conditions become unemployed.
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what is done through the vivid vision exercise? group of answer choices the entrepreneur tries to imagine what the business will look like 3 years into the future. the entrepreneur assesses what the business looks like in the present. the entrepreneur envisions how he or she is going to build the business and the steps needed to take to get there. the entrepreneur tries to imagine what the business will look like in 10 years.
Answers
Vivid vision exercise involves the entrepreneur envisioning how they will build the business and the steps needed to get there. The entrepreneur tries to imagine what the business will look like 3 years into the future, and sometimes up to 10 years. The correct option is a.
The vivid vision exercise is crucial in helping entrepreneurs create a mental picture of what their businesses should be like in the future. It is a tool used to drive the direction of the company, unify the team, and motivate employees to work towards the same goal.
It helps entrepreneurs to get clear on what they want to achieve, and how they want to get there.In the vivid vision exercise, the entrepreneur should imagine what the company looks like in the future and what goals they should have accomplished in that period. They should also visualize the steps needed to achieve those goals and make sure they are actionable.
The exercise should be clear and simple and should be shared with the team to align their efforts with the company's goals. In conclusion, the vivid vision exercise is a powerful tool that entrepreneurs can use to achieve their long-term goals. The correct option is a.
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what is the present value of the annual interest payments on a 10-year bond that pays a coupon interest rate of 10% on a $1,000 face value bond, if the yield on similar bonds is 9%?
Answers
The present value of the annual interest payments on the bond is approximately $39.70.
To calculate the display esteem of the yearly interest instalments on a 10-year bond, we have to be use the display esteem equation. The equation is as follows:
Present Value = Coupon Payment / (1 + Yield Rate)^n
Where:
Coupon Payment is the annual interest payment.
Yield Rate is the yield on similar bonds.
n is the number of years.
In this given case, the coupon payment is 10% of the $1,000 face value bond, which is $100. The yield on similar bonds is given as 9%, and the bond has a 10-year maturity.
By using the formula, we can find out the present value as follows:
Present Value =[tex]$100 / (1 + 0.09)^10[/tex]
Present Value = [tex]$100 / 1.09^10[/tex]
Present Value ≈ $39.70
Therefore, the present value of the annual interest payments on the bond is approximately $39.70.
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Rather than aggregate health expenditures, we often look at real expenditures per capita. this calculation requires us to deflate the aggregate expenditures by?
Answers
Step 1: Real expenditures per capita require deflation of aggregate expenditures by the appropriate price index.
Step 2: In order to calculate real expenditures per capita, it is necessary to adjust or deflate the aggregate expenditures by using the appropriate price index. Deflation is the process of removing the effects of inflation from the nominal value of expenditures, allowing for a more accurate representation of the purchasing power of those expenditures over time.
By deflating the aggregate expenditures, we account for changes in the general price level and ensure that the comparison of expenditures across different time periods is meaningful. This adjustment is important because it allows us to analyze and compare healthcare spending in a way that reflects changes in both the quantity and price of healthcare services.
To deflate the aggregate expenditures, we use a price index such as the Consumer Price Index (CPI) or the Medical Care Price Index (MCPI). These indices measure changes in the prices of goods and services over time. By applying the appropriate price index to the aggregate expenditures, we can remove the influence of inflation and express the expenditures in constant dollars, providing a more accurate measure of the real value of healthcare spending per person.
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How has globalization changed economies and the lives of workers?
Is it likely to lead to greater poverty of greater prosperity?
What factors support your point of view.
Answers
Globalization has led to an increase in economic opportunities, lower prices of goods, and access to international markets. However, it has also created an imbalance between developed and developing countries that could lead to greater poverty or prosperity.
Globalization is the process by which countries become interconnected through trade, investment, and communication. It has led to several changes in economies and the lives of workers across the world. One significant impact of globalization is that it has increased economic opportunities, particularly in developing countries. By opening up markets, businesses can access more customers and sell their products and services globally. As a result, economies have grown, and poverty rates have decreased. However, globalization has also had negative effects on some workers and economies. One significant impact is that it has created an imbalance between developed and developing countries. Developed countries have more resources and technology, which gives them a competitive advantage over developing countries. This imbalance could lead to greater poverty in developing countries that cannot compete or find jobs.
On the other hand, developed countries could experience greater prosperity by outsourcing jobs to developing countries where labor is cheaper. Another factor that supports this point of view is the rise of automation and artificial intelligence. As technology advances, more jobs become automated, leading to a decrease in jobs for low-skilled workers. This trend could exacerbate inequality and lead to greater poverty if workers cannot find employment. Furthermore, the impact of globalization on the environment is another factor that could lead to greater poverty or prosperity. Developed countries tend to have more resources to invest in green technologies, while developing countries might not. This could lead to environmental degradation, which could affect economic growth and poverty levels negatively. Thus, the potential impact of globalization on economies and workers is complex, and it could lead to greater poverty or prosperity, depending on several factors.
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Beckford Paints makes and sells paint to home improvement stores. Beckford's only plant can produce up to 17 million cans of paint per year. Current annual production is 14 million cans. Fixed manufacturing, selling, and administrative costs total $21 million per year. The variable cost of making and selling each can of paint is $6.30. Stockholders expect a 25% annual return on the company's $44 million of assets. Requirements 1. What is Beckford's current total cost of making and selling 14 million cans of paint? What is the current cost per can of paint? 2. Assume that Beckford is a price-taker and the current wholesale market price is $9.30 per can of paint. What is the target total of cost in producing and selling 14 million cans of paint? Given Beckford's current total costs, will the company reach stockholders' profit goals? 3. Continuing with Requirement 2, let's say that Beckford has found ways to reduce its total fixed costs by $270,000. What is the target variable cost per can of paint? 4. Suppose Beckford plans to spend an additional $2.3 million on advertising to differentiate its product in order to increase sales volume to 16 million cans and become more of a price-setter. Assume that Beckford did reduce its total fixed costs by $270,000 as stated in Requirement 3 but could not find ways to save on its variable costs. What is the cost-plus price for a can of paint under these conditions?
Answers
Beckford Paints makes and sells paint to home improvement stores. 1. Current cost: $7.80 per can, total cost $109.2 million. 2. Target cost: $32 million, company won't reach profit goals. 3. Target variable cost: $0.805 per can after reducing fixed costs. 4. Cost-plus price: $7.7125 per can with additional advertising cost.
1. Beckford's current total cost of making and selling 14 million cans of paint is calculated as follows:
Total variable cost = Variable cost per can * Number of cans
= $6.30 * 14 million
= $88.2 million
Total cost = Total variable cost + Fixed costs
= $88.2 million + $21 million
= $109.2 million
Cost per can = Total cost / Number of cans
= $109.2 million / 14 million
= $7.80 per can
2. The target total cost to reach stockholders' profit goals can be calculated as follows:
Target total cost = Assets * Desired return rate + Fixed costs
= $44 million * 0.25 + $21 million
= $11 million + $21 million
= $32 million
Since Beckford's current total cost is $109.2 million, which is higher than the target total cost, the company will not reach stockholders' profit goals.
3. After reducing total fixed costs by $270,000, the new fixed costs become $21 million - $270,000 = $20.73 million. The target variable cost per can of paint can be calculated as follows:
Target total cost = Total variable cost + Fixed costs
$32 million = Variable cost per can * 14 million + $20.73 million
Variable cost per can = ($32 million - $20.73 million) / 14 million
= $11.27 million / 14 million
≈ $0.805 per can
4. The additional cost from advertising is $2.3 million. With a sales volume of 16 million cans, the cost-plus price for a can of paint can be calculated as follows:
Cost-plus price = (Total cost + Additional cost) / Number of cans
= ($109.2 million + $2.3 million) / 16 million
≈ $7.7125 per can.
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