Answer:
$1,500
Explanation:
Investment interest expenses = Interest Income + Non qualifying dividends
Investment interest expenses = $500 + $1,000
Investment interest expenses = $1,500
$1,500 < $2,500 (Investment interest expenses)
The long term capital gains are not considered in investment income because this income is taxed at a preferential rate. Hence, the Investment interest expenses deduction for the year is $1,500.
eorge and Weezy received $30,200 of Social Security benefits this year ($12,000 for George; $18,200 for Weezy). They also received $5,000 of interest from jointly owned City of Ranburne Bonds and dividend income. What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations
Answer:
$0
Explanation:
George and Weezy will not get any amount as social security benefit if they file married joint. The sum of their modified AGI plus the 50% of their social security benefit is [$5,000 + $8,000 + $15,100]. This equals to $28,100 which is below the minimum amount of social security.
Which type of educational worker will most likely help students find books outside the classroom to help them write research papers? administrator librarian designer principal
Answer:
Librarian
Explanation: Enjoy (っ＾▿＾)۶٩(˘◡˘ )
The type of educational worker that will most likely help students find books outside the classroom to help them write research papers is librarian.
Who is a librarian?A librarian can be defined as the person that works in the library whose soles reponsibility is to find, sort and arrange bookes.
A librarian is the right position to help a student find books because that is the duty or work of a librarian.
Therefore the type of educational worker that will most likely help students find books is librarian.
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What are the changing roles of public, private, and nonprofit agencies in addressing public problems? What difficulties might a public manager face in trying to implement management techniques borrowed from the private sector?
Answer:
In the clarification segment elsewhere here, the definition of the query is mentioned.
Explanation:
Indeed, whenever it comes to solving civic issues, the functions of civic, corporate, and nonprofit organizations are shifting. Whenever it comes to solving civic concerns, civic companies have historically been at the forefront. These companies have advocated state incentives, often at the expense of profitability, with respect to the household spending of specialized services and products. By encouraging fair use, public corporations are considered to defend the public.
The position of public entities is now evolving if they're no necessarily safeguarding the public's needs at the expense of profitability, but by generating gains which are already required of them as a company, they attempt to resolve public issues. Via their CSR programs, private companies have become more interested in addressing public issues. The aim of private corporations was to raise income and build wealth for their owners, but now because they are willing to make a change in the community of individuals. In solving societal issues, non-profit organizations have always been at the forefront. The main difference is that more non-profit organizations are becoming larger and on a size equal to the one of certain private and government entities.The following problems could be encountered by a public manager attempting to incorporate organizational strategies imported from either the private sector:
When applying management strategies, a high degree of public sector bureaucracy can continue to be a challenge as well as a roadblock. The adoption of institutional reforms would make it extremely difficult for the public sector to adopt management strategies along with its tradition.A company forecasts growth of 6 percent for the next five years and 3 percent thereafter. Given last year's free cash flow was $100, what is its horizon value (PV looking forward from year 4) if the company cost of capital is 8 percent?
a. $0
b. $1,672
c. $2,000
d. $2,676
Answer:
d. $2,676
Explanation:
The computation of the horizontal value is shown below:
FCF1 = (100 × 1.06) = 106
FCF2 = (106 × 1.06) = 112.36
FCF3 = (112.36 × 1.06) = 119.1016
FCF4 = (119.1016 × 1.06) = 126.247696
FCF5 = (126.247696 × 1.06) = 133.8225578
Now
Horizon value is
= FCF5 ÷ (Cost of capital - Growth rate)
= 133.8225578 ÷ (0.08 - 0.03)
= $2,676
Hence, the correct option is d.
According to the question,
The computation of the horizontal value will be:
→ [tex]FCF_1 = 100\times 1.06[/tex]
[tex]= 106[/tex]
→ [tex]FCF_2 = 106\times 1.06[/tex]
[tex]= 112.36[/tex]
→ [tex]FCF_3 = 112.36\times 1.06[/tex]
[tex]= 119.1016[/tex]
→ [tex]FCF_4 = 119.1016\times 1.06[/tex]
[tex]= 126.25[/tex]
→ [tex]FCF_5 = 126.25\times 1.06[/tex]
[tex]= 133.8226[/tex]
hence,
The horizon value will be:
= [tex]\frac{FCF_5}{Cost \ of \ capital - Growth \ rate}[/tex]
By putting the values, we get
= [tex]\frac{133.8226}{0.08-0.03}[/tex]
= [tex]2,676[/tex] ($)
Thus the above approach i.e., "option d" is right.
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Consider a mutual fund with $240 million in assets at the start of the year and 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $2.5 million. The stocks included in the fund's portfolio increase in price by 5%, but no securities are sold and there are no capital gains distributions. The fund charges 12b-1 fees of .75%, which are deducted from portfolio assets at year-end. a. What is the fund's net asset value at the start and end of the year
Answer:
Net asset value at the start of the year = $240,000,000 / 10,000,000 shares
Net asset value at the start of the year = $24
Asset in the beginning $240,000,000
Increase in value $240,000,000*5% $12,000,000
Assets at the end $352,000,000
Less: 12b-1 Charges $352,000,000 * 0.75%) $2,640,000
Asset at the end $349,360,000
Net asset value at the end of the year = $349,360,000/10,000,000 shares
Net asset value at the end of the year = $34.936
Karla owns a monopolistically competitive firm that has many competitors that advertise. What can Karla realistically hope to achieve if she decides to advertise as well?
Answer:
1.) Katy can educate her consumers about the differences between her store and her competitors.
2.) Katy can protect her consumer base.
Explanation:
Using advertisements, Katy can show her consumer the differences and advantages that her products have over those of her competitors thereby encouraging them to patronise her.
She can also use these adverts to protect her customer base from her competitors because when they see the adverts, they will be even more encouraged to keep buying from Katy and will thus be less likely to switch to her competitors.
The other two options are incorrect.
Sydney accepts delivery of $39,000 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $26,130.
Sydney pays $440 cash to Express Shipping for delivery charges on the merchandise.
Sydney returns $1,100 of the $39,000 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $737.
Sydney pays Troy for the amount owed. Troy receives the cash immediately.
part 2 Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.
Record the merchandise sold on account.
Record the cost of goods sold.
Record the sales return.
Record the cost of sales return.
Record the cash collected for credit sales.
Answer:
39,000 Explanation:
FOB shipping point. The goods cost Troy $26,130.
ancy operates a business that uses the accrual method of accounting. In December, Nancy asked her brother, Hank, to provide her business with consulting advice. Hank billed Nancy for $8,700 of consulting services in year 0 (a reasonable amount), but Nancy was only able to pay $5,200 of the bill by the end of this year. However, Nancy paid the remainder of the bill in the following year. a. How much of the $8,700 consulting services will Hank include in his income this year if he uses the cash method of accounting
Answer: $5200
Explanation:
Cash accounting method occurs when transactions are recorded in an accounting book only when payment has been made for the goods sold or the goods received.
Out of the $8,700 consulting services, the amount that'll be included by Hank in his income this year if he uses the cash method of accounting will be $5200. This is because only $5200 was paid out of the $8700.
Skipper Company manufactures toy boats and uses an activitybased costing system. The following information is provided for the month of May: Activity Estimated Indirect Activity Costs Allocation Base Estimated Quantity of Allocation Base Materials handling Number of parts parts Assembling Number of parts parts Packaging Number of boats boats Each boat consists of four parts, and the direct materials cost per boat is . There is no direct labor. What is the total manufacturing cost per boat? (Round any intermediate calculations and your final answer to the nearest cent.)
Answer:
$ 22.97
Explanation:
Calculation for the total manufacturing cost per boat
First step is to Calculate the Activity rates
Activity Cost Pool Activity driver Overhead Cost (A) Expected Activity (B) Activity rate (A/B)
Materials handling Number of Part
$ 3,300÷ 3000 =$ 1.10 Per Part
Assembling Number of Part
$ 4,800÷3000 =$ 1.60 Per Part
Packaging Number of Boat
$ 6,000÷ 1300 =$ 4.62 Per Boat
Second step is to Calculate the Cost assigned to Boat
Activity name Activity Rates Activity ABC Cost
(A) (B) (A x B)
Materials handling
$ 1.10 × 4.00=$ 4.40
Assembling
$ 1.60 × 4.00 =$ 6.40
Packaging
$ 4.62 × 1.00 = $ 4.62
Total Overheads assigned per boat $ 15.42
($4.40+$6.40+$4.62)
Last step is to Calculate for the total manufacturing cost per boat
Boat
Direct material $ 7.55
Direct labor $0
Overheads $15.42
Total Cost per unit $ 22.97
($7.55+$15.42)
Therefore the total manufacturing cost per boat is $ 22.97
Coca Cola stock has the following probability distribution of expected prices one year from now: State Probability Price 1 25 % $ 50 2 40 % $ 60 3 35 % $ 70 If you buy Coca Cola today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding-period return on Coca Cola
Answer:
18.18%
Explanation:
Calculation for the expected holding-period return on Coca Cola
First step is to calculate the Expected Price in one year
Expected Price in one year = 50*25% + 60*40% + 70*35%
Expected Price in one year =12.5+24+24.5
Expected Price in one year = $61
Last step is to get Calculate the Holding period return using this formula
Holding period return = (Price after 1 year + Dividend - Price amount paid)/Price amount paid
Let plug in the formula
Holding period return= (61+4-55)/55
Holding period return=10/55
Holding period return=0.1818*100
Holding period return= 18.18%
Therefore the expected holding-period return on Coca Cola will be 18.18%
5. The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. What is the total cost to produce 50 cookies
Answer:
$20
Explanation:
First, we need to find the total cost of producing 100 cookies.
From the above question, the total cost to produce 100 cookies is given by the average total cost of $0.25 multiplied by 100 units
TC = $0.25 × 100 = $25.
Therefore, the total cost to produce 50 cookies, is equal to the cost of producing 100 units minus the marginal cost ($0.10 per unit) of the additional 50 units.
TC = $25 - ($0.1 × 50) = $20
deposited pierrs's check for $1000 in the bank what is the general jeneral entry?
Answer:
When a cheque received is not deposited on the same day, it is taken in the cash account and when it is deposited in bank, then a contra entry is passed. For example cheque received from Ram on 15th March is deposited on 18th March, following entries will be passed: 15/3 Cash A/c Dr.
Explanation:
Lightfoot Company sells its product for $55 per unit and has variable costs of $30 per unit. Total fixed costs are $25,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units if variable costs increase by $5 due to an increase in the cost of directmaterials?
A. It will increase by 250 units.
B. It will decrease by 167 units.
C. It will decrease by 250 units.
D. It will increase by 167 units.
Answer:
The Break-even point in units will increase by 250 units.
Explanation:
Giving the following information:
Fixed costs= $25,000
Selling price= $55
Unitary varaible cost= $30
First, we need to calculate the current break-even point in units:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 25,000 / 25
Break-even point in units= 1,000
Now, the new Break-even point in units:
Break-even point in units= 25,000 / (55 - 35)
Break-even point in units= 1,250
The Break-even point in units will increase by 250 units.
true or false. a factor that can come between the purchase intention and purchase decision is the attitude of others g
Answer:
True
Explanation:
Before a consumer makes a decision to buy a product, several factors can affect him. Two distinct factors are the attitude of others and unexpected situational factors. When the customer notices that a lot of people around him have a negative disposition or opinion about a product, they are likely to be discouraged from buying that product.
This is even more likely to happen if the consumer lacks enough motivation to buy that product. So the attitude of others can affect the buyer's intention which is his motivation and the final decision to purchase that product.
A lot of factors can come between purchase intensions. A factor that can come between the purchase intention and purchase decision is the attitude of others is a true statement.
The more positive a person's attitude toward the a product, the greater their purchase intentions.
Another factor consider is perceived playfulness that also affects purchase intention positively.
The factors that affect a consumer's purchase intention can be said to be product perception, shopping experience, customer service etc.
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Roger owns some farmland that he rents to a tenant. The tenant lives in an old farmhouse on the property and raises crops on the land. Roger is concerned about legal liability if the tenant injures someone. Roger requires the tenant to have liability insurance and to add himself to the liability coverage through an endorsement. Under the tenant's liability insurance, Roger is a(n)
Answer:
additional insured
Explanation:
An additional insured endorsement refers to an amendment clause made to an exiting policy which adds someone else, and therefore, extends the coverage of the policy to include this recently added party.
In this case, Roger was included or added to his tenant's liability insurance policy, therefore, he will be covered by it.
Donald is an agent representing Xmart, a large department store chain. Xmart has sent him to deal with Fred in regard to purchasing Fred's land in order to erect a new store. When Donald first meets Fred, Fred calls Xmart to verify that Donald is in fact an agent authorized to deal on Xmart's behalf. Xmart sends Fred a written confirmation of Donald's authorization to act as its agent and states that a contract signed by Donald will be honored by Xmart. Donald and Fred meet every other day during the negotiations. While the negotiations are still ongoing, Donald is fired by Xmart because it doesn't feel that he is making sufficient progress. Why is it important for Xmart to communicate with Fred regarding Donald's firing
Answer:
If Xmart doesn't notify Fred that Donald is not there agent anymore, then any agreement made between Donald and Fred will be valid and binding to Xmart.
Donald is no longer Xmart's agent, but unless Fred is notified, he still may act as an apparent agent. Apparent agents are people that someone could assume are acting on behalf of a principal, e.g. a person that wears a store's uniform inside a store is presumably a salesperson or someone that works for the store, therefore, he/she is an apparent agent. You do not ask for employment contracts when you enter a store.
Curtis invests $450,000 in a city of Athens bond that pays 6.50 percent interest. Alternatively, Curtis could have invested the $450,000 in a bond recently issued by Initech, Incorporated that pays 7.75 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond
Answer:
$8,370
Explanation:
Calculation for How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond
Using this formula
Explicit tax = (Amount Invested× Interest percentage)×Marginal tax rate
Let plug in the formula
Explicit tax =($450,000×7.75%)×24%
Explicit tax =$34,875×24%
Explicit tax =$8,370
Therefore the amount of explicit tax that Curtis would incur on interest earned on the Initech, Incorporated bond will be $8,370
Which of the following statements is true? Group of answer choices If current Real GDP is greater than Natural Real GDP, the economy is in a recessionary gap. If current Real GDP is less than Natural Real GDP, the economy is in long-run equilibrium. Wages are flexible if the economy is self-regulating. Wages rise but prices remain constant in long-run equilibrium. All economists believe the economy is self-regulating.
Answer: Wages are flexible if the economy is self-regulating.
Explanation:
Classical economists believe that the economy is self-regulating. This means that if the economy is not at equilibrium, it will return to equilibrium if it is left without interference.
For this to happen, inputs such as wages have to flexible to enable them to adjust to market conditions and thus take the Economy back to equilibrium.
For instance, if there is a recession, wages will reduce so that the prices that the producers can charge will reduce as well which will enable supply to match demand and bring the economy back to equilibrium.
A business buys $5000 worth of resources to produce a good. The business makes 100 units of the good and each of them sells for $65. The value added by the business to these products is:
a. $5,000
b. $6,500
c. $1,500
d. $1,000
Answer:
$1,500
Explanation:
A business buys $5000 worth of resources resources to produce a good
The business makes 100 unit of of the good and sell each for $65
Therefore the value added by the business to the product can be calculated as follows
= $65×100
= $6500
$6,500-$5,000
= $1,500
Hence the value added by the business to the product is $1,500
Consider a firm with production function F(K, L)=3L+8K. Assume that capital is fixed at K=12. Assume also that the rental rate (price) of capital r=10 and the wage rate (price) of labor w=3. The cost of production is the total expenditure on capital (fixed cost) and labor (variable cost). Then the cost of producing q units is__.
A. C(q)=114+(9q/8).
B. C(q)=24+39.
C. C(q)=88+(q/12).
D. C(q)=24+ q.
E. C(q)=24+q2
Question attached
Answer and Explanation:
Answer and explanation attached
Answer the following questions on the basis of the following three sets of data for the country of North Vaudeville: (A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110 235 110 285 100 210 100 235 100 260 100 235 95 235 95 235 100 260 90 235 90 210 100 285 a. Which set of data illustrates aggregate supply in the immediate short run in North Vaudeville? (Click to select) The short run? (Click to select) The long run? (Click to select) b. Assuming no change in hours of work, if real output per hour of work decreases by 5 percent, what will be the new levels of real GDP in the right column of B?
Question attached
Answer and Explanation:
1a. We can see immediate short run aggregate supply in North vaudeville in column A. This is because the price is fixed while output increases
1b. We can see short run aggregate supply in North vaudeville in column c. This is because output increases with price increase.
1c we can see long run aggregate supply in North vaudeville in column B. This is because output is constant with price increase.
Assuming output per hour of work decreases by 25% for column C then for each price, output is:
2A. Given price P= 110, output is 285(1-0.25) = 213.75
2B. Given price P = 100, output is 260(1-0.25) = 195
2C. Given price P = 95, output is 235(1-0.25) = 176.25
2D. Given price P = 90, output is 210(1-0.25) = 157.50
3. The new data from question 2 reflects a decrease in aggregate supply.
Assume that if Ivanhoe Water accepts Clifton’s offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 80,410 of the new lights each year at a price of $13. Variable costs of the lights are expected to be $10 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.
Question Completion:
Question 2 Ivanhoe Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,330 timers, the company has calculated the following unit costs Direct fixed costs include supervisory and clerical salaries and equipment depreciation. Direct materials Direct labor Variable manufacturing overhead Direct fixed manufacturing overhead Allocated fixed manufacturing overhead $12 10 (30% salaries, 70% depreciation) 10 Total unit cost $42 Clifton Clocks has offered to provide the timer units to Sandhill at a price of $34 per unit. If Sandhill accepts the offer, the current timer unit supervisory and clerical staff will be laid off (a1) Your answer is correct. Calculate the total relevant cost to make or buy the timer units. (Round answers to O decimal places, eg, S250.) Make Buy 100825 1371220
Answer:
Ivanhoe Water
1. Total relevant cost to make the timer units:
If Ivanhoe does not accept the Clifton's offer, its total cost = $35 * 40,330 = $1,411,5500
If it accepts Clifton's offer, the total cost = $34 * 40,330 = $1,371,220
2. Net cost = $40,330
Explanation:
a) Data and Calculations:
Cost of producing 40,330 timers
Direct materials $12
Direct labor 7
Variable manufacturing overhead 3
Direct fixed manufacturing overhead 10
Allocated fixed manufacturing overhead 10 (30% salaries, 70% depreciation)
Total unit cost $42
Clifton's offer = $34 per unit
Total relevant cost to make the timer units:
If Ivanhoe does not accept the Clifton's offer, its total cost = $35 * 40,330 = $1,411,5500
If it accepts Clifton's offer, the total cost = $34 * 40,330 = $1,371,220
Net cost = $40,330
Out of the total cost of $42, $7 for the depreciation is not considered relevant. This leaves the relevant cost at $35 per unit. Any cost that cannot be eliminated by a decision is not relevant, it is a sunk cost. The salaries of the supervisory and clerical staff can be eliminated, so it is relevant here.
Show how Cablevision can conduct an ROI analysis. Describe the information that the company should collect and how it should b collected.
Answer:
Explanation:
Cablevision can easily accomplish this by doing the following. First gather the number of sales of premium services and other products that non-trained individuals are accomplishing in a given time period (example, one month). Next, under the same conditions place the newly trained individuals and gather the same data from them (number of sales/subscribers gained, premium products, and other products). Finally, they would simply need to compare the difference in the number of sales to see if the training paid off. They would also need to calculate if the difference in sales surpasses the costs of training.
The journal entry to record the transfer of units to the next department in process accounting is a(n):
Answer:
Decrease in one asset and an increase in another asset
Explanation:
The journal entry to record the transfer of units to the next department in process accounting is a(n):
i. Decrease in one asset
ii. Increase in another asset
BE5-12 Keyser beverage company reported the following items in the most recent year
Suppose that Congress passes legislation making it more difficult for firms to fire workers. One example might be a law requiring severance pay for fired workers. The goal of this legislation is to reduce the rate of job separation without affecting the rate of job finding. Use this information to answer the following three questions. (Assume the size of the labor force remains constant.) If this legislation reduces the rate of job separation (s) without affecting the rate of job finding (f), how would the natural rate of unemployment change
Answer:
If the new law reduces the rate of job separation without affecting the rate of job finding, then, the natural rate of unemployment will fall.
This is because of the formula
U / L = s / (s + f)
Where U is unemployment, L is labor force, s is rate of separation, and f is rate of job finding.
The reason why the rate of natural unemployment will fall is because if employees are harder to fire, companies will be more careful when hiring workers, since the cost of firing a worker is now higher.
Mills Corporation acquired as an investment $225 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $250 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $240 million. Required: 1. & 2. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate. 3. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2021. 4. Suppose Moody’s bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2022, for $266 million. Prepare the journal entries required on the date of sale.
Answer:
Please see solution below.
Explanation:
1.
July 1, 2021
Dr Investment in bonds $225,000,000
Dr Premium on investment in bonds $25,000,000
Cr Cash $250,000,000
December 31, 2021
Dr Cash $18,000,000
Cr Interest revenue $15,000,000
Cr Premium on investments in bonds
$3,000,000
2.
Investment in bonds. $225,000,000
Premium on investment in bonds $22,000,000
3.
January 2, 2022
Dr. Cash $266,000,000
Cr Investment in bonds $225,000,000
Cr Premium on investment in bonds $22,000,000
Cr Gain on sale of investments $19,000,000
Workings:
Effective interest rate on first coupon received = [ $225,000,000 × 8%] - [ $250,000,000 × 6%]
= $18,000,000 - $15,000,000
= $3,000,000
Premium on investment in bonds = $25,000,000 - $3,000,000
= $22,000,000
2. What's a good way to reduce food costs?
A buying items on sale
B making a shopping list and sticking to it
C making sure you go to the store on a full stomach
D all of the above
Researchers at Ohio State and Michigan put leader behavior into two broad categories; __________ and __________.
a. Task , Power
b. People , Task
c. Task , Organizational
Answer:
b. People , Task
Explanation:
Based on the Michigan Leadership Studies that was carried out around 1950s and 1960s which centered on behavioral approaches and identification of leader relationships and group processes. The outcome of the research showed that there are three significant traits of productive leaders which are mainly:
1. Task-oriented behavior
2. Relationship-oriented behavior: this focused on people interaction in and out of the work place.
3. Participative leadership.
Hence, in this case, it can be concluded that "Researchers at Ohio State and Michigan put leader behavior into two broad categories; PEOPLE and TASK.
1. When will countries trade? Assuming 2 goods, food and clothing, and that both countries’ preferences are homothetic (but not necessarily identical), determine whether two countries will trade in each of the following situations: (a) Countries have identical preferences and identical endowments. (b) Countries have identical preferences, their endowments differ, and their endowments are not in the same ratio of food to clothing. (c) Countries have identical preferences, their endowments differ, but the ratio of food to clothing is the same in both countries. (d) Countries have identical endowments but different preferences. (e) Countries have both different preferences and different endowments.
Answer:
(a) Countries have identical preferences and identical endowments.
Explanation:
Analyzing the statement, there is information that the preferences of countries are homothetic (but not necessarily identical) with respect to the 2 goods, food and clothing.
That is why it is correct to state that countries will not trade with each other, as countries have identical preferences and identical allocations, which means that the demands for these goods will be related to the prices of the goods and not in relation to income or preferences.
Therefore, there is no need to commercialize these two goods between these countries, except in situations of scarcity.