The calculation of the earnings per share (EPS) is given below: a. 2019: Profit from continuing operations = $250,000 Weighted average outstanding shares = 20,466EPS = $250,000/20,466 = $12.21
1. The missing amounts are as follows: 2. a. The company earned a profit of $97,875 during 2021. 2. b. The calculation of the outstanding shares on each of the cash dividend dates is given below: a. Cash dividend date: December 1, 2019 Outstanding shares on December 1, 2019 = 20,000 + (20,000 × 20%) = 24,000b. Cash dividend date: December 1, 2020Outstanding shares on December 1, 2020 = 40,800 + (40,800 × 20%) = 48,960Therefore, the number of outstanding shares on each of the cash dividend dates is as follows: a. Cash dividend date: December 1, 2019 = 24,000b. Cash dividend date: December 1, 2020 = 48,960c. There were no cash dividends in 2021. The calculation of the weighted-average number of common shares outstanding is given below: a. 2019: Outstanding shares on December 31, 2018 = 20,000Outstanding shares after share dividend on December 1, 2019 = 24,000 Weighted average outstanding shares = (20,000 × 365) + (24,000 × 31)/396,500 = 20,465.91 ≈ 20,466 b. 2020:Outstanding shares on December 31, 2019 = 27,300Outstanding shares issued on March 31, 2020 = 8,000Weighted average outstanding shares = (27,300 × 92) + (8,000 × 274)/34,448,000 = 28,376.54 ≈ 28,377c. 2021:Outstanding shares on December 31, 2020 = 40,800Outstanding shares issued on July 1, 2021 = 6,400Outstanding shares after 2:1 stock split on November 1, 2021 = 80,400Weighted average outstanding shares = (40,800 × 304) + (6,400 × 92) + (80,400 × 60)/51,554,400 = 67,500.44 ≈ 67,50. The calculation of the earnings per share (EPS) is given below: a. 2019:Profit from continuing operations = $250,000. Weighted average outstanding shares = 20,466EPS = $250,000/20,466 = $12.21. b. 2020:Profit from continuing operations = $215,000Gain (loss) on discontinued segment = $90,000Total profit = $305,000Weighted average outstanding shares = 28,377EPS = $305,000/28,377 = $10.76c. 2021:Profit from continuing operations = $97,875. Weighted average outstanding shares = 67,500EPS = $97,875/67,500 = $1.45Therefore, the answers to the given questions are as follows: 1. The missing amounts are given below: 2. a. The company earned a profit of $97,875 during 2021.2. b. The number of outstanding shares on each of the cash dividend dates is as follows: a. Cash dividend date: December 1, 2019 = 24,000b. Cash dividend date: December 1, 2020 = 48,960c.
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Kristen Lu purchased a used automobile for $22,900 at the beginning of last year and incurred the following operating costs: Depreciation ($22,900 + 5 years) $ 4,580 Insurance $ 2,400
Garage rent $ 1,200 Automobile tax and license $ 620 Variable operating cost $ 0.08 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $4,580. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 22,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
Average fixed cost per mile _____
Variable operating cost per mile ______
Average cost per mile ______
2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? Variable operating costs ? Depreciation ? Automobile tax ? License costs ? Insurance costs
The average cost per mile of owning and operating the car is $0.
1. to compute the average cost per mile of owning and operating the car for kristen, we need to consider both the fixed and variable costs.
first, let's calculate the average fixed cost per mile:annual depreciation = $4,580
miles driven = 22,000average fixed cost per mile = annual depreciation / miles driven
average fixed cost per mile = $4,580 / 22,000 = $0.21 per mile
next, let's calculate the variable operating cost per mile:variable operating cost per mile = variable operating cost per mile = $0.08 per mile
finally, let's calculate the average cost per mile:
average cost per mile = average fixed cost per mile + variable operating cost per mileaverage cost per mile = $0.21 + $0.08 = $0.29 per mile 29.
2. when deciding whether to use her own car or rent a car for an extended cross-country trip, kristen should consider the relevant costs. the following costs are relevant in this decision:
- variable operating costs: these costs include gasoline, oil, tires, maintenance, and repairs. they are important to consider as they will directly impact the cost of using her own car or renting a car.
- depreciation: depreciation is relevant because it represents the decrease in value of the car over time. it may be considered if kristen wants to account for the wear and tear on her own car during the trip.
- automobile tax: automobile tax may not be directly relevant for this decision, as it is usually an annual cost and not specifically tied to a temporary cross-country trip.
- license costs: license costs may not be directly relevant for this decision either, as they are usually an annual or periodic expense and not specifically tied to a temporary trip.
- insurance costs: insurance costs are relevant in the decision as kristen needs to ensure that she is adequately covered during her trip, whether she uses her own car or rents a car.
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Name four characteristic of good quality information. Explain them
briefly.
Four characteristics of good quality information are accuracy, completeness, relevancy, and timeliness. Below are brief explanations of each: Accuracy: Good quality information should be accurate. It should be based on verifiable facts and should be free of errors.
The information should be reliable and should provide correct data. Completeness: Good quality information should be complete. It should provide all the necessary information required to make a decision. The information should cover all aspects related to the topic. Relevancy: Good quality information should be relevant. It should be directly related to the subject and should be important for decision-making.
The information should be useful and should meet the needs of the users. Timeliness: Good quality information should be timely. It should be provided in a timely manner, allowing users to access and use it when they need it. The information should be current and up-to-date, so that it remains relevant and useful.
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Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm in New York. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks’ salary. On November 15, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Tonya and her coworkers had come to expect the bonus and believed that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy’s policy is to pay overtime at 150% of straight time.Tonya’s supervisor was surprised to see overtime being reported, because there is generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the "honor system" in reporting their work hours.Is Cannally and Kennedy CPA firm obligated to pay a bonus to its employees under any circumstances?
Yes
No
Yes, Cannally and Kennedy CPA firm is obligated to pay a bonus to its employees under certain circumstances.
Is the CPA firm legally bound to provide an annual bonus to its employees?Cannally and Kennedy's long-standing practice of providing a year-end bonus to its employees creates an implied agreement between the firm and its staff members. The consistent provision of this bonus over the past 10 years has established an expectation among employees, including Tonya, that the bonus would be granted each year. Therefore, the sudden discontinuation of the annual bonus could be seen as a breach of the implicit agreement.
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n a market of UT sweatshirts, market demand is given by the equation Q-150-2P D and market supply is given the equation Q,-3P, where Pis market price Suppose Dr. Heinz Doofenshmirtz, an evil scientist, has convinced the bookstore that sells sweatshirts to impose a surchage (as a tax) on every UT sweatshirt sold so that he would use the proceeds from the surcharge towards buliding an Obliterate inator-a promising device supposedly would obliterate alt forms of cheating in UT onlines classes. The bookstore manager has decided to impose surcharge for $25 per sweatshirt sold. All proceeds froms teh surcharge golo Di Doof to france his inator. How much money wil Dr. Doofenshmirts is going to recieve from the bookstore? How is the burden of the surcharge ($25) divided between the bookstore and the students? Whose burden is heavier: students' or bookstore? (Hint: you can use algebra to find the equilibrium before and after the surcharge and answer the questions altematively, you can use graph paper, draw the supply and demand equations, and find the answers] For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)
The burden of the surcharge is divided between the bookstore and the students in the following way:
The students pay $20 for the sweatshirt, which is $10 less than before the surcharge. The students also pay $25 for the surcharge, which is added to the price of the sweatshirt. The bookstore receives $20 for the sweatshirt and $25 for the surcharge, for a total of $45 per sweatshirt.
The burden of the surcharge is heavier on the students, as they pay $45 for a sweatshirt that used to cost $30.
Before the surcharge, the market equilibrium is given by:
Qd = Qs
150 - 2P = 3P
5P = 150
P = 30
Q = 150 - 2(30) = 90
So, before the surcharge, the market price is $30, and the quantity sold is 90.
After the surcharge, the demand equation becomes Qd = 150 - 2(P + 25) = 100 - 2P
The supply equation remains the same: Qs = 3P
Setting Qd = Qs, we get:
100 - 2P = 3P
5P = 100
P = 20
So, after the surcharge, the market price is $20.
The quantity sold is Q = 3(20) = 60.
The total amount of money collected from the surcharge is:
$25 x 60 = $1,500
The burden of the surcharge is divided between the bookstore and the students in the following way: The students pay $20 for the sweatshirt, which is $10 less than before the surcharge. The students also pay $25 for the surcharge, which is added to the price of the sweatshirt. The bookstore receives $20 for the sweatshirt and $25 for the surcharge, for a total of $45 per sweatshirt.
Therefore, the burden of the surcharge is heavier on the students, as they pay $45 for a sweatshirt that used to cost $30.
In conclusion, the surcharge imposed by Dr. Doofenshmirtz generates $1,500 for his Obliterate-inator, and the burden of the surcharge is heavier on the students than on the bookstore.
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Explain the advantages and disadvantages of conducting training
away from the work setting and On the Job Training. Describe a
situation in which each one of these methods would be best suited;
justif
A company wants to provide a hands-on, personalized, and job-specific experience, On the Job Training is the better option. A situation in which Conducting Training Away from the Work Setting would be best suited.
Let's discuss them:
Advantages of Conducting Training Away from the Work Setting:
1. The employees are less likely to be disturbed or interrupted by their colleagues or work-related tasks.
2. It may be easier to concentrate on learning, which could lead to greater retention and understanding.
3. It can be a way to improve employee morale and job satisfaction.
Disadvantages of Conducting Training Away from the Work Setting:
1. The employees may be away from work for an extended period of time, which may be inconvenient for the company.
2. The cost of transporting employees and/or paying for accommodations may be high.3. Employees may have difficulty relating the training back to their job or applying it on the job.
Advantages of On the Job Training:
1. The training is more specific and hands-on.
2. Employees can learn at their own pace, and training can be customized to their specific needs.
3. Employees are able to apply their training immediately, which can improve performance.
Disadvantages of On the Job Training:
1. It may be more difficult to schedule training around work-related tasks.
2. It may be harder to concentrate and learn in a busy work environment.
3. It may not be possible to provide employees with the same quality of training that they would receive in an off-site setting.
In conclusion, if a company wants to provide a hands-on, personalized, and job-specific experience, On the Job Training is the better option.
On the other hand, if the company wants to improve employee morale and job satisfaction, then Conducting Training Away from the Work Setting would be better suited. A situation in which Conducting Training Away from the Work Setting would be best suited.
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You just graduated from college and are starting your new job. You realized the importance to save for the future and have figured out that you will save $1,000 per quarter for the next 10 years; and then increase to $7,000 per quarter for the following 5 years. The amount accumulated at the end of these investments will be your retirement egg nest. You plan to start retirement and start withdrawing quarterly amounts the following quarter (you will be in retirement for 25 years). If your required rate of return is 12% compounded quarterly, how much are your quarterly withdrawals?
1. The total savings during the investment period will be: $180,000. 2/ At the end of your investment period, the accumulated amount will be approximately $687,675.34. 3. You can plan to withdraw approximately $21,358.50 per quarter during your retirement.
To calculate the quarterly withdrawal amount during your retirement with a required rate of return of 12% compounded quarterly, we can follow these steps:
1. Calculate the accumulated amount at the end of the investment period, considering the savings amounts and timeframes you mentioned.
In the first 10 years, you will save $1,000 per quarter for a total of 40 quarters, which amounts to:
$1,000 * 40 = $40,000.
Inthe following 5 years, you'll save $7,000 per quarter for a total of 20 quarters, which amounts to:
$7,000 * 20 = $140,000.
The total savings during the investment period will be:
$40,000 + $140,000 = $180,000.
2. Calculate the accumulated amount at the end of the investment period, considering the required rate of return of 12% compounded quarterly.
To calculate the accumulated amount, we can use the formula for compound interest:
A = P * (1 + r/n)^(n*t)
Where:
A = Accumulated amount
P = Principal amount (initial investment)
r = Quarterly interest rate (12% divided by 4, or 0.12/4)
n = Number of times the interest is compounded per year (4, since it's compounded quarterly)
t = Number of years (15, the total investment period)
For the total investment period of 15 years:
P = $180,000
r = 0.12/4 = 0.03
n = 4
t = 15
A = $180,000 * (1 + 0.03/4)^(4*15) ≈ $687,675.34
So, at the end of your investment period, the accumulated amount will be approximately $687,675.34.
3. Calculate the quarterly withdrawal amount during your retirement using the accumulated amount.
To calculate the quarterly withdrawal amount, we can use the formula for the present value of an annuity:
Withdrawal amount = (A * r) / (1 - (1 + r)^(-n))
Where:
A = Accumulated amount
r = Quarterly interest rate (12% divided by 4, or 0.12/4)
n = Number of quarters in retirement (25 years * 4 quarters per year, or 100 quarters)
A = $687,675.34
r = 0.12/4 = 0.03
n = 100
Withdrawal amount = ($687,675.34 * 0.03) / (1 - (1 + 0.03)^(-100))
Withdrawal amount ≈ $21,358.50 (rounded to the nearest cent)
Therefore, with a required rate of return of 12% compounded quarterly, you can plan to withdraw approximately $21,358.50 per quarter during your retirement.
Please note that these calculations are based on the assumptions made, and it's always advisable to consult with a financial advisor to tailor the calculations to your specific situation and get personalized advice.
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E、 Long Answer Questions_10*1=10 marks each (50) 1. Explain Mathematically NPV, IRR and Payback period? (10.0 × 1 10.0) 2. Do Banks Have a Liquidity Problem? (10.0 ×1= 10.0) 3. What is CAPM? Expla
a) Net Present Value (NPV): NPV is a financial metric used to evaluate the profitability of an investment project. It calculates the difference between the present value of cash inflows and the present value of cash outflows over a specific time period. The formula for NPV is:
NPV = CF₀ + (CF₁ / (1+r)) + (CF₂ / (1+r)²) + ... + (CFₙ / (1+r)ⁿ)
Where CF represents the cash flow for each period, r is the discount rate, and n is the number of periods. A positive NPV indicates that the investment is expected to generate more cash inflows than outflows and is considered financially viable.
b) Internal Rate of Return (IRR): IRR is another financial metric used to assess the profitability of an investment. It is the discount rate that makes the NPV of an investment equal to zero. In other words, it is the rate at which the present value of cash inflows equals the present value of cash outflows. The IRR can be calculated using numerical methods or through financial calculators/software.
c) Payback Period: The payback period is a simple financial metric that measures the time required for an investment to recover its initial cost. It represents the length of time needed to generate enough cash inflows to offset the initial investment. The payback period is calculated by dividing the initial investment by the average annual cash inflows. A shorter payback period is generally preferred, as it indicates a quicker recovery of the investment. It's important to note that the overall liquidity situation of banks can vary across different regions, countries, and individual institutions. Regulatory frameworks, capital requirements, and risk management practices also play a significant role in determining a bank's liquidity position. Therefore, it is necessary to analyze specific banks and their respective circumstances to assess whether they have a liquidity problem.
In CAPM, the expected return of an investment is calculated using the following formula:
Expected Return = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate)
The components of CAPM include:
Risk-Free Rate: The rate of return on a risk-free investment, typically represented by the yield on government bonds.Beta (β): Beta measures the sensitivity of an investment's returns to changes in the overall market. It indicates the investment's systematic risk relative to the market. A beta greater than 1 indicates higher volatility than the market, while a beta less than 1 implies lower volatility.Market Return: The expected return of the overall market, often represented by a broad market index such as the S&P 500.CAPM helps investors assess whether an investment is expected to generate sufficient returns given its risk level. By considering the risk-free rate, beta, and market
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The business plan of a new entrepreneur should include all of the following EXCEPT: O capital required. O operational planning. target market. O competitive advantages.
The business plan of a new entrepreneur should include capital required, operational planning, target market, and competitive advantages. None of them should be excluded from the plan.
The business plan of a new entrepreneur is a comprehensive document that outlines the various aspects of their business idea. It is crucial for the entrepreneur to consider and include all necessary elements in their plan.
1. Capital required: This section of the business plan provides an estimation of the financial resources needed to start and sustain the business. It includes information about initial investments, operating costs, and potential sources of funding.
2. Operational planning: This part of the plan focuses on the day-to-day operations of the business. It covers aspects such as production processes, logistics, supply chain management, staffing requirements, and strategic decision-making.
3. Target market: Understanding the target market is essential for any business. This section identifies the specific customer segment the entrepreneur intends to serve and provides insights into their needs, preferences, and behaviors. It also includes market research and analysis to support the business's marketing and sales strategies.
4. Competitive advantages: This section highlights the unique selling points or competitive advantages of the entrepreneur's business. It identifies what sets their product or service apart from competitors and how it provides value to customers.
Therefore, all of the mentioned elements—capital required, operational planning, target market, and competitive advantages—are essential components of a comprehensive business plan for a new entrepreneur. None of them should be excluded from the plan.
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Question 2 a) Discuss the relationship between Risk and Return. 1 mark b) List the two (2) main sources of capital that big corporations use to finance their investments. 2 marks c) Discuss which sour
a) The relationship between Risk and Return is that the higher the potential return, the higher the risk, or the lower the potential return, the lower the risk.
Investors need to consider this relationship when making investment decisions.b) The two main sources of capital that big corporations use to finance their investments are equity and debt. Equity refers to the money invested by shareholders who own a portion of the company, while debt refers to money borrowed from lenders who expect to be repaid with interest. Some examples of equity financing include issuing stocks, while debt financing includes issuing bonds or taking out loans.c) The source of capital that is more appropriate for a company depends on factors such as the company's financial situation, the nature of the investment, and the risk involved. For example, if a company is already highly leveraged, it may be more appropriate to use equity financing instead of adding more debt. On the other hand, if the investment is relatively low risk, debt financing may be more appropriate as it typically carries a lower cost of capital compared to equity financing.
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In job satisfaction trends there is a statement that the level of employee satisfaction in small companies is actually higher than in large companies, what causes this to happen and is there a way that large companies can do to increase this satisfaction? (chapter management about individual behavioral)
The statement that employee satisfaction in small companies is higher than in large companies is a widely observed trend.
There are several reasons why this may be the case. Firstly, in smaller companies, there is often a more personal relationship between employees and management. This can lead to better communication and a greater sense of community within the workplace, which can contribute to higher job satisfaction. Additionally, small companies often have less bureaucracy and more flexibility in their policies, allowing employees to have a greater sense of autonomy and control over their work.
On the other hand, large companies can take steps to increase employee satisfaction. One approach is to focus on creating a positive workplace culture, emphasizing values such as inclusivity, teamwork, and employee recognition. Providing opportunities for career development and growth can also contribute to job satisfaction. Additionally, implementing policies that prioritize work-life balance, such as flexible schedules or remote work options, can help employees feel more fulfilled and satisfied in their roles.
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2. Short answer questions 1) What are the advantages and drawbacks of standardization and adaptation? 2) What are factors influencing pricing decisions? 3) What are the strategic alternatives or appro
Advantages and drawbacks of standardization and adaptation:
Standardization refers to the approach of offering the same products or services across different markets, while adaptation involves customizing offerings to meet the specific needs and preferences of local markets. Here are the advantages and drawbacks of both approaches:
Advantages of standardization:
Cost-efficiency: Standardization allows companies to achieve economies of scale by producing and marketing a single, standardized product, reducing production and marketing costs.
Consistent brand image: A standardized approach helps in building a consistent brand image globally, leading to increased brand recognition and customer loyalty.
Simplified logistics: By producing a standardized product, companies can simplify their supply chain and distribution processes.
Market responsiveness: Adapting products to local markets allows companies to meet the unique demands and preferences of customers, leading to increased sales and market share.
Competitive advantage: Adapting products can help companies differentiate themselves from competitors and gain a competitive edge by offering tailored solutions.
Cultural sensitivity: By adapting products, companies can demonstrate respect for local cultures and build stronger relationships with customers.
Drawbacks of adaptation:
Increased costs: Adapting products can result in higher production and marketing costs due to the need for customization and localized strategies.
Complex logistics: Managing a variety of customized products and strategies across different markets can pose logistical challenges.
Brand inconsistency: Adaptation may lead to inconsistencies in brand image and messaging, which can dilute the overall brand identity.
Factors influencing pricing decisions:
Market demand: Understanding customer demand and price sensitivity is essential in determining the optimal pricing strategy. Higher demand may support higher prices, while lower demand may require competitive pricing or discounts to stimulate sales.
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Bmi Inc stock has 40% chance of producing a 25% return,a 35% chance of producing a 9% return and a 25% chance of producing a -21% return.
What is the firm's expected rate of return?
Please use excel
The firm's expected rate of return for BMI Inc stock is approximately 5.15%.
How to calculate BMI Inc's expected rate of return?To calculate the expected rate of return for BMI Inc stock, we can use the following formula in Excel:
= (Probability1 * Return1) + (Probability2 * Return2) + (Probability3 * Return3)
Given the probabilities and returns:
Probability1 = 40%
Return1 = 25%
Probability2 = 35%
Return2 = 9%
Probability3 = 25%
Return3 = -21%
Using the formula in Excel, the calculation would be:
= (0.4 * 0.25) + (0.35 * 0.09) + (0.25 * -0.21)
The expected rate of return for BMI Inc stock is approximately 5.15%.
Note: The returns are expressed in decimal form (e.g., 25% is represented as 0.25) for the calculation.
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the prices of zero-coupon bonds are: maturity price 1 0.95420 2 0.90703 3 0.85892 calculate the one year forward rate, deferred 2 years.
The price of a zero-coupon bond with a specific maturity is the present value of its face value that is to be received at maturity. Zero-coupon bonds are also known as discount bonds or deep discount bonds.
The price of a zero-coupon bond with a specific maturity is the present value of its face value that is to be received at maturity. Zero-coupon bonds are also known as discount bonds or deep discount bonds. There are no coupon payments made by the issuer of the bond. The difference between the maturity price and the initial price, which is paid for the bond, is the interest earned. A zero-coupon bond's return on investment is calculated by measuring the bond's return to maturity. Maturity price is a price paid when a bond or other security reaches maturity.A forward rate is a predicted interest rate based on current interest rates and the anticipated interest rates in the future. The one-year forward rate that is deferred two years can be calculated as follows:We have to find out the forward rate for 1 year after 2 years. Let's suppose that the annual interest rate for zero-coupon bonds that matures in 3 years is r3. The annual interest rate for a zero-coupon bond that matures in two years is r2. And the annual interest rate for a zero-coupon bond that matures in one year is r1.To calculate the one-year forward rate that is deferred two years we will use the following formula:1+r1=(1+r2)×(1+r2f)1+0.0545=(1+0.0525)×(1+r2f)r2f=1.05452/1.0525-1r2f=0.001898 or 0.1898%. In this question, we are given the prices of zero-coupon bonds with different maturities. We need to find the one year forward rate that is deferred two years. We will use the formula for calculating the one-year forward rate that is deferred two years, which is:1+r1=(1+r2)×(1+r2f)Where r1 is the interest rate for a zero-coupon bond that matures in one year, r2 is the interest rate for a zero-coupon bond that matures in two years, and r2f is the forward rate for a zero-coupon bond that matures in two years and starts after one year.Using the above formula, we get:r2f = (1 + r1) / (1 + r2) - 1We are given the prices of zero-coupon bonds with different maturities. To calculate the interest rates for these bonds, we can use the following formula:P = M / (1 + r)nWhere P is the price of the bond, M is the face value of the bond, r is the interest rate, and n is the number of years to maturity.Using the above formula, we get:r3 = (100 / 85.892)^(1/3) - 1r3 = 0.0560 or 5.60%r2 = (100 / 90.703)^(1/2) - 1r2 = 0.0525 or 5.25%r1 = (100 / 95.420) - 1r1 = 0.0545 or 5.45%Substituting the values in the formula for calculating the one-year forward rate that is deferred two years, we get:r2f = (1 + 0.0545) / (1 + 0.0525) - 1r2f = 0.001898 or 0.1898%Therefore, the one year forward rate that is deferred two years is 0.1898%.
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another mcq option is 4
Allowing a cycle time of 5 minutes. Task Time Work Task (seconds) A 70 B 60 C 120 D 60 240 100 190 3 6 2 E F G Calculate the theoretical minimum number of workstations? Immediate Predecessor(s) A B C,
According to the statement the theoretical minimum number of workstations required to complete the process is 18.
Workstations are used in manufacturing and production facilities to provide workspaces for workers. The theoretical minimum number of workstations can be calculated using the following formula:Tmin = Sum of task times/ cycle timeThe minimum number of workstations required to complete the process is given by the value of Tmin rounded up to the nearest whole number. Task Time Work Task (seconds) A 70 B 60 C 120 D 60 240 100 190 3 6 2 E F GWe are provided with the above table with task times and immediate predecessors. We need to calculate the theoretical minimum number of workstations.Let's calculate the cycle time using the given data:Cycle Time = HCF (3, 6, 2) * 5 min= 30 minNext, we will calculate the task time sum using the given data:Task Time Sum = 240 + 100 + 190 = 530 secondsNow, we will substitute the values in the formula and calculate the theoretical minimum number of workstations:Tmin = Task Time Sum/ Cycle Time= 530/30= 17.67 ≈ 18Therefore, the theoretical minimum number of workstations required to complete the process is 18.
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Assume that the oil extraction company needs to extract units of oil (a depletable resource) reserve between two periods in a dynamically efficient manner. What should be a maximum amount of so that the entire oil reserve is extracted only during the 1st period f(a) the marginal willingness to pay for ol in each period is given by P = 33 -0.39. marginal cost of extraction is constant at $2 per unit and (c) discount rate is 27 1 points QUESTION 4 Assume that a country is endowed with 30 units of all reserve (a) the marginal willingness to pay for oil in each period is given by P10-0.579 (b) the marginal cost of extraction of oil is constant at $2 per unit (c) the discount rate is 1% (d) the marginal cost of renewable energy is 59, where odca How long will it take for a country to transition to a renewable energy source?
The remaining oil to extraction be extracted will be (30-a).
The present value of the first-period extraction cost is given by 2a/(1.27) = 1.5748aThe present value of the second-period extraction cost is given by 2(30-a)/(1.27)² = 0.6079(30-a)The present value of the willingness to pay for oil in the first period is given by (33-0.39a)/1.01 = 32.6732673267-0.3861386139aThe present value of the willingness to pay for oil in the second period is given by (33-0.39(30-a))/(1.01)² = 17.8127883190+0.3861386139a
The above expression simplifies to max a {48.4860556457-0.7957383878a}The first-order condition for the above problem can be found by differentiating the expression with respect to a and equating the result to zero. Therefore,-0.7957383878 + 0 = -0.7957383878The optimal level of first-period oil extraction that ensures dynamic efficiency is, therefore, a = 24.6785. Since a < 30, it implies that some oil is left in the ground.
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Individual Problems 15-3 Microsoft and a smaller rival often have to select from one of two competing technologies, A and B. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. If the two companies select different technologies, Microsoft's payoff is 6 units of utility, while the small rival suffers a loss of utility of 3. If the two companies select the same technology, Microsoft suffers a loss of utility of 3 while the rival gains 3 units of utility. Using the given information, fill in the payoffs for each cell in the matrix, assuming that each company chooses its technology simultaneously. Microsoft Technology A Technology B Technology A Rival Microsoft Rival Technology B Rival: Microsoft True or False: There is no equilibrium in pure strategies. O True O False Rival: Rival: Microsoft Microsoft
In the given scenario, Microsoft and its smaller rival have to choose between two competing technologies, A and B. Microsoft wants to select a different technology from its rival.
Upon filling in the payoffs for each cell in the matrix, we can observe that there is no equilibrium in pure strategies. In the case where both companies choose Technology A, Microsoft suffers a loss of utility while the rival gains utility, creating an incentive for Microsoft to deviate and choose Technology B. Similarly, if both companies choose Technology B, Microsoft's payoff is higher when it deviates and selects Technology A. This lack of equilibrium in pure strategies suggests that the optimal strategy for each company involves mixed strategies, where they choose their technologies with certain probabilities to achieve the highest expected payoffs. By doing so, they can balance their interests and avoid predictable patterns that can be exploited by the other company.
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What was the budget deficit in 2021? What were the three biggest spending components of the 2021 budget? What are the two biggest sources of revenue for the federal government in 2021? What is the relationship between budget deficits and the national debt?
In 2021, the budget deficit in the United States refers to the difference between the government's total spending and its total revenue for that year.
The specific figure for the budget deficit in 2021 would require up-to-date information beyond my knowledge cutoff in September 2021.
Regarding the three biggest spending components of the 2021 budget, they can vary depending on government priorities and circumstances. Common areas of significant spending include healthcare, defense, and social programs like Social Security or Medicare. However, the exact breakdown would need the most recent budget data.
The two biggest sources of revenue for the federal government in 2021 are typically individual income taxes and payroll taxes. These two revenue streams account for a significant portion of the government's income and fund various public expenditures.
Budget deficits and the national debt are closely linked. When a budget deficit occurs, the government must borrow money to cover the shortfall, resulting in an increase in the national debt. Over time, if budget deficits persist, the national debt accumulates, potentially leading to long-term fiscal challenges such as increased interest payments and limited borrowing capacity.
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Suppose the market supply is given by L=2W. Assume the product market is competitive and the product price is p=$11. Also suppose MP1= 9.2-0.8L and that the firm has monopsony power.
Report numerical answers as a decimal, do not round at all.
A. Write the formula for the inverse supply of labour and graph the supply curve. The slope of this supply curve is _____
B. For this firm, MCL=_______ (enter the simplified formula). Illustrate this market graphically, including accurate numbers for slopes and intercepts. Write the condition which the monopsonist's optimal choice of labour must satisfy. This monopsonist will choose employment level _________. At this employment level, the firm will offer the wage $ ________, and the value marginal product of labour is $ _________ . The average cost of labour for this monopsonist is $ and the firm's profit per worker is $ _______ so this monopsonist makes a profit of $ _______.
C. The competitive outcome would occur at the intersection of which two curves? Indicate this point on your graph. Based on the equations given, the competitive level of employment would be and the competitive wage would be $ ______ . Relative to the monopsony outcome, competitive employment is _______ (higher/lower/the same) and competitive wages are _______ (higher/lower/the same).
Now suppose the union insists wages must not be below $5:
D. Carefully draw the firm's new marginal cost of labour. For employment levels up to L= _______ , the firm's marginal cost of labour will be $5. For levels of employment greater than that, the marginal cost of labour _______ (increases/decreases). Explain why.
E. Has the condition for the monopsonist's optimal choice of L changed? After the union influence, the level of employment will be ______ be paid $ _______. Relative to the competitive outcome, employment after the union influence is ______ (higher/lower/the same) and workers will ________ (higher/lower/the same) and (increased/decreased/not affected) wages are______. Relative to the monopsony outcome, the union has ______ employment and _______ (increased/decreased/not affected) worker pay.
Relative to the competitive outcome, employment after the union influence is higher, and workers will have higher wages. The effect on wages is increased because the union has successfully set a wage floor. The impact on worker pay depends on the specific wage levels and the comparison between monopsony and competitive outcomes, which cannot be determined without the demand curve equation.
A. The inverse supply of labor can be obtained by rearranging the equation for market supply:
W = L/2
The slope of the supply curve can be determined by comparing the coefficient of L in the supply equation, which is 1/2. Therefore, the slope of the supply curve is 1/2.
B. The marginal cost of labor (MCL) for this firm is equal to the wage rate (W) in a monopsonistic labor market. Therefore, the MCL formula is:
MCL = W = L/2
To illustrate the market graphically, we can plot the supply curve, demand curve, and the marginal cost of labor. However, without the demand curve equation, it is not possible to accurately depict the graph or determine the specific slopes, intercepts, and optimal employment level.
The condition for the monopsonist's optimal choice of labor is that the MCL should be equal to the value marginal product of labor (VMPL). This occurs when MCL = VMPL.
C. The competitive outcome would occur at the intersection of the supply and demand curves. However, since the demand curve equation is not provided, we cannot determine the specific intersection point, the competitive level of employment, or the competitive wage.
D. The firm's new marginal cost of labor would be represented by a horizontal line at $5 for employment levels up to L=10. For levels of employment greater than 10, the marginal cost of labor remains at $5. This is because the union insists that wages must not be below $5, so the firm cannot pay lower wages regardless of the level of employment.
E. The condition for the monopsonist's optimal choice of L remains the same, which is MCL = VMPL. However, after the union influence, the level of employment will increase to meet the wage floor of $5. The specific level of employment and wage cannot be determined without the demand curve equation.
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Which of the following scenarios involves a positive externality? O a. A manufacturing firm emits greenhouse gases into the atmosphere. O b. You plant a pretty garden that all of your neighbors enjoy looking at. O c. Your roommate listens to bad music late at night, preventing you from getting a good night's sleep. O d. I find my favorite flavor of PopTarts in the grocery store.
Scenario (b) involving planting a pretty garden that all neighbors enjoy looking at is an example of a positive externality.
A positive externality occurs when the actions of an individual or firm create benefits for others that are not directly reflected in the market transaction. In this case, scenario (b) fits the definition of a positive externality because planting a pretty garden not only brings personal enjoyment to the individual but also provides aesthetic benefits to the neighbors who can enjoy looking at it.
Option (a) involving a manufacturing firm emitting greenhouse gases is an example of a negative externality because it imposes costs on society in terms of environmental pollution. Option (c) involving a roommate listening to bad music that disrupts your sleep is also a negative externality as it creates a cost (reduced quality of sleep) for you. Option (d) where you find your favorite flavor of PopTarts in the grocery store is not an externality at all, as it doesn't involve external effects on others.
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1. An insurance market consists of high-risk patients, who average $40,000 in spending per year, and low-risk patients, who average $1,000 per year. Overall, low-risk patients represent 90 percent of the population. What would average spending be for a population like this?
2. Refer to Exercise 6.1. What would average spending be if low-risk patients were 92 percent of the population?
3. Refer to Exercise 6.1. If an insurer sold 100,000 policies at $6,000, what would revenue be? What would medical costs be if the insurer paid for everything and low-risk patients were 90 percent of the population? How would that change if low-risk patients were 92 percent of the population?
4. Why did hospitals have limited incentives to reduce readmissions prior to the ACA?
1.The average spending for a population like this would be $4,900.
2. If low-risk patients were 92 percent of the population, the average spending would be $4,120.
3. The medical costs would be $490,000,000 if low-risk patients were 90 percent of the population, and $412,000,000 if low-risk patients were 92 percent of the population.
To calculate the average spending for a population consisting of high-risk and low-risk patients, we can use the weighted average formula:
1.Average Spending = (Percentage of High-Risk Patients * High-Risk Spending) + (Percentage of Low-Risk Patients * Low-Risk Spending)
Average Spending = (0.10 * $40,000) + (0.90 * $1,000)
Average Spending = $4,000 + $900
Average Spending = $4,900
Therefore, the average spending for a population like this would be $4,900.
2.If low-risk patients were 92 percent of the population, we can recalculate the average spending using the new percentage:
Average Spending = (0.08 * $40,000) + (0.92 * $1,000)
Average Spending = $3,200 + $920
Average Spending = $4,120
If low-risk patients were 92 percent of the population, the average spending would be $4,120.
3.To calculate the revenue from selling 100,000 policies at $6,000 per policy, we multiply the number of policies by the price:
Revenue = Number of Policies * Price per Policy
Revenue = 100,000 * $6,000
Revenue = $600,000,000
The revenue would be $600,000,000.
If low-risk patients were 90 percent of the population, and the insurer paid for everything, the medical costs would be:
Medical Costs = Number of Policies * Average Spending
Medical Costs = 100,000 * ($4,900)
Medical Costs = $490,000,000
If low-risk patients were 92 percent of the population, the medical costs would be:
Medical Costs = Number of Policies * Average Spending
Medical Costs = 100,000 * ($4,120)
Medical Costs = $412,000,000
Therefore, the medical costs would be $490,000,000 if low-risk patients were 90 percent of the population, and $412,000,000 if low-risk patients were 92 percent of the population.
4. Prior to the Affordable Care Act (ACA), hospitals had limited incentives to reduce readmissions because they were typically paid on a fee-for-service basis. This means that hospitals were paid for each service or procedure they performed, including readmissions. As a result, there was no financial penalty or strong incentive for hospitals to focus on preventing readmissions or improving the quality of care to reduce the need for readmissions
The ACA introduced penalties for hospitals with high readmission rates, which created a stronger incentive for hospitals to focus on reducing readmissions. The penalties provided hospitals with a financial motivation to improve care coordination, enhance patient education, and implement strategies to prevent avoidable readmissions.
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Cost Concept On February 3, McCade Repair Service extended an offer of $100,000 for land that had been priced for sale at $114,000. On February 28, McCade Repair Service accepted the seller's counteroffer of $109,000. On October 23, the land was assessed at a value of $164,000 for property tax purposes. On January 15 of the next year, McCade Repair Service was offered $174,000 for the land by a national retail chain. At what value should the land be recorded in McCade Repair Service's records?
$ 174,000 X
The land should be recorded at a value of $174,000 in McCade Repair Service's records.
The cost concept in accounting states that assets should be recorded at their historical cost, which is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire the asset at the time of its acquisition. In this case, the land was initially offered at $100,000, but the counteroffer of $109,000 was accepted by McCade Repair Service.
Since the counteroffer of $109,000 was accepted, that becomes the cost basis of the land. The subsequent assessments and offers do not affect the recorded value of the land. Therefore, the land should be recorded at its historical cost of $109,000.
Based on the cost concept, McCade Repair Service should record the land at its historical cost of $109,000 in their records. This ensures that the financial statements accurately reflect the amount paid to acquire the land and follows the principle of reporting assets at their original cost.
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Give an example of a government-imposed barrier to entry. An example of a government-imposed barrier to entry is
A. a tariff on imports. B. a patent. C. economies of scale. D. both a and b. E. all of the above.
An example of a government-imposed barrier to entry is A. a tariff on imports.
A tariff is a tax imposed on imported goods, making them more expensive and less competitive compared to domestically produced goods. By implementing tariffs, the government can protect domestic industries from foreign competition and create a barrier for foreign firms trying to enter the market.
While option B, a patent, can also create a barrier to entry, it is not a government-imposed barrier but rather a legal protection granted to inventors or creators. Patents provide exclusive rights to inventors for a certain period, preventing others from using, selling, or manufacturing the patented invention without permission. This can limit competition in the market but is not directly imposed by the government.
Option C, economies of scale, is not a government-imposed barrier to entry but rather a natural advantage that larger firms may have due to their ability to achieve lower average costs as they increase production.
Therefore, the correct answer is D. both a and b, as tariffs and patents are examples of government-imposed barriers to entry.
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The foreign bank representative office_ A) issues letters of credit B) trades Eurodollars OC) None of them D) accepts deposits and makes loans E) obtains local market information
The correct answer is E) obtains local market information.The foreign bank representative office.
A foreign bank representative office typically serves as a liaison between the parent bank and the local market. Its primary purpose is to gather information about the local market, including economic conditions, regulatory changes, and potential business opportunities. Representative offices do not typically engage in activities such as issuing letters of credit, trading Eurodollars, accepting deposits, or making loans. Their main function is to provide market intelligence and support the parent bank's operations in the foreign market.
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The Company's bank statement for the month of September showed a balance per bank of $7,000. The company's Cash account in the general ledger had a balance of $4,766 at September 30. Other information is as follows: 1. Deposit in transit, $5,000. 2. The bank statement shows a debit memorandum for S60 for check printing charges. 3. Check No. 119 paid for $284 was incorrectly record by the Company for $248. 4. The total amount of checks still outstanding at September 30 amounted to $5,800. 5. The bank returned an NSF check from a customer for $530. 6. The bank included a credit memorandum for $2,060, which represents collection of a customer's note by the bank for the company; principal amount of the note was $2,000, interest was $100 and bank fee was $40. Required: Prepare the bank reconciliation.
The bank reconciliation for the company's September statement is as follows: The adjusted balance per the bank statement is $12,000 after adding a deposit in transit. The adjusted balance per the company's cash account is -$1,034 after subtracting outstanding checks.
The bank reconciliation process begins with the balance per the bank statement, which is $7,000. Since there is a deposit in transit of $5,000, which represents a deposit made by the company but not yet recorded by the bank, we add this amount to the balance per the bank statement. This gives us an adjusted balance per the bank statement of $12,000.
Moving on to the company's cash account, the balance is $4,766. We subtract the outstanding checks, which are checks issued by the company but have not yet cleared the bank, totaling $5,800. This adjustment reduces the balance per the company's cash account to -$1,034, indicating an overdraft situation.
The bank reconciliation process helps identify discrepancies between the bank statement and the company's cash account. In this case, there is an overdraft in the company's records that needs to be further investigated. This may involve looking into the recording error for Check No. 119, the NSF check from a customer, and the bank fees. Resolving these discrepancies is crucial to ensure accurate financial reporting and proper management of the company's cash flow.
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under the labor theory of value, the profits, i.e. the returns for all inputs earned by a company should be distributed to:
Under the labor theory of value, the profits or returns earned by a company would be distributed to the laborers or workers involved in the production process.
According to this theory, the value of a product is determined by the amount of labor required to produce it. Therefore, the profits generated from the sale of the product should rightfully belong to the workers who contributed their labor to its production. In this view, profits are seen as the surplus value extracted from the laborers' efforts and should be distributed back to them as a fair compensation for their work.
This stands in contrast to other economic theories where profits may be distributed to other factors of production such as capital owners or shareholders. The labor theory of value emphasizes the central role of labor in the creation of value and argues for a more equitable distribution of the returns derived from economic activities.
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Explain two types of cybercrime and how each would impact both
individuals and a business?
200-300 words typed please
Cybercrime has become a major concern for both individuals and businesses as they can lead to huge losses. The following are two types of cybercrime and how each would impact both individuals and businesses: 1. Malware 2. Phishing
Cybercrime refers to any criminal activity that is performed using the internet, a computer system, or any other computer technology. The internet has provided criminals with a platform where they can carry out illegal activities.
1. Malware Malware refers to any software that is designed to cause damage or disruption to a computer system or a network. Malware can cause a computer to crash, damage files, or steal personal information. Malware can be used to infect a system with a virus, worm, or Trojan horse. Malware can be introduced to a computer system through email attachments, software downloads, or any other means of file sharing. For individuals, malware can lead to the loss of personal data, including sensitive information like bank account details, social security numbers, and credit card information. The impact can be more significant for businesses, which can lose confidential data, trade secrets, and customer information, which can lead to loss of reputation, loss of business, and lawsuits.
2. Phishing Phishing refers to the practice of tricking people into providing their personal information, such as login credentials, credit card information, or bank account details. Phishing attacks can be carried out through email, social media, or any other communication platform. Phishing is often used to gain access to a system or to steal sensitive information. For individuals, phishing can lead to the loss of personal information, which can be used for fraudulent activities. The impact can be more significant for businesses, which can lose confidential data, trade secrets, and customer information, which can lead to loss of reputation, loss of business, and lawsuits.In conclusion, cybercrime can cause significant damage to both individuals and businesses. It is important to take measures to prevent cybercrime, such as using strong passwords, using antivirus software, and avoiding suspicious websites.
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banks lost money during the mortgage default crisis because:_____
Banks lost money during the mortgage default crisis because of the significant increase in mortgage defaults , leading to a decline in value of mortgage-backed securities & causing losses on their investments.
What is Crisis?
A crisis is a significant, often unpredictable, and disruptive event or situation that poses a threat or challenge to individuals, organizations, or societies. It is characterized by intense pressure, urgency, and the potential for negative consequences. Crises can take various forms, such as natural disasters, economic downturns, political upheavals, public health emergencies, or social unrest. They often require immediate action, decision-making under pressure, and effective crisis management to mitigate the impact, restore stability, and navigate through the difficult circumstances. Crises can have far-reaching implications and may necessitate coordinated efforts to address and resolve the underlying issues.
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rl+enterprises’+had+net+sales+of+$1,958,000+and+net+income+of+$968,000+in+20x7+and+it+experienced+a+25%+increase+in+net+income+over+20x6.+what+was+rl's+20x6+net+income?
The RL enterprise’s net income for the year 20X6 is $774,400Explanation:According to the information provided in the question, the RL enterprise had net sales of $1,958,000 and net income of $968,000 in the year 20X7. Furthermore, it experienced a 25% increase in net income over 20X6.
Therefore, we can use the given data to calculate the net income for the year 20X6. Let us use the following formula for this calculation:Net income for 20X6 = Net income for 20X7 / (1 + rate of increase in net income)Putting the given values in the above formula, we get:Net income for 20X6 = $968,000 / (1 + 25%) Net income for 20X6 = $968,000 / 1.25Net income for 20X6 = $774,400Therefore, the RL enterprise’s net income for the year 20X6 is $774,400. Hence, the long answer to the question
"rl+enterprises’+had+net+sales+of+$1,958,000+and+net+income+of+$968,000+in+20x7+and+it+experienced+a+25%+increase+in+net+income+over+20x6.+what+was+rl's+20x6+net+income?" is:RL enterprise’s net income for the year 20X6 is $774,400.
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Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Sean, green (triangle symbols) for Yvette, purple (diamond symbols) for Bob, tan (dash symbols) for Cho, and blue (circle symbols) for Eric. Use the rectangles t shade the areas representing consumer surplus for each person who is willing and able to purchase a tablet at a market price of $90. (Note: If a person will not purchase a tablet at the market price, indicate this by leaving his or her rectangle in its original position on the palette.) 240 Sean 210 Sean 180 150 Yvette 120 Bob 90 60 Cho 30 0 Eric 7 5 4 3 1 QUANTITY (Tablets) Based on the information on the previous graph, you can tell that three consumers will buy tablets at the given market price, and total $100 consumer surplus in this market will be j PRICE (Dollars per tablet) 2 Yvette Bob Cho Eric Market Price 6 Suppose the market price of a tablet increases to $150. On the following graph, use the rectangles once again to shade the areas representing consumer surplus for each person who is willing and ab purchase a tablet at the new market price: orange (square symbols) for Sean, green (triangle symbols) for Yvette, purple (diamond symbols) tan (dash symbols) for Cho, and blue (circle symbols) for Eric. (Note: If a person will not purchase a tablet at the new market price, indicate leaving his or her rectangle in its original position on the palette.) ? 240 Sean 210 Sean 180 Market Price 150 Yvette 120 Bob 90 60 Cho 30 0 Eric PRICE (Dollars per tablet) 0 1- 2 Yvette Bob Cho Eric 3 4 5 QUANTITY (Tablets) I Based on the information in the second graph, when the market price of a tablet increases to $150, the number of consumers willing to buy a to and total consumer surplus increases tablet increases to four consumers $240 Save & Continue
The first graph depicts the consumer surplus for each buyer at a market price of $90. Three consumers are willing and able to purchase tablets at this price, and the total consumer surplus in the market amounts to $100. In the second graph, where the market price increases to $150, four consumers are willing and able to buy tablets, and the total consumer surplus increases.
In the first graph, we observe that Sean, Yvette, and Bob are willing to purchase tablets at the market price of $90, while Cho and Eric are not willing to buy at this price. The consumer surplus for each buyer is represented by the shaded area above the market price and below their respective willingness-to-pay values. The total consumer surplus in the market is the sum of the individual consumer surpluses, which amounts to $100. In the second graph, the market price increases to $150. We can see that Sean, Yvette, Bob, and Cho are now willing to purchase tablets at this higher price, while Eric still does not make a purchase. The consumer surplus for each buyer is once again represented by the shaded area above the market price and below their respective willingness-to-pay values. With four buyers participating in the market, the total consumer surplus has increased compared to the previous scenario.
Overall, the consumer surplus increases when the market price of the tablet rises from $90 to $150, as more buyers are willing to purchase at the higher price, expanding the overall benefits for consumers in the market.
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Explain the challenges a government will face when a negative externality is present in a market. Identify an example of an elastic and inelastic good you have purchased. Compare and contrast your examples to the characteristics of elasticity.
Please do not copy answers to another question.
When a negative externality is present in a market, the government faces several challenges. Firstly, identifying and measuring the extent of the externality can be difficult, as it often involves quantifying the costs imposed on third parties. Additionally, determining the appropriate policy response to address the externality is challenging. Interventions like taxes, subsidies, or regulations may have unintended consequences and require careful consideration.
An example of an elastic good I have purchased is a vacation package. When the price of vacation packages increases, I can choose to forego the purchase or opt for a cheaper alternative, such as a shorter or less luxurious vacation. This demonstrates the responsiveness of demand to price changes.
On the other hand, an example of an inelastic good I have purchased is prescription medication. The price of medication has little impact on my decision to purchase it, as it is essential for my health and well-being. The demand for medication tends to be less sensitive to price changes.
Elastic goods have a higher price elasticity of demand, meaning that consumers are more responsive to price changes. In contrast, inelastic goods have a lower price elasticity of demand, indicating that consumers are less responsive to price fluctuations. The characteristics of elasticity help us understand how changes in price affect consumer behavior and the overall market dynamics.
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