a) The degree of operating leverage for the independent cases are:
i. Approximately 3.67
ii. Approximately 5.18
iii. Approximately 9.08
b) Scenario iii (selling price per unit is $45, variable costs per unit are $12, and it sold 3,300 units) has the largest degree of operating leverage.
How to calculate the degree of operating leverage for different scenarios given the contribution margin, CM ratio, revenue, and unit details?a) For each independent case, compute the degree of operating leverage:
i. $44,000 contribution margin:
Contribution Margin / Operating Profit = Degree of Operating Leverage
Operational Leverage = $44,000 / $12,000
3.67 Degree of Operating Leverage
ii. The CM ratio is 57%, with a revenue of $109,000:
Contribution Margin = Contribution Ratio * Revenue
Margin of Contribution = 57% * $109,000
$62,130 Contribution Margin
Contribution Margin / Operating Profit = Degree of Operating Leverage
Operating Leverage = $62,130 / $12,000.
5.18 Degree of Operating Leverage
iii. The selling price per unit is $45, variable costs per unit are $12, and 3,300 units were sold:
Contribution Margin per Unit = Unit Selling Price - Variable Costs per Unit
Margin of Contribution per Unit = $45 - $12
Margin of Contribution per Unit = $33
Contribution Margin = Contribution Margin per Unit x Number of Sold Units
Margin of Contribution = $33 * 3,300
$108,900 Contribution Margin
Contribution Margin / Operating Profit Degree of Operating Leverage = $108,900 / $12,000 Degree of Operating Leverage 9.08 b) Scenario iii (sales price per unit of $45, variable costs per unit of $12, and 3,300 units sold) has the highest degree of operating leverage, which is approximately 9.08.
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5 Polartx is a retailer of ATVs (all-terrain vehicles) and accessories. An Income statement for its Consumer ATV Department for the current year follows ATVs sell for $4,000 each. Variable selling expenses are $290 per ATV. The remaining selling expenses are fixed. Administrative expenses are 70% variable and 30% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,840 each. Sales Cost of goods sold Gross margin Income Statement-Consumer ATV Department For Year Ended December 311 Operating expenses Selling expenses POLANEX Administrative expenses Net Income Sales $155,000 43,500 $624,000 207,040 336,960 497,500 $139,460 Required: 1. Prepare an income statement for the current year using the contribution margin format. (Do not round intermedinte calculations. Round contribution margin per ATV value to the nearest whole number.) Answer is not complete. POLARIX Income Statement Consumer ATV Department For Year Ended December 31 Return to ques 1. Prepare an income statement for the current year using the contribution margin f Round contribution margin per ATV value to the nearest whole number.) Sales Less: Variable expenses Variable cost of goods sold Variable selling expenses Variable administrative expenses Variable selling expenses POLARIX Income Statement - Consumer ATV Department For Year Ended December 31 Less: Fixed expenses Fixed administrative expenses Fixed selling expenses Net income (loss) X Answer is not complete. x 0 0 Less: Vanable expenses Variable cost of goods sold Variable selling expenses Variable administrative expenses Variable selling expenses Less: Fixed expenses Fixed administrative expenses Fixed selling expenses Net income (loss) >> 2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and earning income? Contribution margin per ATV 0 0
Polartx is a retailer of ATVs (all-terrain vehicles) and accessories. For the current year, the income statement for its Consumer ATV Department is as follows: POLARIX Income Statement - Consumer ATV Department For Year Ended December 31 Sales $155,000 Less:
Variable expenses Variable cost of goods sold: (1,840*35) $64,400
Variable selling expenses: (290*35) $10,150
Variable administrative expenses: [0.70($4,000*35)] $98,000
Total variable expenses $172,550
Contribution margin per ATV ($4,000 – $1,840 – $290 – [0.70($4,000)] = $650
Total contribution margin (35*$650) $22,750 Less:
Fixed expenses Fixed administrative expenses $150,000
Fixed selling expenses $33,500
Total fixed expenses $183,500
Net income (loss) ($160,750)
Hence, the income statement for the current year using the contribution margin format is provided above. Given the following data: ATVs sell for $4,000 each.
Variable selling expenses are $290 per ATV. The remaining selling expenses are fixed. Administrative expenses are 70% variable and 30% fixed.
The company purchases ATVs from a supplier for $1,840 each.
Sales Cost of goods sold Gross margin Income Statement-Consumer ATV Department For Year Ended December 31 Operating expenses Selling expenses POLANEX Administrative expenses
Net Income Sales $155,000 43,500 $624,000 207,040 336,960 497,500 $139,460
By utilizing the contribution margin format, we will create an income statement for the year that ended on December 31 for Polartx, an ATV retailer.
The contribution margin format of the income statement separates costs as variable or fixed, as well as sales, and gives us the contribution margin, which we can use to cover fixed expenses.
The contribution margin formula is sales revenue less variable expenses. Variable costs include the cost of goods sold and the variable selling and administrative expenses.
The remaining expenses, which are administrative and selling expenses, are fixed costs that do not change as sales volume increases.
The contribution margin for each ATV sold is $650 (4,000 – 1,840 – 290 – [0.70(4,000)]), and
Polartx sold 35 ATVs during the year, yielding a total contribution margin of $22,750 (35 × $650).
Therefore, contribution margin per ATV is $650.
The cost of goods sold is $1,840 per ATV, yielding total variable cost of goods sold of $64,400 (35 × $1,840).
The total variable selling expenses are $10,150 (35 × $290),
and the total variable administrative expenses are $98,000 (35 × $4,000 × 0.7).
As a result, total variable expenses are $172,550.
Fixed expenses are $183,500, comprising fixed administrative expenses of $150,000 and fixed selling expenses of $33,500. The income statement is as follows:
POLARIX Income Statement - Consumer ATV Department For Year Ended December 31 Sales $155,000
Less: Variable expenses Variable cost of goods sold: (1,840 × 35) $64,400 Variable selling expenses: (290 × 35) $10,150 Variable administrative expenses: [0.70($4,000 × 35)] $98,000
Total variable expenses $172,550 Contribution margin per ATV ($4,000 – $1,840 – $290 – [0.70($4,000)] = $650
Total contribution margin (35 × $650) $22,750
Less: Fixed expenses Fixed administrative expenses $150,000
Fixed selling expenses $33,500
Total fixed expenses $183,500
Net income (loss) ($160,750)
In conclusion, Polartx had a net loss of $160,750 in its Consumer ATV Department for the year ended December 31. Since the contribution margin is greater than the fixed expenses, the contribution margin can help cover Polartx's fixed expenses. Therefore, to increase net income, Polartx needs to increase sales volume.
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The Maximin Criteria is equivalent to O choosing the best among the highest outcomes. O choosing the Nash equilibrium O choosing the best among the worst outcomes O none of these answers is correct O choosing the dominant strategy
The correct statement is that the Maximin Criteria is equivalent to choosing the best among the worst outcomes, focusing on minimizing potential losses or ensuring a satisfactory outcome even in unfavorable situations.
The Maximin Criteria is a decision-making principle commonly used in game theory and decision theory. It involves selecting the best option by considering the worst possible outcome or minimizing the maximum possible loss.
The Maximin Criteria is equivalent to choosing the best among the worst outcomes. It focuses on ensuring the best possible outcome in the worst-case scenario. By considering the maximum possible loss or minimum payoffs in a decision or game, the Maximin Criteria aims to protect against potential risks or unfavorable circumstances.
This principle is particularly useful when decision-makers are risk-averse and prioritize minimizing potential losses over maximizing gains. It helps to identify strategies or choices that provide a satisfactory outcome even in the least favorable conditions.
In contrast, the other options listed are not accurate descriptions of the Maximin Criteria. Choosing the Nash equilibrium refers to a concept in game theory where each player's strategy is optimal given the strategies chosen by other players. Choosing the dominant strategy refers to selecting the best option regardless of the actions taken by other players.
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COVID 19 has presented significant challenges for the tourism
and hospitality industries since January 2019 and continues to do
so. Discuss the political, economic, social and technological
implicatio
COVID-19 has had a major effect on the tourism and hospitality industries since the beginning of 2019 and continues to do so. The pandemic has caused widespread lockdowns, travel restrictions, and social distancing measures, which have resulted in a decrease in both domestic and foreign travel and a drop in demand for hospitality services. This essay will discuss the political, economic, social, and technological consequences of the pandemic on these industries.Political implications The pandemic has had a significant political impact on the tourism and hospitality industries, with many governments imposing strict restrictions on international and domestic travel.
Governments have also introduced economic stimulus programs, such as loans and grants, to assist the tourism and hospitality industries in recovering from the pandemic's economic consequences. As a result of the pandemic, many governments have been required to reevaluate their tourism policies to ensure that they are effective in dealing with future pandemics.
Economic implicationsThe COVID-19 pandemic has had a significant impact on the global economy, and the tourism and hospitality industries have been particularly affected. The pandemic's economic consequences have resulted in the closure of hotels, restaurants, and other businesses, as well as job losses. Despite the introduction of government economic stimulus plans, many businesses are still struggling to survive.Social implicationsThe COVID-19 pandemic has had a significant social impact on the tourism and hospitality industries. Travel restrictions, social distancing rules, and lockdowns have resulted in a decrease in the number of people traveling and staying in hotels, resorts, and other accommodation establishments. The tourism industry is often one of the primary sources of employment and income in many regions, and the pandemic's effect on the industry has had a significant social impact.
Technological implicationsCOVID-19 has accelerated technological adoption in the tourism and hospitality industries, with many establishments implementing digital technologies to improve the safety and convenience of their services. Contactless payment systems, online booking, and check-in systems are examples of such technologies. The pandemic has demonstrated the need for technological innovation in the tourism and hospitality industries to improve the customer experience, operational efficiency, and safety of customers and staff.In conclusion, COVID-19 has had a significant impact on the tourism and hospitality industries, with political, economic, social, and technological implications. Governments must continue to support these industries during and after the pandemic to ensure their survival and to help them recover from the pandemic's economic consequences.
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A corn farmer will tend to expand his output as long as the price of corn exceeds aversge variabke cost and:
a) marginal cost is smaller than the market price
b) marginal revenue is larger than the market price of corn c) marginal revenue is positive
d) marginal revenue is kess than the market price of corn
A corn farmer will tend to expand his output as long as the price of corn exceeds the average variable cost and marginal revenue is larger than the market price of corn. Option b) is correct.
Marginal revenue (MR) is the revenue gained from producing an additional unit of a product or selling one more unit of it. Marginal revenue is calculated by dividing the change in total revenue by the change in quantity sold. Marginal revenue is the derivative of total revenue with respect to the number of units produced or sold.
It is the extra income that comes in from selling an additional product or service. A rational profit-maximizing producer will expand his or her production only if the marginal revenue of the additional unit exceeds its marginal cost.
Therefore, b is correct.
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"Use of a single cost driver rate when an indirect cost pool includes costs that have different cost drivers (causes of costs) leads to distortions in job costs." Do you agree with this statement? Explain.
Yes, I agree that the use of a single cost driver rate when an indirect cost pool includes costs that have different cost drivers (causes of costs) leads to distortions in job costs.
When it comes to allocating indirect costs, the use of a single cost driver rate for all indirect costs can lead to distortions in job costs.
Different indirect costs have different cost drivers, which are the causes of costs. For example, in manufacturing, the cost of machine maintenance is driven by the number of machine hours used, while the cost of setup is driven by the number of setups or batches.
Using the same cost driver rate for both these costs will result in distorted job costs because the rate will not accurately reflect the actual usage of each cost driver. For example, if the machine maintenance cost is high, then the jobs that use more machine hours will be overallocated, while the jobs that use fewer machine hours will be underallocated.
Similarly, if the setup cost is high, then the jobs that require more setups will be overallocated, while the jobs that require fewer setups will be underallocated.
To avoid these distortions, a company needs to use multiple cost driver rates to allocate indirect costs. Each cost driver rate should be based on the specific cost driver for each indirect cost. This will result in more accurate job costs and help the company make better decisions.
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Matt sells usually sells goods at $130 each, he gives Anil a trade discount of $10 so he sells goods to Anil for $120. He also offers a cash discount of 5% for prompt payment. Matt is registered for VAT. This means that $120 x 5% = $6 cash discount is available. How much output VAT should Matt include on Anil's invoice?
The output VAT that Matt should include on Anil's invoice is $12. This is calculated as follows: Output VAT = (Net sales × VAT rate) ÷ (100% + VAT rate) Net sales = $120 − $6 (cash discount) = $114VAT rate = 10% (since Matt is registered for VAT) Output VAT = ($114 × 10%) ÷ (100% + 10%) = $11.40 ≈ $12
Matt sold the goods to Anil for $120, after deducting a trade discount of $10. He also offered a cash discount of 5% for prompt payment. Since Matt is registered for VAT, he is liable to charge VAT on the sale.In order to calculate the output VAT on the sale, we need to determine the net sales amount first. The net sales amount is the amount that is subject to VAT. To calculate this, we need to deduct the cash discount from the invoice amount. In this case, the cash discount is $6, so the net sales amount is $120 - $6 = $114. This is the amount on which the VAT will be charged.The VAT rate that Matt needs to charge is 10%, which is the standard rate in his country. To calculate the output VAT, we need to apply the formula:Output VAT = (Net sales x VAT rate) / (100% + VAT rate)Substituting the values in the formula, we get:Output VAT = ($114 x 10%) / (100% + 10%) = $11.40 ≈ $12Therefore, the output VAT that Matt should include on Anil's invoice is $12. This is the amount that Anil will pay in addition to the net sales amount of $114, making the total invoice amount $126.
Matt is liable to charge VAT on the sale of goods to Anil. He needs to include the output VAT on the invoice. The output VAT is calculated as a percentage of the net sales amount, which is the invoice amount minus any cash discounts. In this case, the output VAT is $12. This is the amount that Anil will pay in addition to the net sales amount of $114.
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What types of products does Dynamic Steel make (Business or Consumer), and are they a distributor, producer, or merchant wholesaler? How do you know?
Dynamic Steel is a that creates commercial products such as steel and metal for business purposes. Dynamic Steel is a producer, as it is a manufacturer that creates its products.
A producer is a type of business or company that creates goods or products by utilizing labor, machines, and other materials. In addition to producing the goods, manufacturers may also be in charge of marketing and distributing their products. They may also sell the goods directly to customers or businesses or through middlemen such as wholesalers and retailers
.Dynamic Steel is a producer that creates steel and metal products for commercial purposes. Therefore, it is correct to say that Dynamic Steel produces business-to-business (B2B) products as opposed to business-to-consumer (B2C) products.
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Which of the following is NOT an issue in the reduction of trade protection in agriculture?
a. consumption subsidies.
b. export tariffs.
b. production subsidies.
d. import tariffs and quotas.
e. export subsidies.
Export subsidies is not an issue in the reduction of trade protection in agriculture. Option e is correct.
The act of implementing tariffs, quotas, and other trade barriers that restrict or restrict imports and shield domestic farmers from foreign competition is known as agricultural trade protection. The most important issue in the reduction of trade protection in agriculture is export subsidies.
This is since a subsidy encourages a nation's farmers to produce more than they would otherwise, which leads to overproduction. As a result, the government may have to offer more subsidies to sell the excess on the global market. This can drive down prices for other nations' farmers and put them out of business.
Therefore, e is correct.
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In the aggregate demand-aggregate supply model, as a result of a decrease in aggregate demand, ceteris paribus, the price level ________ and real gross domestic product (GDP) ________.
a. increases; remains unchanged
b. decreases; decreases
c. increases; decreases
d. decreases; increases
e. remains unchanged; increases
In the aggregate demand-aggregate supply model, as a result of a decrease in aggregate demand, ceteris paribus, the price level decreases and real gross domestic product (GDP) decreases.
Aggregate demand represents the total spending in an economy, consisting of consumption, investment, government spending, and net exports. When aggregate demand decreases, it means there is less overall spending in the economy. This leads to a decrease in both the price level and real GDP.
A decrease in aggregate demand results in a downward shift of the aggregate demand curve. This shift indicates a decrease in the quantity of goods and services demanded at each price level. As a result, businesses lower their prices to stimulate demand, leading to a decrease in the overall price level.
Additionally, the decrease in aggregate demand leads to a decrease in real GDP, as there is reduced demand for goods and services. Businesses may produce less, leading to a decline in economic output.
Therefore, the correct answer is option b: decreases; decreases.
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Are the following normal or inferior goods?
Group of answer choices
a. Generic brand ketchup
[ Choose ] Inferior Normal
b. Name brand ketchup
[ Choose ] Inferior Normal
c. iPhone
[ Choose ] Inferior Normal
d. Ramen noodles
[ Choose ] Inferior Normal
Generic brand ketchup and ramen noodles are considered inferior goods, while name brand ketchup and the iPhone are considered normal goods.
Generic brand ketchup is typically considered an inferior good. An inferior good is a type of product for which demand decreases as consumer income rises. In the case of generic brand ketchup, as consumers' income increases, they may be more likely to switch to higher-quality, name brand ketchup options. Therefore, generic brand ketchup is often seen as a lower-quality alternative chosen by consumers with lower incomes.
Name brand ketchup is generally considered a normal good. A normal good is a product for which demand increases as consumer income rises. Name brand ketchup is often associated with higher quality and is preferred by consumers who have the financial means to purchase it. As consumers' incomes increase, they may be more willing to spend on name brand options, leading to an increase in demand for name brand ketchup.
The iPhone is typically classified as a normal good. As consumer income rises, the demand for iPhones tends to increase. The iPhone is a premium smartphone brand known for its advanced features, design, and technology. As consumers have more disposable income, they are more likely to spend on high-end smartphones like the iPhone, leading to an increase in demand for these devices.
Ramen noodles are often considered an inferior good. As consumer income rises, the demand for ramen noodles tends to decrease. Ramen noodles are inexpensive and often associated with being a budget-friendly option for individuals with lower incomes. As consumers' incomes increase, they may be more inclined to choose higher-quality and more varied food options, resulting in a decline in the demand for ramen noodles.
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Assume Walk-Toki Company is considering offering a new product, Cassio. Why would it matter if Walk-Toki Company knows how much it costs to produce and deliver each Cassio?
Assuming Walk-Toki Company is considering offering a new product, Cassio, it would be essential for the company to know how much it costs to produce and deliver each Cassio.
The significance of knowing how much it costs to produce and deliver each Cassio are as follows:
For costing and pricing the product:
Knowing the cost of production and delivery helps in setting the price of the Cassio that would be profitable to the company. If the company does not know the cost of production and delivery, it may end up setting a price that would not be profitable.
For budgeting:
Knowing the cost of production and delivery helps in budgeting the costs associated with the product. The cost of production and delivery would be required to make an accurate budget for the Cassio production.
For improving efficiency: Finding inefficiencies in the production and delivery process is made easier by being aware of the cost of production and delivery. To lower total costs and increase profit, the business can endeavour to improve the efficiency of the manufacturing and distribution process.
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Following negotiations, Office Park, Inc., enters into an informal contract with Quality Janitorial Company for custodial services for Office Park's buildings. This means that the parties' contract: ________
This means that the parties' contract is a verbal or implied agreement that is not formally documented or written.
When Office Park, Inc. enters into an informal contract with Quality Janitorial Company for custodial services, it means that the agreement between the two parties is not formally documented or written. Instead, it is likely to be a verbal agreement or an implied understanding based on discussions and negotiations.
Informal contracts are less formal than written contracts and may not have all the specific terms and conditions clearly outlined. While they are still legally binding, they may be more susceptible to misunderstandings or disputes due to the lack of detailed documentation. It is important for both parties to maintain clear communication and mutual understanding of their obligations and expectations.
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(Related to Checkpoint 4.1) (Liquidity analysis) Airspot Motors, Inc. has $2,470,800 in current assets and $852,000 in current liabilities. The company's managers want to increase the firm's inventory
To analyze the liquidity of Airspot Motors, Inc., we can calculate its current ratio. The current ratio is a measure of a company's ability to cover its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities.
Current Ratio = Current Assets / Current Liabilities
Given that Airspot Motors, Inc. has $2,470,800 in current assets and $852,000 in current liabilities, we can calculate the current ratio as follows:
Current Ratio = $2,470,800 / $852,000
Current Ratio ≈ 2.90
The current ratio of 2.90 indicates that Airspot Motors, Inc. has $2.90 in current assets for every $1.00 in current liabilities. Generally, a current ratio above 1.0 is considered favorable, as it implies that the company has sufficient current assets to cover its current obligations. In this case, Airspot Motors, Inc. appears to have a relatively healthy liquidity position.
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A consent order is a statement in which the company agrees to stop the disputed behavior but does not admit that it broke the law. If the company violates the consent order, it will usually be forced to pay a fine.
A consent order is a legal agreement between a company and a regulatory authority that requires the company to cease certain activities or behaviors that are under dispute, without admitting legal liability or wrongdoing.
It is a settlement reached between the company and the regulatory agency to resolve the issues at hand. By agreeing to a consent order, the company agrees to comply with the specified terms and conditions outlined in the order.
If the company fails to abide by the terms of the consent order or breaches any provisions, it may face consequences such as fines or penalties imposed by the regulatory authority as a means of enforcing compliance.
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Monthly Transactions TRANSACTIONS FOR FEBRUARY 1 Feb You received a Debit Card from your financial institution and also set up a Pay-by-Phone account. These allow you to use your checking account without actually writing a check Be sure to deduct any fransactions from your checkbook balance. 3 Feb Write Check 109 for $108 to Internet Connections for six months on-line service. 5 Feb Use your Debit Card to pay $46.40 to Best Produce for groceries
8. Feb Write Check 110 for $32.81 to National Electric Company for their bill dated February 3, 10 Feb Write Check 111 for $67.14 to Internal Revenue Service for the balance due on your federal income tax
In February, the transactions include receiving a Debit Card and setting up a Pay-by-Phone account.
Check 109 was written for $108 to Internet Connections for six months of online service. $46.40 was paid using the Debit Card to Best Produce for groceries. Check 110 was written for $32.81 to National Electric Company for their February bill. Check 111 was written for $67.14 to the Internal Revenue Service for the balance due on federal income tax.
In February, the following transactions took place:
1. Received a Debit Card and set up a Pay-by-Phone account.
2. Check 109: Paid $108 to Internet Connections for six months of online service.
3. Used the Debit Card to pay $46.40 to Best Produce for groceries.
4. Check 110: Paid $32.81 to National Electric Company for their February bill.
5. Check 111: Paid $67.14 to the Internal Revenue Service for the balance due on federal income tax.
These transactions demonstrate various ways of utilizing the checking account, such as electronic payments, check writing, and debit card usage. It's important to deduct these transactions from the checkbook balance to maintain an accurate record of the account's financial status.
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Consider the following three securities: TIGHT, EASE and NEUTRAL. TIGHT pays $100 if the Fed raises interest rates at the next meeting. EASE pays $100 if the Fed lowers interest rates at the next meeting. NEUTRAL pays $100 if the Fed does not change interest rates (neither increases nor decreases rates) at the next meeting. Suppose that TIGHT is currently trading at $63, EASE is currently trading at $4 and NEUTRAL is trading at a price of $24.
(a) If you buy 1 share of TIGHT, 1 share of EASE and 1 share of NEUTRAL, what is the payoff you guarantee on the Fed's meeting day?
(b) According to the No Arbitrage Condition, what must be the price of a $100 face value zero-coupon bond that matures on the Fed meeting day?
(c) Suppose that this zero-coupon bond is trading at $96. How would you set up a transaction to earn a riskless arbitrage profit? Assume no trading costs.
(d) Suppose that shorting TIGHT, EASE, and NEUTRAL is costless, but shorting the zero-coupon bond costs $10 per $100 face value. Can you still make an arbitrage profit?
According to "Dr Pepper Targets College Football Fans," price discounting (price wars) can destroy oligopoly profits. So, instead
the entire industry will always collapse.
rival oligopolists rely on product differentiation and advertising.
firms will wait for one firm to increase prices.
firms are powerless to change prices.
According to "Dr Pepper Targets College Football Fans," price discounting (price wars) can destroy oligopoly profits. So, instead B. rival oligopolists rely on product differentiation and advertising.
What do oligopolies do to avoid price discounting ?Oligopolies are market structures where a small number of firms dominate the industry, and they have the ability to influence prices and impact profits.
Engaging in price wars by aggressively discounting prices can lead to a downward spiral of diminishing profits for all firms involved. Instead, firms in an oligopoly typically focus on differentiating their products or services to attract customers and establish a competitive advantage.
They invest in advertising, branding, innovation, and other strategies to create perceived value and loyalty among consumers.
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Quah’s mobility matrices suggest that: countries do not often change their income relative to the world average; that this is most true of the richest and poorest countries; and that for, those that do experience a change, a downward shift is more common than an upward shift. In what ways do these observations lend support to:
(a) the path dependency thesis presented in Chapter 3 of Cypher and Dietz; and
(b) Sen’s proposition that freedom/capabilities themselves are important means to the expansion of further freedoms/capabilities?
Quah's mobility matrices provide insights into the change in the country's economic status relative to the world average. For rich and poor countries, countries do not often change their income relative to the world average. When there is a change, a downward shift is more common than an upward shift.
These observations lend support to Sen's proposition that freedom and capabilities themselves are important means to the expansion of further freedoms and capabilities. Sen's proposition regarding freedom and capabilities emphasizes that a person's capability or freedom to act as per his or her own will and make choices freely is of utmost importance. A person who has these capabilities can expand their freedom and capabilities further, contributing to an overall increase in societal freedom. The observations by Quah's mobility matrices lend support to this argument since they illustrate that richer and poorer countries have lower chances of changing their economic status. In this way, the countries are restricted from further economic growth and development, as they do not have the freedom or capabilities to do so.
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Ramsey Model with Fiscal Policy. Consider a Ramsey economy that is on its balanced growth path. Suppose the government announces at time 0 that at some later time, time t₁, investment income will begin to be taxed at rate Tk. This tax will then be in place forever. Revenues from this tax will be rebated back to households as lump-sum transfer. (2a) Begin by describing and drawing the balanced growth before the policy an- nouncement. (20 points) (2b) Draw the phase diagram showing the dynamics of c and k from the an- nouncement till t₁. Interpret your answer. (20 points) (2c) Draw the phase diagram showing the dynamics of c and k after time t₁. Interpret your answer. (20 points) (2d) Can c change discontinuously at time t₁? Why or why not? (10 points) (2e) In light of your answers to parts (2b), (2c), and (2d), what must c do at time 0? (10 points) (2f) Analyse now the alternative policy where the government announces at time 0 that the tax on investment will be in place from time 0 till ₁ and then it will be set to zero forever after. (20 points)
The Ramsey model also known as Ramsey Cass Koopmans model or Ramsey growth model is a model, which have the difference with the Solow model on the basis of consumption, which leads to increase in the accumulation of wealth, and enhances savings.
(a) The balanced growth path before the policy announcement is characterized by constant capital per effective worker (k) and constant consumption per effective worker (c). This implies that both variables grow at a constant rate over time, and the economy experiences steady-state growth.
(b) The phase diagram from the announcement until time t₁ shows the dynamics of c and k. Initially, both variables are on the balanced growth path. When the tax on investment income is announced, it reduces the after-tax return on capital, leading to a decrease in investment. As a result, the capital stock per effective worker declines, causing a decrease in consumption. The phase diagram illustrates the movement away from the balanced growth path.
(c) After time t₁, the phase diagram shows the new dynamics of c and k. The tax on investment income leads to a permanent decrease in investment, which lowers the steady-state level of capital per effective worker. Consequently, consumption per effective worker also decreases permanently.
(d) Consumption cannot change discontinuously at time t₁. According to the Ramsey model, consumption is a smooth function of capital per effective worker. The introduction of the tax affects the long-run equilibrium level of capital, which, in turn, affects consumption. Since the adjustment process is continuous, there are no sudden jumps or discontinuities in consumption at time t₁.
(e) In light of the dynamics described in parts (2b) and (2c), consumption at time 0 must be adjusted to reflect the future decrease in consumption resulting from the tax on investment income. This means that consumption at time 0 should be lower than it would have been in the absence of the tax announcement, as households anticipate the future decline in consumption.
(f) Analyzing the alternative policy where the tax on investment is implemented immediately, the phase diagram would show a similar initial movement away from the balanced growth path as described in part (2b). However, once the tax is set to zero after time t₁, investment returns increase, leading to higher investment and a subsequent increase in the capital stock per effective worker. As a result, consumption per effective worker rises, potentially surpassing the initial balanced growth path.
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1) what elements are found in an effective financial plan? a) flexibility to allow for changes in your situation b) sufficient liquidity to meet unexpected needs c) insurance protection from catastrophic events d) helps you legally reduce the amount of taxes you owe e) all of the above
The correct answer is option (e) all of the above. A financial plan is essential for the long-term financial success of an individual.
It can ease your financial stress, provide for your immediate needs, and aid in the development of a savings account for objectives like retirement. Making a financial plan is crucial because it enables you to maximize your assets and provides you with the assurance to handle any hiccups along the path.
The aim of a long-range financial plan is to indicate in monetary terms the actions that the Council proposes to take over the medium to longer period to accomplish its stated goals.
Hence, The correct Option is (E).
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a. rafael received $100,000 cash and a vehicle worth $17,900. rafael also paid $9,700 in selling expenses.
Rafael received $100,000 cash and a vehicle worth $17,900, and he paid $9,700 in selling expenses.
The cash received by Rafael, amounting to $100,000, represents an inflow of cash into his possession. It can be considered a cash asset, which increases his overall cash balance. This cash can be used for various purposes such as investments, paying off debts, or funding future expenses.
Additionally, Rafael received a vehicle worth $17,900. This vehicle can be classified as a non-cash asset. Non-cash assets represent valuable items or properties that are not in the form of cash but have economic value. In this case, the vehicle contributes to Rafael's total asset value, and its worth can be utilized or converted into cash if needed.
On the other hand, Rafael incurred $9,700 in selling expenses. Selling expenses are costs associated with the sale of goods or services and are typically incurred to generate revenue. These expenses may include advertising costs, sales commissions, transportation costs, or any other expenses directly related to the selling process. By deducting these expenses from his revenue, Rafael can determine his net profit or loss from the sale.
Overall, the $100,000 cash, $17,900 vehicle, and $9,700 selling expenses have an impact on Rafael's financial position, affecting his assets and expenses.
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Which of the following is true about both stock splits and stock dividends? both have no impact on shareholder wealth both are a prescribed percentage at declaration both are designed to place shares in a trading range both divide firm equity into more pieces all of the answers shown are true of both stock splits and stock dividends Which of these is not a factor influencing dividend policy? changing tax laws flotation costs investment opportunities contraints on dividends capital availability
The correct option that is true about both stock splits and stock dividends is "both divide firm equity into more pieces."
In other words, stock dividends and stock splits both divide the existing shares of the firm into more pieces. This statement is true for both stock dividends and stock splits.
They both don't have an impact on shareholder wealth. However, the number of shares increases, and their respective prices decrease. Investors end up with more shares, which represent the same value as the previous shares held by them.
The following is not a factor influencing dividend policy: Flotation costs.
Flotation costs are the expenses associated with issuing new stocks or bonds. These expenses are incurred when a company issues new securities to the public. The dividend policy of a company is influenced by many factors.
Some of the important factors include investment opportunities, capital availability, constraints on dividends, and changing tax laws.
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Which of the following is similar for both a competitive industry and a monopoly? Group of answer choices A. In the long run, average total costs are minimized. B. Profits signal consumers' demand for more output. C. Continuous pressure to improve product quality. D. The level of economic profits in the long run.
Profits signal consumers demand for more output is similar for both a competitive industry and a monopoly. Option B is the correct answer.
The two extremes of market systems are monopoly and perfect competition, however businesses in a perfectly competitive market and monopoly corporations share some characteristics. Both deal with the same cost and production tasks and aim to make as much money as possible. Both are assumed to have completely competitive factor markets and the identical shutdown decisions. Option B is the correct answer.
Price equals marginal cost in a market with perfect competition, and businesses make no economic profit. In a monopoly, the price is set higher than the marginal cost, and the company makes a profit. In an equilibrium when perfect competition exists, a good's supply and price are both economically advantageous. Monopolies result in an equilibrium where a good's price is greater and its supply is lower.
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CENGAGE MINDTAP Numbers and Graphs: Prices: Free, Controlled, and Relative (Ch 04) Back to Assignment Attempts Average / 3 5. Working with Numbers and Graphs Q5 Suppose the absolute price of good X is
The relative price of X with respect to Y increases by p percent if the price of X rises by p percent but the price of Y stays the same.
Suppose the absolute price of good X is Px and the absolute price of good Y is Py.
Then the relative price of good X with respect to Y is given by:Relative price of good X with respect to Y = Px / Py
Conversely, the relative price of good Y with respect to X is given by:Relative price of good Y with respect to X = Py / Px
If the price of X increases, then the relative price of X with respect to Y increases, and the relative price of Y with respect to X decreases.
Suppose the price of X increases from $10 to $15 while the price of Y remains constant at $20.
Then the relative price of X with respect to Y increases from 10 / 20 = 0.5 to 15 / 20 = 0.75.
Similarly, the relative price of Y with respect to X decreases from 20 / 10 = 2 to 20 / 15 = 1.33.
In general, if the price of X increases by p percent while the price of Y remains constant, then the relative price of X with respect to Y increases by p percent.
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If some firms in the industry make an economic profit, then Select one:
A. the industry must be an oligopoly.
B. the firms must practice product differentiation.
C. the industry must be monopolistically competitive.
D. the industry cannot be perfectly competitive.
E. rival firms will enter if there are no barriers to entry.
If some firms in the industry make an economic profit, then rival firms will enter if there are no barriers to entry. Option C is the correct answer.
In a market that is competitive and where businesses are making money, new businesses will be motivated to enter the market. This input will raise the number of businesses, boost the amount of the item supplied, lower prices, and boost profit. Option C is the correct answer.
Competing businesses will enter the industry as soon as the firm is profitable. The original company's customer demand and revenue margin curves will be decreased as a result. Monopolistic adversaries might encounter a brief financial gain or loss, but entering or leaving the market will continue to push these enterprises toward an unfavorable economic profit result in the future. When there is monopolistic competition, the zero economic profit outcome is different than when there is perfect competition.
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The senate is debating whether to continue funding a community college program that prepares students for exciting and well-paying careers. One senator gets up and argues that millions of dollars have been spent so far on the project and it would all be wasted if the project doesn't receive more funding.
a. Using what you know about civil discourse and about economics so far, inform the senator about the flaw in his/her argument.
b. What should the decision be based on?
c. Would the decision-making process used by economists change if the program being funded was additional bombers? Explain.
The fact that millions of dollars have been spent on the project so far is irrelevant to the current decision about whether to continue funding it. Instead, the senator should focus on the project's future costs and benefits.
a. The senator's argument is flawed because he or she is relying on the sunk cost fallacy. A sunk cost is a cost that has already been incurred and cannot be recovered.
b. The decision should be based on a cost-benefit analysis. The senators should evaluate whether the benefits of the program, such as preparing students for exciting and well-paying careers, outweigh the costs of funding it. They should also consider alternative uses of the funds, such as funding other programs or reducing taxes.c. The decision-making process used by economists would change if the program being funded was additional bombers. Economists would consider the opportunity cost of funding the program, which is the value of the next best alternative use of the funds. They would also consider the marginal cost and marginal benefit of each additional bomber. If the marginal benefit of an additional bomber is greater than its marginal cost, then economists would recommend funding the program.
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Assume that the economy of Wineville is a large producer of grapes, wine and wine bottles. Originally, its economy was in the position where its actual GDP equalled its potential GDP. However, there was a sudden and large increase in the demand for grapes, wine and wine bottles in Wineville from Wineville’s neighbouring country, Boozeland. The president of Wineville, Mr Chardonnay was pleased. a) Using the aggregate demand and aggregate supply model illustrate and explain the short-run impact of an increase in the demand for grapes, wine and wine bottles from Boozeland on Wineville’s economy. b) After the increase in demand what type of output gap is the economy of Wineville experiencing and what would you expect to have happened to unemployment? c) If Mr Chardonnay or the Central Bank of Wineville (Bank of Wineville Society, BWS for short) does not intervene in the economy after the increase in demand for grapes, wine and wine bottles, illustrate and explain the long-run impact of this using the aggregate demand and aggregate supply model on a new diagram. d) Explain why this long-run impact may be problematic? e) If the workers in Wineville face a perfectly competitive labour market, illustrate and explain the impact of an increase in the level of immigration to Wineville from workers in Boozeland on Wineville’s labour market.
a) Using the aggregate demand and aggregate supply model, an increase in the demand for grapes, wine, and wine bottles from Boozeland will have the following short-run impact on Wineville's economy:
Aggregate Demand (AD) Curve: The demand increase will shift the AD curve to the right. This is because the increase in demand for grapes, wine, and wine bottles will result in higher consumer spending and investment in Wineville.
Short-Run Equilibrium: Initially, the increase in demand will lead to an increase in output (GDP) and price levels in the short run. The economy will move to a new equilibrium point at a higher level of GDP and higher price levels.
Output and Employment: The increase in demand will create a higher demand for goods and services, leading to an increase in production. This increase in production will require additional labor, which will lead to increased employment levels.
b) After the increase in demand, the economy of Wineville is experiencing a positive output gap. This means that actual GDP exceeds potential GDP. As a result, unemployment is expected to decrease. The increase in demand for grapes, wine, and wine bottles will require businesses to increase production, leading to higher employment levels and a reduction in unemployment.
c) If there is no intervention by Mr. Chardonnay or the Central Bank of Wineville, the long-run impact of the increased demand for grapes, wine, and wine bottles can be illustrated and explained using the aggregate demand and aggregate supply model on a new diagram:
Aggregate Supply (AS) Curve: In the long run, the AS curve is vertical, representing potential GDP. This indicates that the economy's output is determined by its productive capacity and factors such as labor, capital, and technology.
Long-Run Equilibrium: With no intervention, the increased demand will lead to higher prices in the short run. However, in the long run, wages and input costs will adjust, causing the AS curve to shift to the left until it intersects with the initial AD curve at potential GDP. The economy will return to its original potential output level but at higher price levels.
d) The long-run impact may be problematic due to potential issues such as:
Inflationary Pressures: The increase in demand without a corresponding increase in the economy's productive capacity can lead to sustained upward pressure on prices. This can result in inflation, eroding the purchasing power of consumers and reducing economic stability.
Resource Constraints: If the increase in demand is not accompanied by increased investment in productive capacity, the economy may face constraints in meeting the higher demand. This can result in supply shortages, leading to bottlenecks and potential disruptions in the market.
Loss of Competitiveness: If Wineville becomes overly reliant on the demand from Boozeland, it may neglect other sectors and export markets. This can make the economy vulnerable to shifts in demand or changes in trade policies, affecting its long-term competitiveness.
e) If workers in Wineville face a perfectly competitive labor market, an increase in the level of immigration from workers in Boozeland will have the following impact on Wineville's labor market:
Supply of Labor: The increase in immigration will lead to a larger supply of labor in Wineville's labor market. This will shift the supply curve for labor to the right, increasing the number of available workers.
Impact on Wages: The increased supply of labor can put downward pressure on wages as there is now a larger pool of workers competing for available jobs. This can lead to lower wage rates or slower wage growth.
Impact on Employment: With a larger labor supply, businesses may be able to hire more workers at a lower wage. This can lead to increased employment opportunities and potentially reduce unemployment levels
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The Food Service Manager continually blames the new check system for mis-categorizing the items purchased, when in fact she did not fully engage in the mandatory training on setting up the new system and mis-categorized the items in the data base. Which defense mechanism is this? O withdrawal O repression O rationalization O substitution
The defense mechanism exhibited in this scenario is rationalization, where the Food Service Manager blames the new check system for mis-categorizing items instead of acknowledging their own lack of training and mis-categorization.
The defense mechanism exhibited in this scenario is rationalization. The Food Service Manager is rationalizing her actions by blaming the new check system for mis-categorizing items, when in reality, the issue arose due to her lack of engagement in the mandatory training and mis-categorization in the database. Rationalization involves justifying or providing plausible reasons for one's behavior or actions in order to protect one's self-esteem or avoid taking responsibility for their actions.In conclusion, the Food Service Manager's use of the defense mechanism of rationalization allows them to avoid taking responsibility for their lack of training and mis-categorization by shifting the blame to the new check system.
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Automatic fiscal stabilizers are most helpful in
O removing persistent output gaps.
O reducing the intensity of business cycles.
O eliminating price fluctuations in the economy.
O promoting economic growth.
O making discretionary fiscal policy effective.
Automatic fiscal stabilizers are most helpful in reducing the intensity of business cycles. (B)
They help to smooth the economy during times of recession by automatically increasing government spending and decreasing taxes. By doing so, they help to stimulate aggregate demand and prevent the economy from falling into a deep recession.
Automatic stabilizers are built into the system of government spending and taxation. They help to reduce the severity of economic fluctuations by automatically stabilizing the economy during periods of economic stress. These stabilizers include unemployment insurance, welfare payments, and progressive income taxation.
Automatic stabilizers also help to reduce uncertainty and promote economic growth by providing a predictable source of support during difficult times.
The effectiveness of automatic stabilizers depends on their design and implementation, as well as the overall state of the economy. In general, they are most effective when they are targeted towards those who are most in need, and when they are flexible enough to respond to changing economic conditions.(B)
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Which of the following changes during a company's reporting period would impact its net income but not its cash flow? An increase in inventories An increase in dividends A decrease in depreciation expense A decrease in accounts payable
if any of the following occurred during a company's reporting period, it would affect net income but not cash flow: a reduction in depreciation costs. As a result, option (C) is correct.
Value, interest rate, and liquidity are only loosely related to one another in terms of cash flows. A cash flow that will occur on day tN in the future can be changed into a cash flow of the same value on day t0.
Discounting is a transformation procedure that accounts for the time worth of money by changing the nominal amount of the cash flow in accordance with the reporting period current interest rates.
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