When there is structural unemployment, the real wage is rigid at a level above the market-clearing level. The real wage is defined as the wage paid to workers divided by the price level. The correct option is c.
In the case of structural unemployment, there is a mismatch between the skills of the unemployed and the available jobs in the market. This means that there are more workers looking for jobs than there are jobs available. The result of this situation is that employers can be pickier in choosing employees, and can thus offer lower wages.
However, since the wage is already low and workers are still unable to find jobs, it cannot go any lower, making it rigid. Hence, the real wage becomes rigid at a level above the market-clearing level.
An example of this situation is when workers in declining industries like coal mining or steel production lose their jobs and cannot find work in other fields because they lack the skills required. This leads to a higher real wage, which is the wage paid to workers divided by the price level.
The correct option is c.
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In 2018/2019 the banking sector in Ghana went through a financial crisis. The intensity of the crisis compelled the Bank of Ghana to come out with a bail out strategy to salvage the situation. Critically examine the causes and effects of the financial crisis that hit the banking sector, stating specifically the financial institutions that were involved and what has been done so far to control the crisis in the banking sector of Ghana. What recommendations would you give to prevent future occurrence of such a crisis?
The financial crisis that hit the banking sector in Ghana in 2018/2019 was a significant event that had severe consequences for the country's financial stability. Several causes contributed to the crisis, including weak corporate governance, poor risk management practices, inadequate regulatory oversight, and unethical conduct by some financial institutions.
Here's a critical examination of the causes and effects of the financial crisis that hit the banking sector, stating specifically the financial institutions that were involved and what has been done so far to control the crisis in the banking sector of Ghana:
The cause of the financial crisis in the Ghanaian banking sector included unethical banking practices, poor supervision, and regulation of banks, poor corporate governance, high levels of non-performing loans, and inadequate capitalization of banks, among others. In addition to the above factors, some banks were involved in unethical transactions, some were mismanaged, and some were involved in dubious and fraudulent activities. Notable financial institutions that were involved in the crisis include Capital Bank, UT Bank, and UniBank.
Aside from the above-mentioned banks, several other banks were affected by the crisis, which resulted in the loss of jobs and the loss of confidence in the banking sector. As a result, the Bank of Ghana intervened by revoking the licenses of the affected banks and coming out with a bailout strategy to help stabilize the situation.
The Bank of Ghana revoked the licenses of the banks involved in the crisis and appointed receivers to take over their assets and liabilities. This was to ensure that depositors' funds were protected and to also prevent the banks from further engaging in any fraudulent activities. The government also provided financial support to the affected banks to prevent further job losses.
Recommendations to prevent future occurrence of such a crisis includes the following:
1. Improve corporate governance
2. Strengthen supervision and regulation of banks
3. Develop a risk-based supervision framework
4. Improve capitalization of banks
5. Strengthen the legal framework to enable the Bank of Ghana to effectively supervise and regulate banks.
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The COVID 19 pandemic in 2020 significantly harmed the retail
sector as consumers reduced their shopping and spending. As the
economy recovers in 2021, retail workers are leaving the sector for
higher
The COVID-19 pandemic had a giant effect on the retail quarter in 2020 as purchasers reduced their shopping and spending. Lockdowns, social distancing measures, and economic uncertainties caused save closures, reduced foot traffic, and a shift in the direction of online purchasing. This resulted in sales losses, economic pressure, and activity cuts for plenty of retail corporations.
As the economy recovers in 2021, there are modifications occurring to retail people. Some retail people who have been laid off or skilled decreased hours during the pandemic may additionally are seeking employment in other sectors that offer higher opportunities, which include healthcare, era, or e-commerce. The retail industry itself is also undergoing variations, with accelerated emphasis on digitalization, e-commerce, and omnichannel techniques.
This shift may require one-of-a-kind talent units and understanding, mainly to an ability to restructure the retail body of workers. Additionally, shops specializing in presenting a secure and handy shopping revel in to regain client self-assurance and entice clients again to physical shops.
Overall, the restoration of the retail region and the destiny of retail workers rely upon various factors which include vaccination prices, patron behavior, authorities guidelines, and the capability of organizations to evolve to converting marketplace dynamics.
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The correct question is:
"How did the COVID-19 pandemic in 2020 impact the retail sector, and what is happening to retail workers as the economy recovers in 2021?"
Tyare Corporation had the following inventory balances at the beginning and end of May. May 1 May 30 $27,000 $33,000 $76,500 $69,000 $15,000 $16,731 Raw materials. Finished Goods Work in Process Durin
The actual direct labor hours worked during May by Tyare Corporation was 162.5 hours costs by the predetermined overhead rate of $12 per hour for the inventory balance.
To find the actual direct labor hours worked during May, we need to calculate the difference between the applied manufacturing overhead cost and the actual manufacturing overhead cost and divide it by the predetermined overhead rate.
Applied manufacturing overhead cost: $40,500
Actual manufacturing overhead cost: $42,450
Difference: $42,450 - $40,500 = $1,950
Predetermined overhead rate: $12 per direct labor hour
Actual direct labor hours worked during May:
$1,950 / $12 per hour = 162.5 hours
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The question is -
Tyare Corporation had the following Inventory balances at the beginning and end of May.
May 1 May 30
Raw materials $27,000 $33,000
Finished Goods $76,500 $69,000
Work in Process $15,000 $16,731
During May, $60,000 in raw materials (all direct materials) were drawn from Inventory and used in production. The company's predetermined overhead rate was $12 per direct labor hour, and it paid its direct labor workers $15 per hour. A total of 330 hours of direct labor time had been expended on the jobs in the beginning Work In Process Inventory account. The ending Work In Process Inventory account contained $7,200 of direct materials cost. The Corporation Incurred $42,450 in actual manufacturing overhead cost during the month and applied $40,500 in manufacturing overhead cost. The actual direct labor hours worked during May totaled:
Multiple Choice
A. 3.960 hours
B. 3,375 hours
C. 3,538 hours
D. 162.5 hours
Consider the following portfolio of securities: Company Beta Market Value Pepsico, Incorporated (Ticker: PEP) 0.67 $34,989 Apple, Incorporated (Ticker: AAPL) 1.34 $30,054 Xcel Energy, Incorpoated (Tic
Portfolio's expected return = 0.0235 + 0.033 + 0.0093Portfolio's expected return = 0.0658 or 6.58%Therefore, the expected return on the portfolio is 6.58%.
When you have to calculate the expected return on a portfolio of securities, you will have to first find the expected return on each security and then find the weighted average of the expected returns to find the portfolio's expected return. Here's how to find the expected return on each security:
Pepsico, Incorporated (Ticker: PEP)Expected return = (probability of an increase in price x potential increase) + (probability of a decrease in price x potential decrease)Probability of increase in price = 0.6Probability of decrease in price = 0.4Potential increase = 0.15 (15%)Potential decrease = -0.05 (-5%)Expected return = (0.6 x 0.15) + (0.4 x (-0.05))Expected return = 0.09 - 0.02Expected return = 0.07 or 7%Apple, Incorporated (Ticker: AAPL)Expected return = (probability of an increase in price x potential increase) + (probability of a decrease in price x potential decrease)
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Required Information [The following information applies to the questions displayed below] At the beginning of the year, Goldenrod Corporation bought a shed, a machine, and a trailer. The shed initially cost $21,600 but had to be renovated at a cost of $800. The shed was expected to last 7 years, with a residual value of $2,100. Repairs costing $620 were incurred at the end of the first year of use. The machine cost $11,900, and is estimated to have a total life of 40,000 hours and residual value of $900. The machine was actually used 2,000 hours in year 1 and 4,000 hours in year 2. The trailer cost $12,600 and was expected to last 4 years, with a residual value of $2,000. Required: 1. Compute the amount to be capitalized for the shed. Total cost Greer Manufacturing purchases property that includes land, buildings and equipment for $5,400,000. In addition, the company pays $174,000 in legal fees, $212,000 in commissions, and $115,000 in appraisal fees. The land is estimated at 24%, the buildings are at 35%, and the equipment at 41% of the property value. Required: a. Determine the total acquisition cost of this "basket purchase". b. Allocate the total acquisition cost to the individual assets acquired. c. Prepare the journal entry to record the purchase assuming that the company paid 35% of the amounts using cash and signed a note (due in five years) for the remainder.
The amount to be capitalized for the shed is $22,620.
a. The total acquisition cost of the "basket purchase" is $5,901,000.
b. The allocation of the total acquisition cost to the individual assets acquired is as follows:
Land: $1,416,240
Buildings: $2,065,350
Equipment: $2,419,410
c. The journal entry to record the purchase is as follows:
Dr. Land $1,416,240
Dr. Buildings $2,065,350
Dr. Equipment $2,419,410
Cr. Cash (35% of total acquisition cost) $2,065,350
Cr. Notes Payable (65% of total acquisition cost) $3,835,650
To compute the amount to be capitalized for the shed, we start with the initial cost of the shed, which is $21,600, and add the renovation cost of $800. Then we subtract the repairs cost of $620 incurred at the end of the first year. Finally, we subtract the residual value of $2,100. Therefore, the amount to be capitalized for the shed is $21,600 + $800 - $620 - $2,100 = $22,620.
a. To determine the total acquisition cost of the "basket purchase," we add the purchase price of $5,400,000 to the legal fees of $174,000, commissions of $212,000, and appraisal fees of $115,000. Therefore, the total acquisition cost is $5,400,000 + $174,000 + $212,000 + $115,000 = $5,901,000.
b. To allocate the total acquisition cost to the individual assets acquired, we multiply the property value by the respective percentages for each asset. The land is allocated 24%, the buildings are allocated 35%, and the equipment is allocated 41% of the property value.
c. To record the purchase, we debit the Land account with the allocated value for land, debit the Buildings account with the allocated value for buildings, and debit the Equipment account with the allocated value for equipment. We credit the Cash account with 35% of the total acquisition cost (as stated in the question), and credit the Notes Payable account with the remaining 65% of the total acquisition cost.
This journal entry reflects the purchase of the property with a combination of cash payment and signing a note payable for the remaining amount.
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An oligopolistic market is characterized by:
many tiny firms.
a few large firms.
negative profits.
low prices.
Gulp and Chug are the two large producers in the oligopolistic market for left-handed coffee mugs. If they can make an agreement, they will cooperate in:
raising production costs.
reducing output, which raises the product price.
allowing new firms into the market.
lowering the product price, which attracts more consumers.
b.) However, if Gulp sticks to the agreement, Chug has an incentive to:
raise its own prices to take advantage of consumer demand.
boost its own production to take advantage of high prices.
exit the market.
cut its own production to reduce costs.
Suppose that, if the market for left-handed computer mice were perfectly competitive, the equilibrium price and quantity would be at point A.
If instead the market was characterized by cooperating oligopolies, which point would represent a likely price and quantity?
B
C
D
E
In an oligopoly, firms like Gulp and Chug can increase profits through collusion, but face challenges of losing consumers in the long run due to high prices.
An oligopolistic market is characterized by a few large firms, which hold a significant share of the market. In an oligopoly, firms can influence market prices through their pricing strategies and marketing practices. Therefore, Gulp and Chug, the two largest producers in the oligopolistic market for left-handed coffee mugs, can increase their profits through collusion if they can make an agreement. They will cooperate in reducing output, which raises the product price.However, if Gulp sticks to the agreement, Chug has an incentive to cut its own production to reduce costs.For more questions on oligopoly
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On January 1, 2021, Bradley Recreational Products issued $130,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $125,799 to yield an annual return of 10%. ( EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare an amortization schedule that determines interest at the effective interest rate. 2. Prepare an amortization schedule by the straight-line method. 3. Prepare the journal entries to record Interest expense on June 30, 2023, by each of the two approaches. 5. Assuming the market rate is still 10%, what price would a second investor pay the first investor on June 30, 2023, for $13,000 of the bonds?
1) Calculation of the amortization schedule that determines interest at the effective interest rate: Effective interest rate is the interest rate that is actually earned or paid on an investment or loan.
In order to calculate the semi-annual interest payments we will use the formula: interest payment = carrying value * contractual interest rate * 1/2Year 1: carrying value (beginning) = $125,799Carrying Value (End) = $128,142 (1.0398 * $125,799)Payment of Interest = $5,886 ($128,142 * 9%/2)Amortization of Discount = $1,059 ($5,886 - $4,827)Year 2:Carrying Value (Beginning) = $128,142Carrying Value (End) = $130,253 (1.0398 * $128,142)Payment of Interest = $5,825 ($130,253 * 9%/2)Amortization of Discount = $1,121 ($5,825 - $4,704)Year 3:Carrying Value (Beginning) = $130,253Carrying Value (End) = $130,828 (1.0198 * $130,253)Payment of Interest = $5,877 ($130,828 * 9%/2)Amortization of Premium = $187 ($5,877 - $5,690)Year 4:Carrying Value (Beginning) = $130,828Carrying Value (End) = $130,828 (maturity)Payment of Interest = $5,888 ($130,828 * 9%/2)Amortization of Premium = $0 ($5,888 - $5,888)
2) Calculation of the amortization schedule by the straight-line method: Straight-line method is a method of accounting that requires uniform expenses (or revenue) to be recorded in each financial period. Under this method, the amortization of premium or discount is allocated equally over each period during the term of the bond. Below is the table of amortization schedule by the straight-line method:
3) Journal entries to record Interest expense on June 30, 2023, by each of the two approaches: There are two methods of calculating the interest expense which are effective interest method and straight-line method. Using the effective interest method, the interest expense is the carrying value of the bond times the effective interest rate. Using the straight-line method, the interest expense is the carrying value of the bond times the contractual interest rate. June 30, 2023, journal entries under effective interest method: June 30, 2023: Interest Expense = $5,536 ($128,142 * 8.63%/2)Discount on Bonds Payable = $351 ($5,886 - $5,536)Cash = $5,536June 30, 2023, journal entries under straight-line method: June 30, 2023: Interest Expense = $5,850 ($130,000 * 9%/2)Cash = $5,8504) Calculation of price of the bonds on June 30, 2023:Assuming the market rate is still 10%, the bond will be sold at par value on June 30, 2023. Therefore, the price of the bonds will be $130,000. The second investor will pay $130,000 to the first investor for $13,000 of bonds.
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Identify the following factors as either economic (tangible) or noneconomic (intangible): first cost, leadership, taxes, salvage value, morale, dependabilityy, inflation, profit, acceptance, ethics,and interest rate.
Factors can be classified as economic (tangible) or noneconomic (intangible) based on their quantifiable financial impact or their intangible nature relating to non-financial aspects such as behavior, perception, or values.
Factors can be categorized as either economic (tangible) or noneconomic (intangible) based on their nature and impact on financial and non-financial aspects. Let's examine each factor and classify them accordingly:
First cost: Economic (tangible) - First cost refers to the initial expenditure incurred in acquiring an asset or starting a project. It has a direct impact on financial resources and can be measured in monetary terms.
Leadership: Noneconomic (intangible) - Leadership is an intangible factor that relates to the ability of individuals to guide and influence others. While leadership can have economic consequences, it primarily encompasses qualities such as vision, communication, and decision-making.
Taxes: Economic (tangible) - Taxes are levies imposed by governments on individuals and organizations. They have a direct financial impact and can be measured in monetary terms.
Salvage value: Economic (tangible) - Salvage value refers to the estimated residual value of an asset at the end of its useful life. It is a tangible factor as it represents the potential monetary value that can be recovered from the asset.
Morale: Noneconomic (intangible) - Morale refers to the emotional and psychological state of individuals or groups within an organization. It relates to motivation, satisfaction, and engagement, which are intangible aspects of the work environment.
Dependability: Noneconomic (intangible) - Dependability refers to the reliability and trustworthiness of individuals, systems, or processes. It is an intangible factor that affects the performance and efficiency of operations.
Inflation: Economic (tangible) - Inflation represents the general increase in prices of goods and services over time. It is an economic factor that has a significant impact on purchasing power and financial planning.
Profit: Economic (tangible) - Profit refers to the financial gain or excess of revenues over expenses. It is a tangible factor that directly affects the financial performance and viability of a business.
Acceptance: Noneconomic (intangible) - Acceptance refers to the willingness or approval of individuals or groups regarding certain ideas, policies, or changes. It primarily relates to social dynamics and perceptions, which are intangible factors.
Ethics: Noneconomic (intangible) - Ethics encompasses moral principles and values that guide individual and organizational behavior. It is an intangible factor that influences decision-making, reputation, and social responsibility.
Interest rate: Economic (tangible) - Interest rate refers to the cost of borrowing or the return on investment. It is an economic factor that directly affects financial decisions, investment opportunities, and borrowing costs.
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Nintendo sell over 700 licenced games on their Nintendo Switch Console which is one of the cheapest gaming consoles around, yet they are some of the most expensive games and you can not play the games on any other console or on a PC. What type of pricing does Nintendo use?
a. product bundle pricing
b. captive product pricing
c. market-skimming pricing
d. product line pricing
The type of pricing strategy employed by Nintendo, where they sell over 700 licensed games on their Nintendo Switch console that are relatively expensive and exclusive to their platform, is captive product pricing.
Captive product pricing involves offering a primary product at a lower price while charging higher prices for complementary or related products that are essential for the primary product's usage or enjoyment. In this case, the Nintendo Switch console is positioned as an affordable gaming console, attracting a wide range of consumers due to its competitive price.
However, Nintendo capitalizes on the captive product pricing strategy by charging premium prices for their exclusive games that can only be played on the Nintendo Switch console. By doing so, they create a strong incentive for consumers to purchase their console and continue buying games from their platform, generating additional revenue and increasing customer loyalty. This approach allows Nintendo to leverage the unique value proposition of their games and maintain a strong market position.
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Argentine Tears. The Argentine peso was fixed through a currency board at Ps1.00 /$ throughout the 1990s. In January 2002 the Argentine peso was floated. On January 29, 2003 it was trading at Ps3.19 /$. During that one year period Argentina's inflation rate was 19 % on an annualized basis. Inflation in the United States during that same period was 2.2 % annualized.
a. What should have been the exchange rate in January 2003 if PPP held?
b. By what percentage was the Argentine peso undervalued on an annualized basis?
c. What were the probable causes of undervaluation?
A. What should have been the exchange rate in January 2003 if PPP held?
The exchange rate in January 2003, if PPP held, should have been Ps_____/$ (Round to five decimal places)
B. By what percentage was the Argentine peso undervalued on an annualized basis?
On an annualized basis, the Argentine peso was undervalued by_____%. (Round to three decimal places and include a negative sign if needed)
A. To determine the exchange rate in January 2003 based on Purchasing Power Parity (PPP), the formula Exchange rate = Spot rate × (1 + inflation rate of domestic currency) / (1 + inflation rate of foreign currency) was used. The PPP-adjusted exchange rate would have been approximately Ps3.7056/$.
B. The Argentine peso was undervalued by around 13.91% on an annualized basis compared to the PPP-adjusted exchange rate of Ps3.7056/$.
C. Factors contributing to the undervaluation include market sentiment, economic and political uncertainties, and the high inflation rate in Argentina relative to the United States, impacting the perceived value of the peso.
a. To determine the exchange rate in January 2003 if Purchasing Power Parity (PPP) held, we can calculate it by taking into account the inflation rates of Argentina and the United States. According to PPP, the exchange rate should adjust based on the relative price levels in each country.
The formula to calculate the PPP-adjusted exchange rate is:
Exchange rate = Spot rate × (1 + inflation rate of domestic currency) / (1 + inflation rate of foreign currency)
In this case, the spot rate in January 2003 was Ps3.19/$, and the inflation rate in Argentina was 19% (0.19) while the inflation rate in the United States was 2.2% (0.022). Plugging these values into the formula:
Exchange rate = 3.19 × (1 + 0.19) / (1 + 0.022)
Exchange rate ≈ 3.19 × 1.19 / 1.022
Exchange rate ≈ 3.7056
Therefore, if PPP held, the exchange rate in January 2003 should have been approximately Ps3.7056/$.
b. To calculate the percentage by which the Argentine peso was undervalued on an annualized basis, we can compare the actual exchange rate of Ps3.19/$ with the PPP-adjusted exchange rate of Ps3.7056/$.
Undervaluation percentage = ((PPP-adjusted exchange rate - Actual exchange rate) / PPP-adjusted exchange rate) × 100
Undervaluation percentage = ((3.7056 - 3.19) / 3.7056) × 100
Undervaluation percentage ≈ (0.5156 / 3.7056) × 100
Undervaluation percentage ≈ 13.91%
On an annualized basis, the Argentine peso was undervalued by approximately 13.91%.
c. The probable causes of undervaluation can be attributed to various factors. One primary factor could be market expectations and investor sentiment. In the aftermath of the currency board system collapse and the subsequent floating of the Argentine peso, there might have been a lack of confidence in the currency's stability. This could have led to speculative pressures and a depreciated exchange rate.
Another factor contributing to undervaluation could be economic and political uncertainties in Argentina. During that period, Argentina faced significant economic challenges, including a deep recession, fiscal imbalances, and a debt crisis. Such conditions often lead to capital flight and currency depreciation.
Moreover, the high inflation rate in Argentina, which exceeded that of the United States by a significant margin, also contributed to the undervaluation. Inflation erodes the purchasing power of a currency, making it less desirable and reducing its value in international markets.
Overall, the undervaluation of the Argentine peso can be attributed to a combination of market sentiment, economic and political uncertainties, and high inflation rates, all of which affected the perceived value of the currency.
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As a small financial analyst, you have been selected by a client to provide assistance in the following cases:
A. Explain why the Future Value of an annuity due is always greater than the Future Value of an ordinary annuity with the same rate of return and the same amount of periods.
B. Marcia is planning to buy a car in five years’ time. She estimates that the car would cost $2,500,000.000. Given that the existing interest rate is 12 %, how much money should she invest now?
C. Marcia has an option to invest in an insurance policy at a rate of 20 % to achieve her goal of purchasing the car for $ 2,500,000. How much should she invest at the beginning of each year for the next 5 years in order to achieve her goal?
D. If the interest rate decreases from 20% to 15%, by how much would Marcia’s annual investment in part C. change?
A. The Value of an annuity due is always greater than the Future Value of an ordinary annuity with the same rate of return and the same number of periods. This is because of the time value of money and the cash flows that are associated with the investment. In an annuity due, cash flows occur at the beginning of each period, while in an ordinary annuity, cash flows occur at the end of each period.
B. Marcia is planning to buy a car in five years’ time. She estimates that the car would cost $2,500,000. Given that the existing interest rate is 12 %, how much money should she invest now?The future value (FV) of an investment is found using the formula FV = PV × (1 + r)n, where PV is the present value of the investment, r is the interest rate, and n is the number of periods.
C. Marcia has an option to invest in an insurance policy at a rate of 20 % to achieve her goal of purchasing the car for $2,500,000. How much should she invest at the beginning of each year for the next 5 years in order to achieve her goal?The formula for the present value of an annuity is PV = Pmt × (1 – 1/((1 + r)^n))/r where Pmt is the payment, r is the interest rate, and n is the number of periods
D. If the interest rate decreases from 20% to 15%, by how much would Marcia’s annual investment in Part C. change?The formula for the present value of an annuity is PV = Pmt × (1 – 1/(1 + r)n))/r, where Pmt is the payment, r is the interest rate, and n is the number of periods. We can determine the new payment amount by substituting the new interest rate (r = 0.15) into the formula:
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On the balance sheet of firm XYZ, the market value of the firm's asset is Vo = 100 million. The liability of XYZ consists of debt and equity; the debt is issued in the form of zero-coupon bonds, and the equity holders have the claim to the remaining of the firm's value after the debt holders are fully paid. The debt has face value F = 90 million. At maturity, the debt holders get paid before the equity holders. The debt has 1 year maturity. The continuously compounded expected growth rate of XYZ's asset is µ = 10%, with volatility o = 10%. The continuously compounded log risk-free rate is r = 5%. All terms are annualized. Suppose that the firm is liquidated after 1 year, i.e., the firm will not issue other products for financing. Compute the market prices of the debt and equity. (ii) Define the leverage ratio of the firm as the ratio of market values of debt and equity. What's the leverage ratio of firm XYZ?
To compute the market prices of the debt and equity, we can use the Black-Scholes-Merton (BSM) model. The market price of the debt can be calculated as the present value of the face value of the debt at maturity using the risk-free rate.
Given:
Vo = 100 million (market value of the firm's asset)F = 90 million (face value of the debt)µ = 10% (expected growth rate of the asset)σ = 10% (volatility of the asset)r = 5% (risk-free rate)T = 1 year (time to maturity)First, we calculate the expected asset value at maturity:
E(V) = Vo * e^(µ*T) = 100 million * e^(0.10 * 1) = 110 millionNext, we calculate the standard deviation of the asset value at maturity:
σ(V) = Vo * e^(σ*√T) = 100 million * e^(0.10 * √1) = 100 million * e^(0.10) = 110 million * e^(0.10) ≈ 110 million * 1.10517 ≈ 121.57 millionWe can now use the BSM model to calculate the market prices of the debt and equity:
1. Debt:
The market price of the debt can be calculated as the present value of the face value of the debt at maturity using the risk-free rate:
P(debt) = F * e^(-r*T) = 90 million * e^(-0.05 * 1) = 90 million * e^(-0.05) ≈ 90 million * 0.951229 ≈ 85.61 million2. Equity:
The market price of the equity can be calculated as the difference between the market value of the asset and the market price of the debt:
P(equity) = Vo - P(debt) = 100 million - 85.61 million ≈ 14.39 million(ii) The leverage ratio of the firm is defined as the ratio of the market values of debt and equity:
Leverage ratio = Market value of debt / Market value of equity = P(debt) / P(equity) ≈ 85.61 million / 14.39 million ≈ 5.948Therefore, the leverage ratio of firm XYZ is approximately 5.948.
About MarketA perfectly market is a structure in which there are many sellers or companies that produce goods. Perfect competition market is also defined as a market that has many companies to provide services to buyers in the market.
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Ladurée is a French luxury bakery famous for the double decker macaron and the tea rooms. The international expansion of the brand from Paris started with the opening of a single store in the Harrods department store in London, and a single store in Saks Fifth Avenue in New York. This is an example of what type of distribution?
a.
Exclusive distribution
b.
Selective distribution
c.
Direct distribution
d.
Intensive distribution
The example provided, where Ladurée expanded internationally by opening a single store in Harrods department store in London and a single store in Saks Fifth Avenue in New York, represents a Selective distribution strategy.
Selective distribution involves carefully selecting a limited number of retailers or outlets to distribute a product. In the case of Ladurée, the brand chose specific high-end and prestigious locations, such as Harrods and Saks Fifth Avenue, for its initial international expansion.
By strategically selecting these exclusive and renowned retailers, Ladurée aimed to maintain a sense of luxury and exclusivity for its products. This approach allows the brand to control the distribution channels, maintain brand image, and cater to a specific target market seeking a premium and unique bakery experience. Selective distribution ensures that the brand's products are available in select locations, enhancing their desirability and creating an aura of exclusivity.
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write short note on:
coordination failure and multiple equillibrium
Coordination failure refers to the inability of economic agents to coordinate their actions effectively, resulting in a suboptimal result or an equilibrium that is not Pareto optimal. Multiple equilibria, on the other hand, refer to the existence of several stable outcomes or equilibria that economic agents might settle into, based on their expectations, regardless of which of them is Pareto optimal.
What is Coordination failure? Coordination failure occurs when rational agents, acting independently and with incomplete information, are unable to agree on a mutually advantageous outcome. They often end up in a suboptimal outcome. Coordination failure can arise in several situations, including the following: Information asymmetries: When information is asymmetric, some agents may have an informational advantage over others. This could result in coordination failure when agents with incomplete information are unable to act optimally.
Information externalities: Coordination failure can occur when an agent's decisions have an impact on the decisions of other agents without being taken into account. This could result in an outcome that is worse than what could have been achieved with coordination. Game theory: Coordination failure arises in game theory when a game has several equilibria, each with its own outcome. What is Multiple equilibria? Multiple equilibria refer to the existence of more than one equilibrium, each of which is stable and Pareto optimal. In economic systems, the presence of multiple equilibria is often the result of self-fulfilling expectations. Suppose that the economy has two equilibria, A and B. Equilibrium A is more desirable than B, but it is difficult to achieve. If agents expect the economy to be in equilibrium B, they will take actions that reinforce this expectation, making equilibrium B more likely.
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Ross Hopkins, president of Hopkins Hospitality, has developed the tasks, durations, and predecessor relationships in the following table for building new motels. Time (weeks) Time (weeks) Immediate Pr
The activity variance along the critical path is 23.66.
What is the activity variance along the critical path?To know activity variance along the critical path, we need to determine the critical path first. The critical path is the longest path in the network diagram that determines the project's overall duration. It consists of activities with zero slack or float.
By analyzing the provided table and drawing the AON (Activity-on-Node) network, we can determine the critical path as follows:
A → B → E → F → H → J → K
The activity variance is calculated using the formula:
[tex]Variance = ((Pessimistic - Optimistic) / 6)^2[/tex]
For each activity on the critical path, we will calculate the activity variance:
Activity A:
Variance_A = ((10 - 4) / 6)^2 = 1.0
Activity B:
Variance_B = ((24 - 2) / 6)^2 = 18.67
Activity E:
Variance_E = ((3 - 1) / 6)^2 = 0.11
Activity F:
Variance_F = ((20 - 6) / 6)^2 = 2.44
Activity H:
Variance_H = ((2 - 2) / 6)^2 = 0.0
Activity J:
Variance_J = ((12 - 4) / 6)^2 = 1.33
Activity K:
Variance_K = ((3 - 2) / 6)^2 = 0.11
The activity variance along the critical path is the sum of the variances of all activities on the critical path:
Variance_critical_path:
= Variance_A + Variance_B + Variance_E + Variance_F + Variance_H + Variance_J + Variance_K
= 1.0 + 18.67 + 0.11 + 2.44 + 0.0 + 1.33 + 0.11
= 23.66.
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Murphy contributed property with an adjusted basis of $66,000 and fair market value of $80,000 for 80% of the stock of CAN Corporation. Dan rendered services to CAN and received 20% of CAN's stock with a value of $20,000. What is Dan's recognized income on this transaction?
In this case, the Fair Market Value of Murphy's contribution of property is more than the stock that he received. Thus, the consideration received is equal to the value of the stock is $20,000 .
As a result, Murphy will not have any gain or loss recognized on the exchange since he is within the provisions of section 351.
According to the Section 351 of the Internal Revenue Code, no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control of the corporation.
For Dan, since he rendered services to CAN and received 20% of CAN's stock with a value of $20,000. The value of the stock he received is equal to the amount of income he must recognize on the transaction. Therefore, Dan's recognized income on this transaction is $20,000.
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The following audit procedures are included in the audit program for the audit of the financial statements of Golden State Overnight Express:
1. Select a sample of acquisitions from the acquisitions journal and perform the following:
a. Vouch the transaction to the voucher package that includes the matched receiving report, purchase order, and vendor invoice.
b. Verify that the purchase order was approved by an authorized purchasing agent.
c. Verify that the electronic initials of an accounts payable clerk are present in the file, indicating that the documents have been appropriately matched and that amounts on the vendor invoice were verified.
d. Recalculate the invoice amount and compare the dollar amounts per the invoice to the amount recorded in the acquisitions journal.
e. Examine whether the transaction was recorded to the correct vendor in the ac-counts payable master file.
f. Determine whether the transaction was recorded in the correct month, based on when the goods were received and the terms of the transaction.
g. Review the chart of accounts to determine if the transaction was charged to the ap-propriate general ledger account.
The audit procedures listed in the audit program for the audit of the financial statements of Golden State Overnight Express are as follows:
Select a sample of acquisitions from the acquisitions journal and perform the following:
a. Vouch the transaction to the voucher package that includes the matched receiving report, purchase order, and vendor invoice.
b. Verify that the purchase order was approved by an authorized purchasing agent.
c. Verify that the electronic initials of an accounts payable clerk are present in the file, indicating that the documents have been appropriately matched and that amounts on the vendor invoice were verified.
d. Recalculate the invoice amount and compare the dollar amounts per the invoice to the amount recorded in the acquisitions journal.
e. Examine whether the transaction was recorded to the correct vendor in the accounts payable master file.
f. Determine whether the transaction was recorded in the correct month, based on when the goods were received and the terms of the transaction.
g. Review the chart of accounts to determine if the transaction was charged to the appropriate general ledger account.
These procedures are designed to assess the accuracy, completeness, and validity of acquisitions recorded in the financial statements, particularly focusing on the accounts payable process. By performing these audit procedures, the auditor aims to obtain sufficient and appropriate audit evidence to support the financial statement assertions related to acquisitions and accounts payable.
It's important to note that the audit program may contain additional procedures beyond the ones listed here, depending on the specific circumstances and risks identified during the audit planning process.
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Handy Home sells windows and doors in the ratio of 8:2 (windows doors). The selling price of each window is $102 and of each door is $252. The variable cost of a window is $63.50 and of a door is $176
To find the contribution margin per unit, we subtract the variable cost per unit from the selling price per unit.
For windows:
Selling price per window: $102
Variable cost per window: $63.50
Contribution margin per window: $102 - $63.50 = $38.50
For doors:
Selling price per door: $252
Variable cost per door: $176
Contribution margin per door: $252 - $176 = $76
Since the ratio of windows to doors is 8:2, we can calculate the weighted average contribution margin:
Weighted average contribution margin = (8/10) * contribution margin per window + (2/10) * contribution margin per door
= (8/10) * $38.50 + (2/10) * $76
= $30.80 + $15.20
= $46
Therefore, the weighted average contribution margin per unit for Handy Home is $46.
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Why did Henry Gantt suggest that frontline supervisors should receive a bonus for each of their workers who completed their assigned daily tasks?
Multiple Choice
Top-level managers would be motivated to do the work of the supervisors.
Stronger employees would be motivated to do some of the work of the weaker employees.
Supervisors would focus on meeting the human needs of their employees rather than their productivity.
More productive employees would prefer a flat daily wage rather than a piecerate system.
Supervisors would be motivated to provide extra attention and training to weaker employees.
Henry Gantt suggested that frontline supervisors should receive a bonus for each of their workers who completed their assigned daily tasks because he believed it would motivate supervisors to provide extra attention and training to weaker employees.
By linking the supervisors' bonus to the completion of tasks by their workers, Gantt aimed to create an incentive for supervisors to actively support and develop their team members.This approach would encourage supervisors to invest time and effort in training and coaching their employees to improve their performance. By focusing on meeting the needs of their employees and providing extra attention to weaker workers, supervisors can help enhance their skills and productivity.
This approach aligns with the principles of human relations and emphasizes the importance of supporting and developing employees to achieve higher levels of performance.Gantt's suggestion aimed to foster a collaborative and supportive work environment, where supervisors are motivated to actively engage with their employees and contribute to their professional growth.
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brian declares bankruptcy. what benefits can he obtain by declaring bankruptcy?
Brian can benefit in many ways by filing for bankruptcy. First of all, he can get debt relief because bankruptcy enables the discharge or restructuring of debts, giving him a chance to get his finances back on track.
An automatic stay, which stops collection efforts and protects Brian from creditor harrassment, may also be advantageous to Brian. He may be able to use exemptions in bankruptcy to protect some of his assets, preventing him from losing everything. Additionally, bankruptcy enables Brian to gradually repair his credit, which can provide a fresh start.
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Dr. Atsu.pdf - Adobe Acrobat Reader DC (64-bit) File Edit View Sign Window Help Home Tools ustom... design ... ↓ division ... 216 Year 2018 2019 2020 Year 2018 2019 2020 Year 2018 2019 2020 goals a.
A concussion can occur when a person's brain hits the inside of their skull. The impact of a blow to the head, such as one that happens during a fall or car accident, is typically the cause.
Contact sports, such as football or boxing, also place people at risk of getting a concussion. The most severe symptoms of a concussion are typically short-lived and improve within a week or two. However, some people may continue to experience symptoms for several weeks or months after the injury. A concussion can cause a variety of symptoms that can last for a short or long period of time, including headaches, nausea, dizziness, fatigue, difficulty concentrating, and memory problems. It is important to seek medical attention if you suspect you have a concussion.
A concussion is a mild traumatic brain injury (MTBI) that can occur as a result of a blow or jolt to the head. This can occur as a result of a fall, a car accident, or a sports injury, among other things. The impact of the blow can cause the brain to shift inside the skull, resulting in a range of symptoms that can range from mild to severe. These symptoms can include headaches, dizziness, fatigue, difficulty concentrating, and memory problems, among others. While most people will recover from a concussion within a week or two, some may continue to experience symptoms for several weeks or months after the injury.
In concussion, it is important to seek medical attention. Concussion management typically involves rest and avoiding activities that could cause further damage to the brain. Concussion symptoms can be monitored by medical professionals and treated with medication or other therapies, if necessary. It is important to take concussion symptoms seriously and seek medical attention to ensure the best possible outcome.
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An investment project has a net present value of $650, Using the general decision rule for the net present value method, what conclusion 15 should be made? 4 Multiple Choice 01:25:57 The project shoul
The rule is that if the net present value of an investment is positive, then the project should be accepted; if negative, then the project should be rejected.
According to the general decision rule for the net present value method, if the net present value of an investment project is positive, the project should be accepted. Since the net present value of the investment project in this case is $650, the project should be accepted. Thus, the conclusion that should be made is that the project is viable and should be undertaken, since it is expected to generate a positive return on investment. Investment appraisal techniques like Net present value method help in determining the feasibility of an investment opportunity by comparing the expected benefits with the cost involved. This method determines the difference between the present value of the future cash inflows and the present value of future cash outflows. The rule is that if the net present value of an investment is positive, then the project should be accepted; if negative, then the project should be rejected.
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Sandstone, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80000. The future cash inflows from its project are $40000, $40000, $30000 and $30000 for years 1, 2, 3 and 4, respectively. Sandstone uses the net present value method and has a discount rate of 12%. Will Sandstone accept the project?
Based on the net present value (NPV) method and a discount rate of 12%, Sandstone, Inc. should not accept the project as it yields a negative net present value.
To determine whether Sandstone, Inc. should accept the project, we need to calculate the net present value (NPV) of the project's cash flows. The NPV is calculated by discounting the future cash flows to their present value and then subtracting the initial outlay or cost.
Step 1: Calculate the present value of cash flows
To calculate the present value of each cash flow, we use the formula:
PV = CF / (1 + r)^n
where PV is the present value, CF is the cash flow, r is the discount rate, and n is the number of years.
Year 1:
PV1 = $40,000 / (1 + 0.12)^1 = $35,714.29
Year 2:
PV2 = $40,000 / (1 + 0.12)^2 = $31,878.16
Year 3:
PV3 = $30,000 / (1 + 0.12)^3 = $22,013.81
Year 4:
PV4 = $30,000 / (1 + 0.12)^4 = $19,591.63
Step 2: Calculate the NPV
The NPV is calculated by summing up the present values of the cash flows and subtracting the initial outlay or cost.
NPV = PV1 + PV2 + PV3 + PV4 - Initial Outlay
NPV = $35,714.29 + $31,878.16 + $22,013.81 + $19,591.63 - $80,000
NPV = $109,197.89 - $80,000
NPV = $29,197.89
Step 3: Decision
Since the NPV is positive, it indicates that the project is expected to generate more value than the initial cost. Therefore, if the NPV is greater than zero, Sandstone, Inc. should accept the project. However, in this case, the NPV is negative ($29,197.89), indicating that the project is expected to result in a net loss. Thus, Sandstone, Inc. should not accept the project.
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Assuming that you own and operate a company a company that has two subsidiaries A. Prepare the consolidated statement of profit and loss for the group B. Prepare the consolidated statement of financial position for the group Assuming that you own and operate a company a company that has two subsidiaries A. Prepare the consolidated statement of profit and loss for the group B. Prepare the consolidated statement of financial position for the group
Consolidated Statement of Profit and Loss for the Group. The consolidated statement of profit and loss represents the financial results of a parent company and its subsidiaries as a single business entity.
The following are the steps involved in preparing the consolidated statement of profit and loss and the consolidated statement of financial position for a group.Prepare the financial statements of the parent company and its subsidiaries. Eliminate intercompany transactions, including any intercompany loans and accounts payable or receivable. Adjust the balance of the parent company's investment account in the subsidiary companies. Combine the remaining balances of the parent company and subsidiaries to prepare the consolidated financial statements.For such more questions on business entity
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Which customer ID bought most food boxes? Explain how you determined relevant customer ID and note down which city this customer ID comes from
Please Tell me the steps on how this would be solved using Excel. Note that this is not the full excel data but just a small sample.
date_sign_up customer_id product_name marketing_channel City
4/17/2015 13:11 71041 Classic - 3 meals per week for 2 people Search Engine Marketing San Diego
4/14/2015 11:32 103289 Classic - 3 meals per week for 2 people Newsletters (internal) Los Angeles
4/14/2015 9:53 107746 Classic - 3 meals per week for 2 people Newsletters (internal) Los Angeles
4/14/2015 16:08 157441 Classic - 3 meals per week for 4 people Newsletters (internal) San Francisco
4/18/2015 8:04 158646 Classic - 3 meals per week for 2 people Newsletters (internal) San Diego
4/18/2015 15:41 178843 3 Meals (vegetarian) for 2 people TV / Radio nal) Los Angeles
4/14/2015 9:53 107746 Classic - 3 meals per week for 2 people Newsletters (internal) Los Angeles
4/14/2015 16:08 157441 Classic - 3 meals per week for 4 people Newsletters (internal) San Francisco
4/18/2015 8:04 158646 Classic - 3 meals per week for 2 people Newsletters (internal) San Diego
4/18/2015 15:41 178843 3 Meals (vegetarian) for 2 people TV / Radio
We found that among the sample data provided, customer ID 107746 from Los Angeles purchased the most food boxes by using Excel functions like COUNTIF and sorting the data.
To determine this, you would follow these steps in Excel:
Arrange the data in a table with columns labeled "date_sign_up," "customer_id," "product_name," "marketing_channel," and "City."
Create a new column titled "Food Boxes" to count the number of food boxes purchased by each customer.
Use the COUNTIF function in Excel to count the occurrences of "Classic - 3 meals per week for 2 people" and "3 Meals (vegetarian) for 2 people" in the "product_name" column for each customer ID. This will give you the number of food boxes purchased by each customer.
Sort the table based on the "Food Boxes" column in descending order to identify the customer with the highest count.
The customer ID with the highest count in the "Food Boxes" column represents the customer who bought the most food boxes. In this case, it is customer ID 107746.
Look at the corresponding row to find the city associated with that customer ID, which is Los Angeles.
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The Guaranteed Income Supplement (GIS) benefit will be subject to clawback if
a.
the pensioner has liquid savings of at least $10,000.
b.
the pensioner receives any income other than OAS.
c.
the pensioner is under the age of 65.
d.
the pensioner has total investments of at least $10,000.
The correct answer is: a. the pensioner has liquid savings of at least $10,000.
The Guaranteed Income Supplement (GIS) benefit is a government program in Canada that provides additional income support to low-income seniors. The GIS benefit is subject to a clawback, which means that it is reduced or eliminated based on certain factors.
One of the factors that can trigger the clawback of GIS is if the pensioner has liquid savings of at least $10,000. When the pensioner's liquid savings exceed this threshold, the GIS benefit amount is reduced or entirely clawed back.
Therefore, option a is the correct answer as it accurately identifies the condition under which the GIS benefit will be subject to clawback.
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in order to promote american production, the government subsidizes cereal producers. (analyze only american firms)
When the government subsidizes cereal producers to promote American production, it aims to incentivize domestic firms to increase their output and competitiveness in the cereal industry.
By providing financial support or other forms of assistance, the government reduces the costs of production for American cereal producers, making them more competitive in the market. This subsidy can have several effects on American firms. Firstly, it reduces the cost of production, allowing cereal producers to lower their prices or maintain profitability even in the face of international competition. This can lead to increased market share for American firms and potentially higher revenues.
Secondly, the subsidy encourages investment in technology, research, and development, as firms strive to improve their productivity and efficiency. This can lead to innovations in cereal production, such as new production techniques or healthier product offerings, giving American firms a competitive edge.
Furthermore, the subsidy provides stability and support to domestic cereal producers, which can incentivize them to expand their operations, hire more workers, and contribute to the overall growth of the American economy.
However, there are some potential drawbacks to consider. Subsidies can distort market dynamics, leading to overproduction and inefficiencies. They may also create a reliance on government support, reducing the incentive for firms to innovate and become more cost-effective on their own. Additionally, subsidies can be costly for the government and may divert resources from other areas of public spending.
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59 Jane Frost wants to receive yearly payments of $31,000 for 8 years. How much must she deposit at her bank today at 13% interest compounded annually? (Do not round intermediate calculations. Round y
Jane Frost must deposit approximately $148,288.62 at her bank today at a 13% interest rate compounded annually in order to receive yearly payments of $31,000 for 8 years
To calculate how much Jane Frost must deposit at her bank today, we can use the present value formula for an ordinary annuity:
Present Value (PV) = Payment amount * [(1 - (1 + interest rate)^(-number of periods))] / interest rate
Available information from the problem:
Payment amount: $31,000 per year
Interest rate: 13% (or 0.13) compounded annually
Number of periods: 8 years
Plugging the values into the formula:
PV = $31,000 * [(1 - (1 + 0.13)^(-8))] / 0.13
Evaluating the expression:
PV ≈ $31,000 * [(1 - (1.13)^(-8))] / 0.13
PV ≈ $31,000 * [(1 - 0.376886051)] / 0.13
PV ≈ $31,000 * [0.623113949] / 0.13
PV ≈ $31,000 * 4.785522688
PV ≈ $148,288.62 (rounded to two decimal places)
Therefore, Jane Frost must deposit approximately $148,288.62.
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a) What are the consequences of an omitted variable? b) What are the impacts of adding an irrelevant variable to the model?
a) Consequences of an omitted variable: An omitted variable may lead to biased or inconsistent parameter estimation. b) Impacts of adding an irrelevant variable to the model: Adding an irrelevant variable will lead to an inconsistent parameter estimation.
a) Omitting an important variable could result in an incorrect interpretation of the parameters of other variables. If the omitted variable is correlated with one or more of the included variables, it can cause omitted variable bias.
b) The variance of the estimated parameters will increase due to the additional variable and also the precision of the estimation will decrease. It can also result in difficulty in interpreting the parameters of other variables in the model.
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A lawnmower operates in a perfectly competitive industry and its total costs are given by: TC(q) = 3q² + 18q, where q denotes the number of lawns mowed. (a) (2) What is the firm's marginal cost? (b) (3) What is the firm's average costs? Does the firm have increasing, constant, or decreasing returns to scale? (c) (2) Graph the marginal and average cost curves on the same set of axes. (d) (3) What is the price beneath which this lawnmower would choose to shut down? (e) (4) If the market price of a mowed lawn is $102 (!), how many lawns will this firm mow? What is the firm's average cost at that level of output? How does it compare to the market price? (f) (6) Find an expression that denotes this firm's profits as a function of the market price ((P)). Your answer should depend on p and otherwise contain only numerical constants. Hint: your answer should be a piecewise function (see part (d)) and you will need to solve for supply as a general function of the market price.
(a) The firm's marginal cost is MC(q) = 6q + 18.
(b) The firm's average cost is AC(q) = 3q + 18/q.
(c) The AC curve will also start from an intercept of 18 on the vertical axis and decrease initially, reaching a minimum point before increasing again.
(d) The price at which the lawnmower would shut down is below this minimum point on the average cost curve.
(e) The firm's average cost at this level of output is $43.29, which is lower than the market price.
(f) The firm's profits as a function of the market price is given by π(P) = P*√6 - 12√6.
(a) The firm's marginal cost (MC) can be obtained by taking the derivative of the total cost (TC) function with respect to quantity (q):
MC(q) = dTC/dq = 6q + 18
Therefore, the firm's marginal cost is MC(q) = 6q + 18.
(b) The firm's average cost (AC) is calculated by dividing the total cost (TC) by the quantity (q):
AC(q) = TC(q)/q = (3q² + 18q)/q = 3q + 18/q
The firm's average cost is AC(q) = 3q + 18/q.
To determine whether the firm has increasing, constant, or decreasing returns to scale, we need to examine the behavior of the average cost as quantity changes. Since the average cost function includes a positive linear term (3q) and a negative inverse term (18/q), the firm experiences decreasing returns to scale.
(c) The marginal cost (MC) and average cost (AC) curves can be graphed on the same set of axes. The vertical axis represents cost, and the horizontal axis represents quantity (q). The MC curve will start from the intercept of the TC function (18) and increase linearly with a slope of 6. The AC curve will also start from an intercept of 18 on the vertical axis and decrease initially, reaching a minimum point before increasing again.
(d) The price at which the lawnmower would choose to shut down is equal to the minimum point on the average cost curve. In this case, the average cost function is AC(q) = 3q + 18/q. To find the minimum point, we can take the derivative of AC(q) with respect to q and set it equal to zero:
dAC(q)/dq = 3 - 18/q^2 = 0
Solving this equation gives q = √6. The price at which the lawnmower would shut down is below this minimum point on the average cost curve.
(e) If the market price of a mowed lawn is $102, the firm will determine its level of output by equating the market price with the marginal cost. Setting MC(q) = P, we have:
6q + 18 = 102
6q = 84
q = 14
The firm will mow 14 lawns. At this level of output, the average cost can be calculated by substituting q = 14 into the average cost function:
AC(14) = 3(14) + 18/14 = 42 + 1.2857 = $43.29
The firm's average cost at this level of output is $43.29, which is lower than the market price.
(f) The firm's profits (π) can be calculated as the difference between total revenue (TR) and total cost (TC):
π = TR - TC = P*q - TC(q) = P*q - (3q² + 18q)
To express the firm's profits as a function of the market price (P), we can substitute q = √6 into the expression:
π(P) = P*√6 - (3(√6)² + 18√6)
π(P) = P*√6 - 12√6
Therefore, the firm's profits as a function of the market price is given by π(P) = P*√6 - 12√6.
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