Economists have estimated the following transportation elasticities. For each pair, explain possible reasons why the elasticities differ.

University of Richmond Professor Erik Craft analyzed the states’ pricing of vanity plates. He found that in California, where vanity plates cost $28.75, the elasticity of demand was 0.52. In Massachusetts, where vanity plates cost $50, the elasticity of demand was 3.52.

a. Assuming vanity plates have zero production cost and his estimates are correct, was each state collecting the maximum revenue it could from vanity plates? Explain your reasoning.

• Neither state is maximizing revenue. Maximum revenue is collected when elasticity is zero.

• Neither state is maximizing revenue. Maximum revenue is collected when elasticity is 1.

• Massachusetts is maximizing revenue but California is not because revenue is only maximized when elasicity is greater than 1.

• California is maximizing revenue but Massachusetts is not because revenue is only maximized when elasicity is less than 1.

b. What recommendation would you have for each state to maximize revenue?

I would recommend that Massachusetts  (Click to select)  lower its price, raise its price, not change its price  and California  (Click to select)  not change its price , raise its price, lower its price  .

c. If these estimates are correct, which state was most likely to be following a politically unpopular policy?

(Click to select)  California, Massachusetts  , because not only is it not collecting maximum revenue but it is also charging a  (Click to select)  higher price , lower price than is optimal. It could simultaneously  (Click to select) lower its price, raise its price and increase revenues, which would please both those who buy vanity plates and the Treasury.

What do you think about R&D being deducted from revenue? (hint: think about accounting, how do accountants try to match expenses with revenue?

Does the deduction of R&D adhere to the general rule of matching expenses and revenue)?

Consider a competitive industry that the government taxes in order to raise revenue (e.g., the sale of alcoholic beverages). Show graphically that the amount of revenue generated by a per-unit tax on the industry can in principle be duplicated by reorganizing it as a state-run monopoly and using the profits as government revenue.

Given demand curve for Silvana Chocolates Company ( SCC ) QD = 10,000 - 25P.

a. How many Bars could be sold for $100?

b. At what price would SCC sales fall to zero?

c. What is the total revenue (TR) equation for SCC in terms of output, Q? What is the marginal revenue equation in terms of Q?

d. What is the point-price elasticity of demand when P = $150 ? What is total revenue at this price? What is marginal revenue at this price?

e. Suppose that the price of SCC rose to P = $250.What would be the new point-price elasticity of demand? What is total revenue at this price? What is marginal revenue at this price?

f. Suppose that the supply Curve of SCC is given by the equation QS = -5,000 + 50P.What is the relationship between quantity supplied and quantity demanded at a price of $300?

g. In this market, what is the equilibrium price and quantity?

2. Consider a two-team league in which the teams play 100 games. The large market team gets gate revenue 12w – (w²/20) if it wins w games while the small market team gets 8w – (w²/20) if it wins w games. There are no other sources of revenue.

i) Find the equilibrium number of wins for each team and the marginal cost of a win.

ii) Suppose that there is revenue sharing, with each team keeping 50% of its revenue and receiving 50% of the other team’s revenue. Determine the equilibrium number of wins for each team and the marginal cost of a win.

iii) Now suppose that there is a payroll cap of 150 for each team (and no revenue sharing). Find the equilibrium number of wins for each team and marginal cost of a win. How do the results change if the cap is 100 for each team?

1. aExplain why it is important to understand the accounting and reporting requirements for an area that an auditor will be assigned to audit – use sales and collections as an example. Briefly explain FASB’s revenue recognition standard. b. Explain the basic processes involved in generating and document revenue transactions; and in collecting for revenue transactions. You can use an example to help you explain the process. As part of your explanation, also state which documents are used to detail the revenue and collections transactions in these processes

Economics of Hedging with Futures

Great Lakes Distributors buys 100,000 bushels of soybean futures at $9.95 per bushel, to cover a commitment to deliver 100,000 bushels of soybeans to a customer in 60 days at a price of $10.25 per bushel. No margin deposit is required. Spot and futures prices for soybeans are equal and fluctuate between $9.50 and $10.40 per bushel. On the day of delivery to the customer, Great Lakes closes its futures position and buys soybeans in the spot market to fulfill its agreement with the customer.

Required

a. Calculate the cost per bushel to Great Lakes if the spot price at the time of purchase is $9.50.

$Answer per bushel

Calculate the cost per bushel if the spot price is $10.40.

$Answer per bushel

b. Prepare the entries Great Lakes makes to record the above events if the spot price is $10.20 per bushel on the day the futures contract is closed, Great Lakes buys the soybeans on the spot market, and delivers them to the customer. The futures position qualifies as a fair value hedge of the firm commitment to sell soybeans to the customer. Great Lakes records income effects of these transactions in cost of goods sold.

Please answer all parts of the question.

The Marginal Revenue curve facing a monopoly firm is

For a firm in a perfectly competitive market

Which of the following results of a competitive market tends to promote equity?

Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated by an​ owner-manager who wishes to maximize profit. Firm 2 is managed by an​ revenue-maximizing manager whose pay is proportional to the​ firm's revenue. Firm 3 is a​ government-owned firm that has been instructed to maximize the amount of​ employment, L, subject to the constraint that revenue must not be negative.

Each of the three firms has a revenue function

​R(q)equals=120120qminus−22q squaredq2

and a cost function of

​C(q)equals=2020plus+4040q.

Determine how much output each firm chooses.

Firm 1 will produce such that

qequals=nothing

units