You are an economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.05 per gallon. Last year motorists purchased 15 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market. The legislature has stated that the $.05 tax will increase government revenues by $750,000 per month and raise the price of gasoline by $.05 per gallon. Please explain why this is correct.

Given the information, the supply and demand curves can be described as follows:

Qs = 15,000,000 + 5,000,000(ps - p0)

Qd = 15,000,000 - 10,000,000(pd - p0)

Where do these formulas come from? Specifically, I don't understand where the 5 and -10 million come from.

Complete both parts of this question. Both the Federal Reserve in the United States and the European Central Bank monitor growth in the money supply over time, but use nominal interest rates to implement monetary policy. Provide an example of a situation in which these two approaches to targeting require different central bank responses. Provide an example in which these two approaches are compatible. 
[Hint: prices are sticky in the short run, so expected inflation and actual inflation may differ.]

Consider a country that has experienced a hyperinflation. In general, countries with higher inflation rates tend to have less stability in the inflation rate, making it difficult to forecast. If this country wants to reduce its inflation rate, state which of the following monetary regimes is least likely to succeed: exchange rate target, money supply target, nominal interest rate policy. 
Which approach is most likely to succeed? Explain.

Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 million direct subscribers (accounts) that generated revenue of $54,300 million. Costs and expenses for the year were as follows:

Assume that 70% of the cost of revenue and 30% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts).

a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number.
million accounts

b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar.
$ million per account

The United States has been described as a melting pot of the world and a favored location for international migration, also referred to as a brain drain phenomenon. Immigration is always a topic of debate in news and media. What are the welfare effects of such requirements? Do you oppose or favor an open immigration policy?

The Kroger Company is one of the largest grocery retailers in the United States, with over 2,000 grocery stores across the country. Kroger uses an online customer opinion questionnaire to obtain performance data about its products and services and learn about what motivates its customers.† In the survey, Kroger customers were asked if they would be willing to pay more for products that had each of the following four characteristics. The four questions were: Would you pay more for

    products that have a brand name?

    products that are environmentally friendly?

    products that are organic?

    products that have been recommended by others?

For each question, the customers had the option of responding Yes if they would pay more or No if they would not pay more.

(a)

Are the data collected by Kroger in this example categorical or quantitative?

categorical quantitative     Correct: Your answer is correct.

(b)

What measurement scale is used?

ratio scale interval scale     ordinal scale nominal scale

QUESTION 12

1. The sociologist "_________________________ _________________" believed that as the United States continued to modernize, urbanize, and industrialize, race and ethnicity would gradually lose their importance, allowing the boundaries between groups to eventually dissolve. He thought the result would be a more "rational" and unified society.

   	a.	Milton Gordon
   	b.	Robert Park
   	c.	Karl Marx
   	d.	Max Weber
   	e.	None of the above.

QUESTION 13

1. According to Wagley & Harris (1958), a minority group has five characteristics. Which of the following is NOT one of the characteristics they emphasized:

   	a.	Lack of self-awareness
   	b.	Intimate relationships
   	c.	Inequality
   	d.	Ascription
   	e.	Visibility

QUESTION 14

1. True or False: Mass immigration from Europe to the United States beginning in the 1820's had a number of causes, but underlying the process was a fundamental shift in subsistence technology: the industrial revolution.

   True

   False

QUESTION 15

1. The process by which European (white) ethnic groups unintentionally affected one another's position in the social class structure of the larger society.

   	a.	Symbolic ethnicity
   	b.	Ethnic succession
   	c.	Segmented assimilation
   	d.	White ethnicity

QUESTION 16

1. True or False: Gender equality is generally highest in the industrialized nations of North America and Western Europe and lowest in the less developed, more agricultural nations of sub-Saharan Africa.

   True

   False

In the United States, given current demands on physicians, how likely is it that over the next 5 years most small practices will adopt EMR and, potentially, HMIS? What are some of the factors that might influence these investment decisions? State your views and support your assertions with examples and references.

Collins LLC is a manufacturer of carpets that are sold to retailers throughout the United States. Collins employs a team of sales people that cold call and subsequently meet with commercial buyers with samples of carpet.  During one such meeting, PMart, a large retail chain, places an oral order for 2,500 8’x10’ Series K carpets that are marketed as made from a synthetic polyester fiber which is resistant to stains and is less expensive than a traditional fiber.

Following the meeting, Collins LLC sends a confirmation notice to PMart that states:

“Confirmation Notice: 2,500 8’x10’ Series K carpets, assorted designs, catalog no. K88094.  Unit Cost: $100. Payment due on receipt. FOB Seller. In the event of a dispute, the parties agree to enter into binding arbitration using AAA arbitration rules.”

Collins subsequently delivered 2,500 carpets to PMart, but upon inspection PMart determined that the carpets were not made from the materials shown during the meeting where the order was placed, and rejects the goods.  When Collins refused to refund PMart’s payment, PMart files a civil lawsuit for breach of contract in the federal district court.  Collins moves to dismiss on the grounds that the parties are obliged to arbitrate their disputes privately.  Using the UCC § 2-207, discuss whether an agreement was reached by the parties, and if so, whether the dispute must be resolved by binding arbitration.

Two of the world’s largest economies, that is, the United States (U.S.) and China are presently involved in a trade dispute whereby the US is threatening to raise tariffs on $200 billion worth of Chinese exports. The position of the US is that they will be taking in billions of dollars in tariffs from this increase. In its retaliation, China’s Finance Ministry announced that it would raise tariffs on a wide range of American goods to 20% or 25% from the existing 10% tariff rate.

Provide an assessment of the current trade dispute between the US and China. Include in your assessment discussions on the following among other trade related matters of relevance to this topic;

(1) What is a tariff?

(2) What do you think are the motives for the trade tension particularly the tariff increase?

(3) What are the products which China exports to the US which the US is proposing to increase tariffs as high as 25% on?

(4) What are the products which the US exports to China which China is proposing to increase tariffs on in its retaliation against the US?

(5) Do you think businesses of the Caribbean region will be impacted if the tariff increases take effect? Give reasons for your answer. (give an example of a business/industry from the region to support your points, if applicable)

(6) What is the World Trade Organization (WTO)? Is the US a member of the WTO? What about China?

(7) Do you think the WTO can play a critical role in trying to resolve this ongoing trade war between the US and China? Give reasons for your answer.

Robert Montoya, Inc., is a leading producer of wine in the United States. The firm was founded in 1950 by Robert Montoya, an Air Force veteran who had spent several years in France both before and after World War II. This experience convinced him that California could produce wines that were as good as or better than the best France had to offer. Originally, Robert Montoya sold his wine to wholesalers for distribution under their own brand names. Then in the early 1950s, when wine sales were expanding rapidly, he joined with his brother Marshall and several other producers to form Robert Montoya, Inc., which then began an aggressive promotion campaign. Today, its wines are sold throughout the world.

            The table Wine market has matured and Robert Montoya's wine cooler sales have been steadily decreasing. Consequently, to increase winery sales, management is currently considering a potential new product: a premium red wine using the cabernet sauvignon grape. The new wine' is designed to appeal to middle-to-upper-income professionals. The new product, Suave Mauve, would be positioned between the traditional table wines and super premium table wines. In market research samplings at the company's Napa Valley headquarters, it was judged superior to various competing products. Sarah Sharpe, the financial vice president, must analyze this project, along with two other potential investments, and then present her findings to the company's executive committee.

            Production facilities for the new wine would be set up in an unused section of Robert Montoya's main plant. New machinery with an estimated cost of $1,800,000 would be purchased, but shipping costs to- move the machinery to Robert Montoya's plant would total $80,000, and installation charges would add another $120,000 to the total equipment cost. Furthermore, Robert Montoya's inventories (the new product requires aging for 5 years in oak barrels made in France) would have to be increased by $100,000. This cash flow is assumed to occur at the time of the initial investment. The machinery has a remaining economic life of 4 years, and the company has obtained a special tax ruling that allows it to depreciate the equipment under the MACRS 3-year class life. Under current tax law, the depreciation allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively. The machinery is expected to have a salvage value of $200,000 after 4 years of use.

            The section of the plant in which production would occur had not been used for several years and, consequently, had suffered some deterioration. Last year, as part of a routine facilities improvement program, $300,000 was spent to rehabilitate that section of the main plant. Earnie Jones, the chief accountant, believes that this outlay, which has already been paid and expensed for tax purposes, should be charged to the wine project. His contention is that if the rehabilitation had not taken place, the firm would have had to spend the $300,000 to make the plant suitable for the wine project.

            Robert Montoya's management expects to sell 125,000 bottles of the new wine in each of the next 4 years, at a wholesale price of $50 per bottle, but $30 per bottle would be needed to cover cash operating costs. In examining the sales figures, Sharpe noted a short memo from Robert Montoya's sales manager which expressed concern that the wine project would cut into the firm's sales of other wines-this type of effect is called cannibalization. Specifically, the sales manager estimated that existing wine sales would fall by 5 percent if the new wine were introduced. Sharpe then talked to both the sales and production managers and concluded that the new project would probably lower the firm's existing wine sales by $60,000 per year, but, at the same time, it would also reduce production costs by $40,000 per year, all on a pre-tax basis. Thus, the net externality effect would be -$60,000 + $40,000 = -$20,000. Robert Montoya's federal-plus-state tax rate is 25 percent, and its overall cost of capital is 10 percent, calculated as follows:

                                    WACC = W_d r _d (1-T) + W_sr_s

                                                = 0.5(10%) (0.6) + 0.5(14%)

                                                = 10%.

            Now assume that you are Sharpe's assistant and she has asked you to analyze this project, along with two other projects, and then to present your findings in a "tutorial" manner to Robert Montoya's executive committee. As financial vice president, Sharpe wants to educate some of the other executives, especially the marketing and sales managers, in the theory of capital budgeting so that these executives will have a better understanding of capital budgeting decisions. Therefore, Sharpe wants you to ask and then answer a series of questions as set forth next. Keep in mind that you will be questioned closely during your presentation, so you should understand every step of the analysis, including any assumptions and weaknesses that may be lurking in the background and that someone might spring on you in the meeting.

A. Define the term "incremental cash flow," Since the project will be financed in part by debt, should the cash flow statement include interest expenses? Explain.

B. Should the 300,000 that was spent to rehabilitate the plant be included in the analysis?

C. Suppose another winemaker had expressed an interest in leasing the wine production site for $30,000 per year. If this were true (in fact it was not), how would that information be incorporated into the analysis?

D. What is Robert Montoya's Year 0 net investment outlay on this project? What is the expected nonoperating cash flow when the project is terminated in year 4?