Hazel Nutt plans on living in NYC. Hazel is considering whether she should buy or rent.

If Ms. Nutt buys the Co-Op apartment it will cost $550,000.  This price includes all closing costs.

Annual home ownership information:

• Property taxes:  1.5% of the property price
• Insurance:  1% of the property price
• Maintenance:  1.5% of the property price
• Mortgage loan:  Assume Hazel will get a $450,000, 4%, 30-year interest only (IO) loan. There are no closing costs or points for the mortgage.

Hazel’s marginal income tax rate is 30%. Her effective tax rate is 25%. She files her income tax returns as a single filer

If she rents the same place, it will cost $3,000 per month in rent.

Assume the apartment value is projected to grow 4% each year that Hazel owns the Co-Op.

When Hazel decides to sell, the closing costs associated with selling is 4%

1. If Hazel buys, what is her total cost of ownership for the first year?  (Include all the annual home ownership costs and expenses, but DO NOT include the purchase price, i.e. acquisition costs).

2. If Hazel buys, what are the tax-deductible expenses (assume no SALT limits apply) AND what is her tax savings (i.e. the tax shield) from ownership in the first year?  

3. If Hazel buys, what is her net cash savings (including the tax benefit) from owning vs renting in the first year?  

Hazel Nutt plans on living in NYC. Hazel is considering whether she should buy or rent.

If Ms. Nutt buys the Co-Op apartment it will cost $550,000.  This price includes all closing costs.

Annual home ownership information:

• Property taxes:  1.5% of the property price
• Insurance:  1% of the property price
• Maintenance:  1.5% of the property price
• Mortgage loan:  Assume Hazel will get a $450,000, 4%, 30-year interest only (IO) loan. There are no closing costs or points for the mortgage.

Hazel’s marginal income tax rate is 30%. Her effective tax rate is 25%. She files her income tax returns as a single filer

If she rents the same place, it will cost $3,000 per month in rent.

Assume the apartment value is projected to grow 4% each year that Hazel owns the Co-Op.

When Hazel decides to sell, the closing costs associated with selling is 4%

1. If Hazel buys, what is her total cost of ownership for the first year?  (Include all the annual home ownership costs and expenses, but DO NOT include the purchase price, i.e. acquisition costs).

2. If Hazel buys, what are the tax-deductible expenses (assume no SALT limits apply) AND what is her tax savings (i.e. the tax shield) from ownership in the first year?  

3. If Hazel buys, what is her net cash savings (including the tax benefit) from owning vs renting in the first year?  

A catering company buys some items with a list price of $5,000. If the supplier extends trade discount rates of 35/30/5, find the net price using the net price factor, complement method.

A photographer buys some merchandise with a list price of $7,000. If the supplier offers trade discount rates of 20/10/5, find the trade discount (in $). (Find the single equivalent discount first.)

A monopolist faces some consumers (called group-H consumers) with an inverse demand function for each consumer given by p = 80 − q. The firm’s total cost function is given by: C(q) = 20q (so that MC = 20 for all q).

First suppose that the firm only uses linear pricing (i.e., charges only a unit price p).

1. Find the price maximizing the firm’s profits.

2. What are the corresponding profit and surplus per consumer?

Now suppose that the firm can use a two-part tariff (pH, FH), with pH the unit price and FH the fixed part.

3. First suppose the firm sets its unit price pH equal to the profit-maximizing linear price found in part (1) above. What fixed fee FH will the firm set at this price, and why?

4. Bearing in mind the opportunity to set a fixed fee FH, what unit price pH will the firm set? What fixed fee FH will it charge in view of this unit price?

5. Compute the firm’s profit per consumer and compare with the one found in the linear pricing case. Comment.

1. With the aid of diagrams, show that when r↓ , the utility of the consumers who have savings (in the first period) will be higher and the utility of the consumers who borrow (in the first period) will be lower.

2. Will an orange producer consumes fewer oranges when price of orange goes down?

What is the percentage change in price for a zero coupon bond if the yield changes from 5% to 8%? The bond has a face value of $1,000 and it matures in 12 years. Use the price determined from the first yield, 5%, as the base in the percentage calculation.

What is the percentage change in price for a zero coupon bond if the yield changes from 6​% to ​7%? The bond has a face value of ​$1,000 and it matures in 13 years. Use the price determined from the first​ yield, ​6%, as the base in the percentage calculation.

What is the percentage change in price for a zero coupon bond if the yield changes from

8.5​%

to

5.5​%?

The bond has a face value of

​$1,000

and it matures in

19

years. Use the price determined from the first​ yield,

8.5​%,

as the base in the percentage calculation.

What is the percentage change in price for a zero coupon bond if the yield changes from 6.5% to 9%? The bond has a face value of $1,000 and it matures in 20 years. Use the price determined from the first yield, 6.5%, as the base in the percentage calculation.

A monopolist can produce a constant average (and marginal) cost of AC=MC=$5. It faces a market demand curve given by Q=53-P.

A)

Consider Problem 2 in the Homework 12 Supplement.  Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1+Q2 = 53-P. Assuming that this second firm has the same costs as the first, how much will each firm produce (Cornot equilibrium)?

B)

Consider Problem 2 in the Homework 12 Supplement.  Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by Q1+Q2 = 53-P. Assuming that this second firm has the same costs as the first, what price will the equilibrium price be (Cornot equilibrium)?

An industry has 1000 firms, each with the production function f(x1; x2 ) x1^.5 x2^.5. The
price of factor 1 is 1 and the price of factor 2 is 1. In the long run, both factors are variable, but in
the short run, each firm is stuck with using 100 units of factor 2.The long run industry supply curve:
Can somebody explain how to solve?