3. Breakdown of a cartel agreement
Consider a town in which only two residents, Sam and Teresa, own wells that produce water safe for drinking. Sam and Teresa can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.
|
Price |
Quantity Demanded |
Total Revenue |
|---|---|---|
|
(Dollars per gallon) |
(Gallons of water) |
(Dollars) |
| 3.00 | 0 | 0 |
| 2.75 | 50 | $137.50 |
| 2.50 | 100 | $250.00 |
| 2.25 | 150 | $337.50 |
| 2.00 | 200 | $400.00 |
| 1.75 | 250 | $437.50 |
| 1.50 | 300 | $450.00 |
| 1.25 | 350 | $437.50 |
| 1.00 | 400 | $400.00 |
| 0.75 | 450 | $337.50 |
| 0.50 | 500 | $250.00 |
| 0.25 | 550 | $137.50 |
| 0 | 600 | 0 |
Suppose Sam and Teresa form a cartel and behave as a monopolist. The profit-maximizing price is
per gallon, and the total output is
gallons. As part of their cartel agreement, Sam and Teresa agree to split production equally. Therefore, Sam's profit is
, and Teresa's profit is
.
Suppose that Sam and Teresa have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Sam says to himself, "Teresa and I aren't the best of friends anyway. If I increase my production to 50 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."
After Sam implements his new plan, the price of water to
per gallon. Given Teresa and Sam's production levels, Sam's profit becomes
and Teresa's profit becomes
.
Because Sam has deviated from the cartel agreement and increased his output of water to 50 gallons more than the cartel amount, Teresa decides that she will also increase her production to 50 gallons more than the cartel amount.
After Teresa increases her production, Sam's profit becomes
, Teresa's profit becomes
, and total profit (the sum of the profits of Sam and Teresa) is now
.
True or False: Based on the fact that both Sam and Teresa increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity.
True
False
Note that Sam and Teresa started by behaving cooperatively. However, once Sam decided to cheat, Teresa decided to cheat as well. In other words, Teresa's output decisions are based on Sam's actions.
This behavior is an example of .
In: Economics
|
The Town of Bedford Falls approved a General Fund operating budget for the fiscal year ending June 30, 2017. The budget provides for estimated revenues of $2,838,000 as follows: property taxes, $1,948,000; licenses and permits, $380,000; fines and forfeits, $280,000; and intergovernmental (state grants), $230,000. The budget approved appropriations of $2,782,000 as follows: General Government, $530,000; Public Safety, $1,660,000; Public Works, $380,000; Culture and Recreation, $156,000; and Miscellaneous, $56,000. |
| Required |
| a&b. |
Prepare the journal entry (or entries), to record the Town of Bedford Falls’s General Fund operating budget on July 1, 2016, the beginning of the Town’s 2017 fiscal year and also record the following transactions that occurred during the month of July 2016. Also show entries in the subsidiary ledger accounts, to record the Town of Bedford Falls’s General Fund operating budget on July 1, 2016, the beginning of the Town’s 2017 fiscal year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) |
| 1. |
Revenues were collected in cash amounting to $37,000 for licenses and permits and $15,000 for fines and forfeits. |
| 2. |
Supplies were ordered by the following functions in early July 2016 at the estimated costs shown: |
| General Government | $ | 8,000 |
| Public Safety | 12,500 | |
| Public Works | 6,700 | |
| Culture and Recreation | 4,800 | |
| Miscellaneous | 1,500 | |
| Total | $ | 33,500 |
| 3. |
During July 2016, supplies were received at the actual costs shown below and were paid in cash. General Government, Culture and Recreation, and Miscellaneous received all supplies ordered. Public Safety and Public Works received part of the supplies ordered earlier in the month at estimated costs of $11,300 and $6,500, respectively. |
| Actual Cost | Estimated Cost | |||||
| General Government | $ | 7,900 | $ | 8,000 | ||
| Public Safety | 11,400 | 11,300 | ||||
| Public Works | 6,700 | 6,500 | ||||
| Culture and Recreation | 4,700 | 4,800 | ||||
| Miscellaneous | 1,500 | 1,500 | ||||
| Total | $ | 32,200 | $ | 32,100 | ||
| c. |
Calculate the amount of budgeted but unrealized revenues in total and from each source as of July 31, 2016. |
| d. |
Calculate the amount of available appropriation in total and for each function as of July 31, 2016. Revenues were collected in cash amounting to $37,000 for licenses and permits and $15,000 for fines and forfeits. Record the issuance of the purchase orders and contracts. Record the issuance of the purchase orders and contracts. |
In: Accounting
| The Town of Willingdon adopted the following General Fund budget for fiscal year 2017: |
| Estimated revenues: | ||
| Taxes | $ | 14,900,000 |
| Intergovernmental revenues | 1,025,000 | |
| Licenses and permits | 418,000 | |
| Fines and forfeits | 155,000 | |
| Miscellaneous revenues | 105,000 | |
| Total estimated revenues | $ | 16,603,000 |
| Appropriations: | ||
| General government | $ | 7,975,000 |
| Public safety | 5,990,000 | |
| Public works | 1,540,000 | |
| Health and welfare | 940,000 | |
| Miscellaneous | 95,000 | |
| Total appropriations | $ | 16,540,000 |
| Required | |
| a-1. |
Prepare the general journal entries to record the adopted budget at the beginning of FY 2017. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) |
| a-2. | Show entries in the subsidiary ledger accounts. |
Just missing a-2 help plzz!
In: Accounting
Trevor is interested in purchasing the local hardware/sporting goods store in the small town of Dove Creek, Montana. After examining accounting records for the past several years, he found that the store has been grossing over $850 per day about 70% of the business days it is open. Estimate the probability that the store will gross over $850 for the following. (Round your answers to three decimal places.) (a) at least 3 out of 5 business days (b) at least 6 out of 10 business days (c) fewer than 5 out of 10 business days (d) fewer than 6 out of the next 20 business days If the outcome described in part (d) actually occurred, might it shake your confidence in the statement p = 0.70? Might it make you suspect that p is less than 0.70? Explain. Yes. This is unlikely to happen if the true value of p is 0.70. Yes. This is likely to happen if the true value of p is 0.70. No. This is unlikely to happen if the true value of p is 0.70. No. This is likely to happen if the true value of p is 0.70. (e) more than 17 out of the next 20 business days If the outcome described in part (e) actually occurred, might you suspect that p is greater than 0.70? Explain. Yes. This is unlikely to happen if the true value of p is 0.70. Yes. This is likely to happen if the true value of p is 0.70. No. This is unlikely to happen if the true value of p is 0.70. No. This is likely to happen if the true value of p is 0.70.
In: Statistics and Probability
The accompanying table shows the price and yearly quantity sold of souvenir T-shirts in the town of Crystal Lake according to the average income of the tourists visiting.
| price of t-shirt | Quantity of t-shirts demanded when average tourist income is 20,000 | Quantity of t-shirts demanded when average tourist income is 30,000 |
| $4 | 3,000 | 5,000 |
| $5 | 2,400 | 4200 |
| $6 | 1,600 | 3000 |
| $7 | 800 | 1000 |
(a) Using the midpoint method, calculate the price elasticity of demand when the price of a T-shirt rises from $5 to $6 and the average tourist income is $20,000.
(b) Using the midpoint method, calculate the price elasticity of demand when the price of a T-shirt rises from $5 to $6 and the average tourist income is $30,000.
(c) Explain the difference in the price elasticity of demand for each income level.
(d) Using the midpoint method, calculate the income elasticity of demand when the price of a T-shirt is $4 and the average tourist income increases from $20,000 to $30,000. Using the midpoint method, calculate the income elasticity of demand when the price of a T-shirt is $7 and the average tourist income increases from $20,000 to $30,000.
(e) Explain the difference in income elasticity of demand for each price.
In: Economics
Luisa Crimini has been operating a beauty shop in a university
town for the past 10 years. Recently, Luisa rented space next to
her shop and opened a spray-tanning salon. She anticipated that the
costs for the spray-tanning service would primarily be fixed but
found that spray-tanning salon costs increased with the number of
appointments. Costs for this service over the past eight months are
as follows:
Spray-Tanning Appointments Total Cost
January 1,600
$
1,754
February
2,000
2,140
March 3,500 2,790
April
2,500
2,400
May
1,500
1,790
June
2,300
2,275
July
2,150
2,200
August 3,000 2,640
Required
(A) Using the high-low method, compute the variable rate for
tanning. Compute the fixed cost per month.
(B) Write the cost formula for spray-tanning services based on
Requirement
A.
(C) Calculate the total predicted cost of spray-tanning services
for September for 2500 appointments.
(D) How much is the total fixed cost for September? How much is the
total predicted variable cost for September?
(E) Identify and briefly explain any additional issues that Luisa
might be wise to consider when using the high-low method to
estimate the costs of her spray-tanning salon.
could u show me the whole solutions of this question?plz
In: Accounting
Suppose there are only two driveway paving companies in a small town, Asphalt Inc. and Blacktop Bros. The inverse demand curve for paving services is P = 1, 600 ? 20Q, where quantity is measured in the number of pave jobs per month and price is measured in dollars per job. The two firms have an identical marginal cost of $400 per driveway.
(a) If the two firms collude and act like a monopoly, splitting the work and profits evenly, how many driveways will each firm pave and at what price? How much profit will each firm make?
(b) Does Asphalt Inc. have an incentive to cheat by paving one more driveway each month?
(c) Suppose each firm decides to pave one more driveway each month. Does Asphalt Inc. have an incentive to cheat?
In: Economics
You purchase a town house for $250,000. Since you are able to make a down payment of 20 percent ($50,000), you are able to obtain a $200,000 mortgage loan for 20 years at a 5 percent annual rate of interest.
a. What are the annual payments that cover the interest and principal repayment?
b. How much of the first payment goes to cover the interest?
c. How much of the loan is paid off during the first year?
d. What is the interest payment during the second year?
e. What is the remaining balance after the second year?
f. Why did the interest payment change during the second year?
In: Economics
Trevor is interested in purchasing the local hardware/sporting goods store in the small town of Dove Creek, Montana. After examining accounting records or the past several years, he found that the store has been grossing over $850 per day about 70% of the business days it is open. Estimate the following probabilities that the store will gross over $850.
(a) At least 3 out of 5 business days. (Use 3 decimal
places.)
(b) At least 6 out of 10 business days. (Use 3 decimal
places.)
(c) Fewer than 5 out of 10 business days. (Use 3 decimal
places.)
(d) Fewer than 6 out of the next 20 business days. (Use 3 decimal
places.)
If this actually happened, might it shake your confidence in the statement p = 0.70? Might it make you suspect that p is less than 0.70? Explain.
No. A probability this small might indicate that the true value of p is less than 0.70.
Yes. A probability this small might indicate that the true value of p is greater than 0.70.
No. A probability this small might indicate that the true value of p is greater than 0.70.
Yes. A probability this small might indicate that the true value
of p is less than 0.70.
(e) More than 17 out of the next 20 business days. (Use 3 decimal
places.)
If this actually happened, might you suspect that p is greater than 0.70? Explain.
No. This is unlikely to happen if the true value of p is 0.70.
Yes. This is likely to happen if the true value of p is 0.70.
Yes. This is unlikely to happen if the true value of p is 0.70.
No. This is likely to happen if the true value of p is 0.70.
In: Statistics and Probability
|
3. Breakdown of a cartel agreement Consider a town in which only two residents, Yakov and Ana, own wells that produce water safe for drinking. Yakov and Ana can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.
Suppose that Yakov and Ana have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Yakov says to himself, "Ana and I aren't the best of friends anyway. If I increase my production to 40 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow." After Yakov implements his new plan, the price of water (increases/decreases) to ____ per gallon. Given Ana and Yakov's production levels, Yakov's profit becomes _____ and Ana's profit becomes _____.Because Yakov has deviated from the cartel agreement and increased his output of water to 40 gallons more than the cartel amount, Ana decides that she will also increase her production to 40 gallons more than the cartel amount. After Ana increases her production, Yakov's profit becomes _____, Ana's profit becomes ____, and total profit (the sum of the profits of Yakov and Ana) is now ________.True or False: Based on the fact that both Yakov and Ana increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity. -True -False Note that Yakov and Ana started by behaving cooperatively. However, once Yakov decided to cheat, Ana decided to cheat as well. In other words, Ana's output decisions are based on Yakov's actions. This behavior is an example of (a prisoner's dilemma, tying, a dominant strategy, a tit-for-tat strategy . |
In: Economics