The argument in the following scenario was invalid. Discuss the logical fallacies that apply to the reasoning and why they matter in light of the scenario

You are engaged in an intense discussion with your friend, Bill, who works in the IT department at your university. Bill complains that many students are using P2P (peer-to-peer) file-sharing applications on the university’s network to download excessive amounts of unauthorized copyrighted material. He also claims that the most effective solution to this problem would be to disable student access to all (existing) P2P sites and to prevent students at your institution from setting up their own P2P sites for any reason whatsoever (even to include noncopyrighted material). You convey to Bill your belief that this measure is too drastic. However, Bill argues that the only way to eliminate unauthorized file sharing among students at your institution is to disable access to all P2P software on the university’s network.

1. Suppose an individual considering purchasing health insurance has a 10% chance of developing a condition that costs $50,000 to treat. The individual has initial disposable income of $90,000 and is risk averse, with utility over final disposable income given by v ( I ) = sq root I.

a) What is the highest premium this individual is willing to pay for an insurance policy that reimburses them $50,000 if they need treatment? (20 points)

b) Now suppose that indiviudals may be either low risk (in which case the probability of developing the condition is 10%) or high risk (in which case the probability of developing the condition is 90%). If the insurance provider cannot tell which category a given individual falls into, what is a fair premium for a policy that pays out $50,000 if treatment is needed? (5 points)

c) Now suppose that although the insurance company cannot tell the individuals risk category, the individuals purchasing insurance know their own risk category. If the insurance company offers two policies: one which pays out $50,000 in the event that treatment is needed, with a premium of $25,000 and another which pays out $2,500 if treatment is needed, with a premium of $500, which policy would be chosen by high risk individuals and which policy would be chosen by low risk individuals? (10 points)

Suppose the company E-bikes R US has an isocost line that crosses the isoquant twice. To cost minimize, E-bikes R US will

A) use a different isocost line to select the bundle of inputs.

B) use the input bundle associated with the intersection on the higher point of the isoquant.

C) use the input bundle associated with the intersection on the lower point of the isoquant.

D) Both B and C.

As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 420,000 shares for $500,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $270,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $527,000.

Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.

The information relates to the Cash Account in the ledger of Covid Company : Balance June 1 $7,150 ; cash deposited $64,000; Balance June 30 $17,404 ; checks written $63,746. The June bank statement shows a balance of $16,122 on June 30. The following are memoranda from bank : Collection of $1,500 note plus interest $30; Interest earned on checking account $45; NSF check from Violet Jones $725; Safety deposit box rent $65. At June 30, deposits in transit were $4,450 and outstanding checks totaled $2,383.

Prepare adjusting entries for adjusted cash balance at June 30

Prepare bank reconciliation at June 30 per book side

As a long-term investment, Painters' Equipment Company purchased 25% of AMC Supplies Inc.'s 520,000 shares for $600,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $370,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $637,000.

Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.

As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 400,000 shares for $480,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $250,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $505,000.

Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.

Q2

A concrete strip footing with a width of B is founded at the depth of D, below the surface of a level site. The water table is at a depth of d below the base of footing. The soil at the site consists of clay having the following properties:

The unit weight = g_t,   the undrained cohesion = c_u, the undrained friction angle = f_u, the drained cohesion = c′ and the drained friction angle = f′

Use Hansen’s theory of bearing capacity to determine the allowable bearing pressure, which could be placed on the footing assuming a factor of safety of F for the following cases:

a) Immediately after loading the footing

b) Long time after loading the footing

Notes: The load is vertical. The ground and the base of footing are horizontal. D should be less than or equal to 2.5 B. The variable d can be positive (below the base), negative (above the base) or zero (at the base). Assume water level cannot be above the ground surface.

Comfy Carrier Systems, Inc. (CCS) modifies vans that seat 15–20 people by adding additional safety features or wheelchair ramps. Most of its customers are cities and counties, who use the vans to transport school children, the elderly, or the handicapped. The company has specialized in a no-frills approach, emphasizing safety, high quality, and low cost. The company's president was quoted as saying, "Let the other guys make a van pretty. We get people where they need to go—faster, better, and cheaper than anybody else."

The company obtains jobs by being the lowest bidder in a sealed bidding process. Recently, the company was solicited by a top-10 college to submit a bid for a van to be used by its athletic team. Some specialized items were required, such as the school's logo on the outside of the van, and the vinyl seats had to be covered in school colors. The company submitted a bid, and was very surprised to obtain it.

When the job was being prepared, the job manager pointed out that several extra costs could result in this job showing a loss. The boss, an ardent supporter of sports in general and this team in particular, told the manager to just record the standard labor and overhead cost for this job. He says that they could use the preset rate for specialized jobs, and increase the overhead application rate (used in submitting bids) by 5% for future routine jobs. "After all," he says, "nobody else comes close to our price anyway. This could start a whole new line of business for us."

Required:

1.   Who are the stakeholders in the decision to increase overhead for routine jobs?

2.   Is the decision to subsidize special jobs by increasing the overhead rate on routine jobs ethical?  Briefly explain.