Many students accumulate debt by the time they graduate from college. Shown in the following table is the percentage of graduates with debt and the average amount of debt for these graduates at four universities and four liberal arts colleges. University % with Debt Amount($) College % with Debt Amount($) 1 72 32,970 1 83 28,754 2 68 32,110 2 94 29,000 3 58 11,228 3 56 10,201 4 64 11,853 4 49 11,015 a. If you randomly choose a graduate of College 2, what is the probability that this individual graduated with debt (to 2 decimals)? b. If you randomly choose one of these eight institutions for a follow-up study on student loans, what is the probability that you will choose an institution with more than 80% of its graduates having debt (to 3 decimals)? c. If you randomly choose one of these eight institutions for a follow-up study on student loans, what is the probability that you will choose an institution whose graduates with debts have an average debt of more than $ 20,000 (to 3 decimals)? d. What is the probability that a graduate of University 1 does not have debt (to 2 decimals)? e. For graduates of University 1 with debt, the average amount of debt is $ 32,970. Considering all graduates from University 1, what is the average debt per graduate? Round to nearest dollar.

4. Suppose an individual can earn a wage of $20/hr, has 100 total waking hours this week, and has no source of non-labor income. Let’s compare the incentives generated by two different types of public programs.

• The Aid to Families with Dependent Children (AFDC) program provides $100, at 0 hours of work, but imposes a 25% tax on earned income up to the point where the benefit is paid back.

• The Earned Income Tax Credit (EITC) consists of a 50% wage subsidy for individuals working low hours, up to a maximum benefit of $120, and then is gradually phased out: EITC imposes a 20% tax on individuals who earn more than $500 up the point where the benefit is paid back.

a. Draw what an AFDC budget constraint looks like, including a standard budget constraint for comparison. Why does the AFDC discourage work? (Explain, using the concept of income and substitution effects in your answer)

b. Draw what an EITC budget constraint looks like, including a standard budget constraint for comparison. How does the EITC solve the work disincentive problem created by the AFDC? (Again, refer to income and substitution effects in your answer)

c. The effects of the EITC on labor supply are not positive for all individuals. On a graph, illustrate a case in which the EITC reduces the number of hours worked by an individual. Explain using income and substitution effects.

1. Suppose an individual can earn a wage of $20/hr, has 100 total waking hours this week, and has no source of non-labor income. Let’s compare the incentives generated by two different types of public programs.

• The Aid to Families with Dependent Children (AFDC) program provides $100, at 0 hours of work, but imposes a 25% tax on earned income up to the point where the benefit is paid back.

• The Earned Income Tax Credit (EITC) consists of a 50% wage subsidy for individuals working low hours, up to a maximum benefit of $120, and then is gradually phased out: EITC imposes a 20% tax on individuals who earn more than $500 up the point where the benefit is paid back.

1. Draw what an AFDC budget constraint looks like, including a standard budget constraint for comparison. Why does the AFDC discourage work? (Explain, using the concept of income and substitution effects in your answer)

2. Draw what an EITC budget constraint looks like, including a standard budget constraint for comparison. How does the EITC solve the work disincentive problem created by the AFDC? (Again, refer to income and substitution effects in your answer)

3. The effects of the EITC on labor supply are not positive for all individuals. On a graph, illustrate a case in which the EITC reduces the number of hours worked by an individual. Explain using income and substitution effects.

Suppose an individual can earn a wage of $20/hr, has 100 total waking hours this week, and has no source of non-labor income. Let’s compare the incentives generated by two different types of public programs.

The Aid to Families with Dependent Children (AFDC) program provides $100, at 0 hours of work, but imposes a 25% tax on earned income up to the point where the benefit is paid back.

The Earned Income Tax Credit (EITC) consists of a 50% wage subsidy for individuals working low hours, up to a maximum benefit of $120, and then is gradually phased out: EITC imposes a 20% tax on individuals who earn more than $500 up the point where the benefit is paid back.

1 Draw what an AFDC budget constraint looks like, including a standard budget constraint for comparison. Why does the AFDC discourage work? (Explain, using the concept of income and substitution effects in your answer)

2 Draw what an EITC budget constraint looks like, including a standard budget constraint for comparison. How does the EITC solve the work disincentive problem created by the AFDC? (Again, refer to income and substitution effects in your answer)

3 The effects of the EITC on labor supply are not positive for all individuals. On a graph, illustrate a case in which the EITC reduces the number of hours worked by an individual. Explain using income and substitution effects.

1. Suppose an individual can earn a wage of $20/hr, has 100 total waking hours this week, and has no source of non-labor income. Let’s compare the incentives generated by two different types of public programs.

• The Aid to Families with Dependent Children (AFDC) program provides $100, at 0 hours of work, but imposes a 25% tax on earned income up to the point where the benefit is paid back.

• The Earned Income Tax Credit (EITC) consists of a 50% wage subsidy for individuals working low hours, up to a maximum benefit of $120, and then is gradually phased out: EITC imposes a 20% tax on individuals who earn more than $500 up the point where the benefit is paid back.

1. Draw what an AFDC budget constraint looks like, including a standard budget constraint for comparison. Why does the AFDC discourage work? (Explain, using the concept of income and substitution effects in your answer)

2. Draw what an EITC budget constraint looks like, including a standard budget constraint for comparison. How does the EITC solve the work disincentive problem created by the AFDC? (Again, refer to income and substitution effects in your answer)

3. The effects of the EITC on labor supply are not positive for all individuals. On a graph, illustrate a case in which the EITC reduces the number of hours worked by an individual. Explain using income and substitution effects.

7) US per capita beef consumption is four times the world’s average.

T/F

8) In an “Oligopoly” market structure the demand curve faced by an individual producer is “horizontal.

T/F

9) In the US, chicken industry, contracting (between packing plants and farms) represents less than 90% of total plant purchasing of chickens.

T/F

10) Currently, the largest importer of US agricultural products is China. 11) The US agricultural Trade balance is negative.

T/F
12) Income is a demand shifter.

T/F
13) Five Rivers is a company belonging to JBS.

T/F

14) Most of white corn produced in the US is grown under contracts.

T/F
15) TDA checks the accuracy of supermarket scanners in Texas.

T/F
16) More of the 30% of US beef production is exported.

T/F
17) Cotton is the top agricultural commodity produced in Texas (by value) 18) US beef exporters will prefer a “stronger’ US Dollar

T/F

19) If demand cross price elasticity is positive, those products are substitutes.

T/F
20) Developed countries will represent most of the future global demand for grain products.

T/F

The Case of the Phony PA

As a Senior Investigator at University Hospital, you were awarded a large grant to study the effects of new medications on healing leg wounds. The grant calls for either a nurse practitioner (NP) or a physician assistant (PA) who will be able to document the processes and keep the paperwork up-to-date on the grant. You interviewed several candidates and have found that Charles Tony, a PA, appeared to be the best candidate. His resume indicated that he earned a bachelor’s degree from a prestigious midwestern university, worked several years as an EMT, then went to PA school and earned an associate’s degree as a PA. He presented diplomas and copies of licensure certificates and had excellent recommendations from many reliable sources. This package was presented to you by the Human Resources Department. He was interviewed by several colleagues who would be participating in the study and was hired. He began work and appeared to be doing a good job. After a few months, some strange events started to occur. For instance, the locker he shared with one of the physicians was broken into. Multiple purchases were made on the physician’s credit cards in a very short time. Mr. Tony claimed his wallet had been stolen during that same incident. Other employees stated he was acting somewhat strange around them. He began dating an employee in the institution, then her apartment was broken into. At this point, no one was really suspicious, and Mr. Tony appeared to perform the functions of this job without any problems. Approximately 14 months after he was hired, he did not show up for work, did not answer his phone, and none of the records he was responsible for could be located. You contacted the HR Department and they began an investigation. To everybody’s surprise, you learned none of his credentials was actually checked back to their primary sources. When this check was completed after he disappeared, none of the academic institutions had ever heard of him. His references were all fraudulent. The police searched his apartment and found many missing pieces of University Hospital equipment. Mr. Tony was, however, nowhere to be found. It appears you hired a true pretender.

Discussion Question:

1.What are the facts in this case?

2. What errors were made in the hiring of Mr. Tony?

3. What are the merits of checking on the background of any employee, especially those entrusted with the care of patients in a hospital or clinical setting?. Whose responsibility is it to check the references?.

4.How could these events have been avoided?

5. Were there red flags that should have altered you to the problem earlier?

6. Provide a detailed plan for evaluation and verification of health care professional's credentials and recommendations to avoid this type of issue in the future.

Dr. Smith and his wife are both medical doctors and they just completed their medical residence at a local hospital. While attending your graduation party, Dr. Smith and his wife learned that you just earned your MBA. The Smiths approached you for advice on the legal form of business they should elect for their medical practice they are planning to open. The Smiths are interested in understanding each form of business organization and advantages and disadvantages of each form.

In advising the Smiths, please address the following questions:

1.         Compare and contrast

a.         the forms of business organizations, advantages, and disadvantages.

b.         general partner vs. limited partner?

c.         limited liability partnership vs. a limited liability company?

2.         Explain the advantages and disadvantages of organizing a business as an “S-Corporation?”

3.         Explain if the form of business organization impact the control of the firm and ethical behavior.

Based on your discussion, explain which form of business organization you would advise the Smiths to elect. Defend your response.

Question 4 – Undergraduate Degree and MBA Major (3 parts, 14 marks)

The MBA program was experiencing problems scheduling its courses. The demand for the

program’s optional courses and majors was quite variable from one year to the next. In one

year, students seem to want marketing courses; in other years, accounting or finance are the

rage. In desperation, the dean of the business school turned to a Statistics professor for

assistance. The Statistics professor believed that the problem may be the variability in the

academic background of the students and that the undergraduate degree affects the choice

of major. As a start, he took a random sample of last year’s MBA students and recorded the

undergraduate degree and the major selected in the graduate program. The undergraduate

degrees were BA (=1), BEng (=2), BBA (=3), and several others (=4). There are three possible

majors for the MBA students: Accounting (=1), Finance (=2), and Marketing (=3). Can the

Statistics professor conclude that the undergraduate degree affects the choice of major?

a) [2 Marks] Create a cross-classified (or contingency) table with undergraduate degree as

the row and MBA major as the column. The data in this table should be deemed as

observed counts.

b) [3 Marks] Create another table with the corresponding expected counts and having row

totals, column totals, and grand total. Round each cell value to two decimal places.

c) [9 Marks] Perform a chi-square test to assess the association (or independence) between

an undergraduate degree and choice of MBA major at 5% level of significance. Verify the

assumptions required for the chi-square test of independence. Make sure you follow all

the steps for hypothesis testing indicated in the Instructions section and show your

computations.

Matt and Martha Maxwell live in an upscale neighborhood in Orem, Utah. Matt is a partner in the family owned automotive painting business. Martha stays home with their child, Melanie, who is age 5. After visiting with their financial planner, the couple became concerned that they were spending too much and not putting enough funds aside for Melanie’s future educational needs. Matt earns $105,000 per year, but with the rising costs of education, they are concerned. Matt is an alumnus of Ohio State University, with tuition and book expenses of approximately $13,600 per year. Martha graduated from Utah Valley University. The expense for tuition and books there is estimated at about $7,500 per year. When Melanie turns 18, the couple wishes to send her to one of these two exceptional universities. They have a slight preference for Utah Valley University. The problem, however, is that with the rate at which tuition is increasing the Maxwell’s are not sure they can save enough money and they have decided they do not want to borrow to pay for Melanie’s education. Assume the tuition at both universities will increase at an annual rate of 6% per year for the foreseeable future. Living expenses are currently estimated at $8,000 per year at both schools. This expense is expected to grow at only 3% per year. Further, assume that Maxwell’s can deposit their money into a growth oriented mutual fund at the Salt Lake City based mutual fund company, Wasatch Advisors which has historically earned 12% per annum. The couple wishes to save by having a pre-determined amount automatically withdrawn form their bank account at the end each month. They plan to contribute from now until Melanie starts college. When Melanie starts college, at the beginning of his freshman year, they will stop making contributions. They want to have enough in their account to cover all four years of college expenses when Melanie starts college. They will make annual withdrawals from the account to cover both tuition and living expenses for Melanie at the beginning of his freshman, sophomore, junior, and senior years. When the withdrawal for the senior year is made the account balance will be zero. Remember, that the funds will continue to earn interest while Melanie is in college. Complete a thorough analysis and write a professional letter to the Maxwell’s (who don’t understand finance) explaining the analysis you performed, why you performed it, the results and conclusions. In the letter and attached schedules provide information that answers the following questions.

What will be the tuition expense, living expense, and total expense for each of the four years that Melanie will attend college? Provide the information for each University.

What amount will be needed in the account when Melanie starts his freshman year if he attends Ohio State?

What amount if he attends UVU? How much money will Matt and Debra have to deposit at the end of each month to allow Melanie to attend Ohio State?

How much money will have to be deposited per month to allow Melanie to attend Utah Valley University? Assume that Matt and Debra stop making deposits when Melanie starts college. The Pearson’s are concerned that given the current market performance the mutual fund will only earn 10% per year. If the return is only 10% how much will be needed in the account when Melanie starts college and how much will have to be deposited per month for Melanie to have sufficient funds to attend each school?