1. If a cartel succeeds in maintaining the cartel price but cannot prevent the entry of new firms into the industry: a. the industry’s total output level will rise. b. entry continues until the equilibrium average cost equals the fixed cost. c. entry continues until the equilibrium marginal cost equals the fixed price. d. All of the above are correct.

2. For a competitive firm, marginal revenue equals average revenue because the: a. firm’s supply curve is horizontal. b. industry’s demand curve is horizontal. c. demand curve facing the firm is horizontal. d. industry’s supply curve is horizontal. e. firm cannot differentiate its product.

A newspaper recently lowered its price from $7.00 to $5.00. As it did, the number of newspapers sold increased from 260,000 to 300,000.

a. What was the newspaper’s elasticity of demand?

Instructions: Enter your response rounded to two decimal places.

Price elasticity of demand is  .

b. Given that elasticity, did it make sense for the newspaper to lower its price?

Demand is   (Click to select)   inelastic   elastic    so it   (Click to select)   does   does not  make sense to lower the price because it   (Click to select)   increases   reduces  total revenue.

c. What would your answer be if much of the firm’s revenue came from advertising and the higher the circulation, the more it could charge for advertising?

3. Consider the following information on the production of basketballs. Demand: P = 10 – Q; Marginal Revenue = 10 – 2Q; Marginal Cost = 1 + Q. a. Graph Demand, Marginal Cost, and Marginal Revenue on the same chart. b. In a competitive market, what would the price and quantity be? c. Now assume this is a monopolistic market. What quantity will the monopolist produce? How much will it charge? Is the monopolist producing too much or too little relative to the competitive market? d. Again, assume this is a monopolistic market. Calculate the deadweight loss to society (Hint: the area of a triangle is 0.5*B*H, where B = the base of the triangle and H = the height of the triangle).

On January 1, 2017, Pronghorn Company purchased 10% bonds having a maturity value of $380,000, for $410,343.38. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Pronghorn Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase.

Prepare a bond amortization schedule.

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017.

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018

On January 1, 2021, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2022. The 2021 income statement reported $4,620 in interest revenue from this note and a $7,500 gain on sale of investment in stock. The stock’s book value was $31,000. The company’s fiscal year ends on December 31.

Required: 1. What is the note’s effective interest rate?

2. Reconstruct the journal entries to record the sale of the stock on January 1, 2021, and the adjusting entry to record interest revenue at the end of 2021. The company records adjusting entries only at year-end.

On April 1^st. (X) Co. the trial balance shows the following:

Additional information:

1. Prepaid insurance for 3-years, effective April 1^st.
2. Depreciation for equipment 1,000 per month.
3. Notes payable were signed at the beginning of April. It is 3-Month, 12% -yearly - note.
4. Five customers paid for the company’s 10-month X services package of $1,000 beginning in April. These customers were serviced in April.
5. X services provided other customer but not billed at April 30 totaled $3,000.

Instruction: prepare the adjusting entries for April.

The Zaarour Corporation's October 31 adjusted trial balance included many accounts, including the following.

Determine the dollar balance in the Corporation's income summary account before it was closed to retained earnings.

1. Takeover is a general and imprecise term referring to the transfer of control of a firm from one group of shareholders to another. This can occur through any one of three means: acquisitions, proxy contests, and going-private transactions. Discuss THREE (3) basic legal procedures that one firm can use to acquire another firm.

                                                                                                                         (CLO3:PLO2:C2)

2. One important reason for an acquisition is that the combined firm may generate greater revenues than two separate firms. Increase in revenue may come from marketing gains, strategic benefits, and increase in market power. Briefly describe this revenue enhancement to the company.                                                                                   

                                                                                                                      (CLO3:PLO2:C4)