The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table.

Based on all these data, the equilibrium price of the product in the market will be

Multiple Choice

• $95.

• $75.

• $120.

• $60.

Business Law

A new hotel has advertised in the local newspapers that its ballroom is going for a cheap rate for the month of June. Patrick wants to make a booking of the ballroom for a party for his daughter, Mary’s birthday on the 25^th June. The hotel manager does not want to accept his booking. However the hotel manager is prepared to give an alternative room to Patrick at a lower rate. Patrick refuses to accept the alternate room and is threatening to sue the hotel for not abiding by the advertisement in the local newspapers.

Critically evaluate whether there is a contract between the hotel and Patrick. Justify the answers with the evidence from the law of contract.

Crescent City Fun Park (Crescent City), an amusement park with thrilling rides and a water park, sells tickets onsite and has a website that allows customers to purchase tickets in advance and bypass the long lines. Customers who use the website include the general public and travel agents. Both individuals and travel agents can purchase tickets online using a major credit card. Some travel agents prefer the option of using the website to purchase tickets, but rather than pay with a credit card, be billed at the end of each month. To use the billing option, a travel agent must contact a sales agent with Crescent City and complete a detailed application with at least two references. Once an application is complete, the sales manager verifies the information, contacts the references, and either approves or denies the application. If the application is approved, the sales manager decides on a credit limit for the travel agent. Terms of payment for all travel agent customers is 30 days from the invoice date.

The auditor performs tests of controls on the credit-granting process and gathers sufficient appropriate audit evidence to conclude that the process is working effectively. Credit is only granted after a thorough credit check. However, Crescent City has continual problems collecting from the larger travel agents within the 30-day period. Some of the largest travel agents regularly take 90 or more days to pay an invoice. Crescent City allows this late payment habit to continue simply because of the volume of business generated by the large travel agents. Crescent City has 398 travel agents as customers, with 42 of them representing 81% of accounts receivable.

a. Recommend which customers should be selected for further testing and why.

b. Explain when the testing of accounts receivable would take place and why.

Crescent City Fun Park (Crescent City), an amusement park with thrilling rides and a water park, sells tickets onsite and has a website that allows customers to purchase tickets in advance and bypass the long lines. Customers who use the website include the general public and travel agents. Both individuals and travel agents can purchase tickets online using a major credit card. Some travel agents prefer the option of using the website to purchase tickets, but rather than pay with a credit card, be billed at the end of each month. To use the billing option, a travel agent must contact a sales agent with Crescent City and complete a detailed application with at least two references. Once an application is complete, the sales manager verifies the information, contacts the references, and either approves or denies the application. If the application is approved, the sales manager decides on a credit limit for the travel agent. Terms of payment for all travel agent customers is 30 days from the invoice date.

The auditor performs tests of controls on the credit-granting process and gathers sufficient appropriate audit evidence to conclude that the process is working effectively. Credit is only granted after a thorough credit check. However, Crescent City has continual problems collecting from the larger travel agents within the 30-day period. Some of the largest travel agents regularly take 90 or more days to pay an invoice. Crescent City allows this late payment habit to continue simply because of the volume of business generated by the large travel agents. Crescent City has 398 travel agents as customers, with 42 of them representing 81% of accounts receivable.

a. Recommend which customers should be selected for further testing and why.

b. Explain when the testing of accounts receivable would take place and why.

An usher at a movie theater claims no more than half of all movie theater customers buy something at the refreshment stand. To test the claim, the usher observes a random sample of 80 people and finds that 47 of them buy something.

a) What is the Null Hypothesis and the Alternative Hypothesis for the usher's claim?

b) If we use a 0.01 significance level, what is the critical value for the test?

c) Calculate the value of the test statistic.

d) What is your decision about the null hypothesis and your conclusion about usher’s claim?

e) Calculate the p-value for this test.

The restaurant at the Hotel Galaxy offers two choices for breakfast: an all-you-can-eat buffet and an a la carte option, where diners can order from the menu. The buffet option has a budgeted meal price of $44. The a la carte option has a budgeted average price of $33 for a meal. The restaurant manager expects that 40 percent of its diners will order the buffet option. The buffet option has a budgeted variable cost of $24 and the a la carte option averages $19 per meal in budgeted variable cost. The manager estimates that 2,600 people will order a meal in any month.

For July, the restaurant served a total of 2,400 meals, including 940 buffet options. Total revenues were $42,300 for buffet meals and $52,560 for the a la carte meals.

Required:

a. Compute the activity variance for the restaurant for July.

b. Compute the mix and quantity variances for July.

Example: agency problem between stockholders and bondholders – asset substitution (over-investment problem)

A firm is at the verge of bankruptcy. It has outstanding debt of $100k, and its total assets amount to also $100k only. (Amount equity=0) The debt has a 10% annual interest, and the firm is confronted with the following two mutually exclusive projects with their respective initial and terminal cash flows.

CF=Cash flow

CF₀ =at t=0

Assuming information asymmetry (information is not equally distributed, the stock holder (in the board) within it the firm know more about the firm rather then the bondholder (not on the board)) exists between stockholders and bondholders at t=0. Else, bondholders may choose to liquidate the firm at t=0.

Which project will the stockholders instruct the managers to accept? Why?

Expected payoff for project A =

Expected payoff for project B =

Expected bondholders’ payoff for project A =

Expected bondholders’ payoff for project B =

Expected stockholders’ payoff for project A =

Expected stockholders’ payoff for project B =

When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach, perhaps you would be horrified by the high price you would have to pay for a bottle of soft drink such as Coca Cola or Pepsi Cola or wine or even bottled water. Perhaps you begin to ponder why the same commodity that you can get at a supermarket at one tenth the hotel price is going for such an astronomical price at the hotel.Of course, such facilities will have a warning such "you are not allowed to bring in your own food or drinks" posted at appropriate places in the facility for the attention of customers.In another scenario, you enter a designer shop to buy clothes with a designer label for a friend on their birthday or on Valentine day and you reckon the clothes are so much expensive compared to similar own brand clothes from a clothing or chain store, even though they may cost a similar amount to produce.

Questions

Using your knowledge in basic economics, especially of the concept of demand and supply, attributes of a competitive market and price elasticity of demand, briefly discuss the following

A. Why may a hotel charge such very high prices for wine, soft drinks or even bottled water and yet quite reasonable prices for food and still get away with such high prices?

B. Why are designer shops able to price their clothes so very expensive and yet still get clients even though similar clothes that are available in a supermarket chain shops cost pretty much less?

When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach, perhaps you would be horrified by the high price you would have to pay for a bottle of soft drink such as Coca Cola or Pepsi Cola or wine or even bottled water. Perhaps you begin to ponder why the same commodity that you can get at a supermarket at one tenth the hotel price is going for such an astronomical price at the hotel.Of course, such facilities will have a warning such "you are not allowed to bring in your own food or drinks" posted at appropriate places in the facility for the attention of customers.In another scenario, you enter a designer shop to buy clothes with a designer label for a friend on their birthday or on Valentine day and you reckon the clothes are so much expensive compared to similar own brand clothes from a clothing or chain store, even though they may cost a similar amount to produce.

Questions

Using your knowledge
in basic economics, especially
of the concept of demand and supply, attributes of a competitive market and price elasticity of demand, briefly discuss the following

A. Why may a hotel charge such very high prices for wine, soft drinks or even bottled water and yet quite reasonable prices for food and still get away with such high prices?

B. Why are designer shops able to price their clothes so very expensive and yet still get clients even though similar clothes that are available in a supermarket chain shops cost pretty much less?

Already rated 100%

Poco Miller is the RM at the Hampton Inn. Mark is the property’s FOM and Latisha is the DOSM. All three serve on the hotel’s RM committee. The hotel has 200 rooms. Next month the hotel will serve as the host hotel for the Retired Firefighters Association. The Association originally blocked 100 rooms per night for Thursday, Friday, and Saturday nights at a rate of $99.00 per night. All the rooms in their block have been picked up. The current rooms availability forecast for the three days of the meeting is as follows:

The group has requested that Latisha add 30 rooms each night to its block at the originally contracted rate of $99.00. It states that its members will use all of the additional rooms if they are made available, but if not, they will move their remaining 30 attendees down the street to the Comfort Inn. Latisha is in favor of increasing the block and keeping the group together. Mark is opposed. He is convinced he can sell 20 more rooms on Thursday, 40 rooms on Friday, and 30 rooms on Saturday at the normal rack rate of $129.99. Under his plan, he states, “The hotel can maximize its ADR.”

Based on Mark’s estimate of future sales to be made at rack rate, Poco knows the hotel will sell out and maximize its occupancy percentage under Latisha’s plan. Help Poco analyze the data she needs to answers the questions that follow by filling in the chart.

A. What would the hotel’s ADR be under Mark’s plan?
B. What would the hotel’s RevPAR be under Mark’s plan?
C. What would the hotel’s ADR be under Latisha’s plan?
D. What would the hotel’s RevPAR be under Latisha’s plan?
E. Who’s plan would you advise Poco to support? Explain your rationale.