Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD:
Demand: P= 1,000- 10Q
Total Revenue: TR= 1,000Q- 10Q2
Marginal Revenue: MR= 1,000- 20Q
MC= 100 + 10Q
where Q indicates the number of copies sold and P is the price in Ectenian dollars.
Complete the following table by finding the price and quantity that maximize the company’s profit and the price and quantity that maximize social welfare.
| Scenario | Price (Dollars) | Quanity (DVD's) |
| Maximizes the companys profits | ??? | ??? |
| Maximizes social welfare | ??? | ??? |
The deadweight loss from the monopoly is $ ___??.
Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options:
1: A flat fee of 2,000
2. 50 percent of the profits
3. 50 ectenian dollars per unit sold
4. 50 percent of the revenue
Complete the following table by finding the price and quantity that maximize the company’s profit under each of the following options.
| Options | Price (Dollars) | Quanity (DVD's) | Change in Deadweight Loss |
| Flat fee of 2,000 Ectentian dollars | ??? | ??? | DECREASE, INCREASE, OR NO CHANGE?? |
| 50 percent of the profits | ??? | ??? | DECREASE, INCREASE, OR NO CHANGE?? |
| 150 Ectenian dollars per unit sold | ??? | ??? | DECREASE, INCREASE, OR NO CHANGE?? |
| 50 percent of the revenue | ??? | ??? | DECREASE, INCREASE, OR NO CHANGE?? |
In: Economics
Assume that the supply function for X is Q(s) = -50 + 5P.
Using this information, select the correct responses from the answers below. Note that multiple answers may be correct.
A.)
|
The inverse supply function can be written as: P = 10 + 1/5Q(s) while the supply function is equal to Q(s) = -50 + 5P. This means that the y-intercept for the inverse supply function is -50. |
B.)
|
When the market price is equal to 50, the following statements are correct: Quantity supplied is equal to 200. Total revenue is equal to 10,000. Producer surplus is equal to 4,000 |
C.)
|
When the market price increases from 60 to 70, the following statements are correct Quantity supplied increases from 250 to 300 Total revenue increases from 15,000 to 21,000 Producer surplus increases from 6,250 to 9,000 |
D.)
|
When the market price declines from 40 to 30, the following statements are correct Quantity supplied falls from 150 to 100. Total revenue falls from 6,000 to 3,000. Producer surplus rises from 2,500 to 4,000. |
E.)
|
The law of supply states that price and quantity supplied are positively related, that is, as price increases, quantity supplied increases. The law of supply reflects the law of increasing marginal returns, that is, as production increases, the marginal cost of production falls, thus price increases are necessary to increase profitability. |
In: Economics
9. Taxation - An algebraic approach
Suppose the supply of a good is given by the equation QS=100P−100QS=100P−100, and the demand for the good is given by the equation QD=350−50PQD=350−50P, where quantity (Q) is measured in millions of units and price (P) is measured in dollars per unit.
The government decides to levy an excise tax of $3.00 per unit on the good, to be paid by the seller.
Calculate the value of each of the following, before the tax and after the tax, to complete the table that follows:
| 1. | The equilibrium quantity produced |
| 2. | The equilibrium price consumers pay for the good |
| 3. | The price received by sellers |
|
Before Tax |
After Tax |
|
|---|---|---|
| Equilibrium Quantity (Millions of units) | ||
| Equilibrium Price per Unit Paid by Consumers | ||
| Price per Unit Received by Sellers |
Given the information you calculated in the preceding table, the tax incidence on consumers is per unit of the good, and the tax incidence on producers is per unit of the good.
The government receives in tax revenue from levying an excise tax of $3.00 per unit on this good.
True or False: The price ultimately received by the seller (that is, the amount of money that the seller gets to keep after receiving payment from the buyer and paying any applicable taxes) would have been different if the tax had been levied on buyers instead.
True
False
In: Economics
Two suppliers have been contracted by a government agency to train agency employees learning to use a new computer system. The marginal cost curve of firm 1 is MC1=160+2Q1, while the marginal cost curve for Firm 2 is MC2=100+Q2, where Q is hours of training per week. Originally, each firm provides 60 hours of training services each week.
What is the total cost to firm 1 of providing 60 hours of training each week?
What is the total cost to firm 2 of providing 60 hours of training each week?
An economically-literate manager suggests it would be better to state a price that the government is willing to pay for an hour of training, and let each firm provide the number of hours they are willing to at this price.
What price should the government set to cost-effectively distribute the number of hours between the two firms while maintaining the total training provided at 120 hours per week?
How many hours of training will firm 1 provide at this price?
What is firm 1’s total cost?
How many hours will firm 2 provide at this price?
What is firm 2’s total cost?
How large is the cost savings resulting from the price rationed system relative to the original allocation of 60 training hours for each firm?
In: Economics
1- If the seller is legally responsible for paying the tax, then
A.the supply curve is shifted to show the imposition of the tax.
B.the demand curve is shifted to show the imposition of the tax.
C.the after-tax price to the seller(PS )equals the original price minus the tax.
D.the after-tax price to the buyer (PB ) equals the original price plus the tax.
2- The smaller the elasticity of supply, the ______ is the decrease in the equilibrium quantity, the ______ is the deadweight loss, and the ______ is the tax revenue.
A.greater; greater; smaller
B.smaller; greater; smaller
C.smaller; smaller; greater
D.greater; greater; smaller
3- If the demand curve is more elastic than the supply curve, then
A.the actual burden will be higher for the buyer than for the seller.
B.the actual burden will be higher for the seller than for the buyer.
C.the statutory burden will be higher for the buyer than for the seller.
D.the statutory burden will be higher for the seller than for the buyer.
4-When an effective production quota is applied, the quantity produced ______ and the price ______. On the last unit, the marginal benefit ______ marginal cost.
A.decreases; rises; exceeds
B.increases; falls; is less than
C.decreases; falls; is less than
D.increases; rises; exceeds
5-A tax on a good _________________ the price that sellers effectively receive, _________________ the price that buyers effectively pay, and _________________ the quantity exchanged.
A.raises; lowers; raises
B.raises; raises; lowers
C.lowers; lowers; raises
D.lowers; raises; lowers
6-Suppose the government decides to tax tennis shoe producers for every pair sold. Before the tax, 100 pairs of tennis shoes are sold every year at a price of 300 dirhams per pair. After the tax is imposed, 80 pairs are sold yearly; consumers pay 320 per pair and producers get to keep 290 per pair.
-The statutory burden of the tax is
A.split evenly between consumers and producers.
B.on consumers.
C.on producers.
D.split between consumers and producers with consumers paying a larger share.
-The actual burden of the tax is
A.split evenly between consumers and producers.
B.split between consumers and producers with consumers paying a larger share.
C.on consumers.
D.on producers.
-The amount of the tax is
A.10 dirhams.
B.320 dirhams.
C.20 dirhams.
D.30 dirhams.
-The burden of the tax on consumers is
A.30 dirhams.
B.20 dirhams.
C.320 dirhams.
D.10 dirhams.
-The burden of the tax on producers is
A.320 dirhams.
B.10 dirhams.
C.20 dirhams.
D.30 dirhams.
-The amount of tax revenue collected is
A.2,400 dirhams.
B.3,000 dirhams.
C.32,000 dirhams.
D.25,600 dirhams.
-The deadweight loss is:
A.the loss of total surplus on 100 pairs of shoes.
B.the loss of total surplus due to the higher price the buyers have to pay and the lower price the sellers get to keep.
C.the loss of consumer and producer surplus on 80 pairs of shoes.
D.the loss of consumer and producer surplus on the 81st to 100th pairs of shoes.
In: Economics
Valquez Manufacturing Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first quarter of 2008, the following data are developed:
Sales: 20,000 units
Unit selling price: RM35
Variable costs per RM of sales:
Sales commissions 6%
Delivery expense 2%
Advertising 4%
Fixed costs per quarter:
Sales salaries RM24,000
Office salaries 17,000
Depreciation 6,000
Insurance 2,000
Utilities 1,000
In: Accounting
(a): The dividends that a firm pays to its stockholders are expected to grow at 3% per quarter for the next four quarters. From t=4 onwards, i.e. from the beginning of the fifth quarter the growth rate in dividends will drop to 1.5% per quarter, and the firm expects to be able to sustain it at this level. Assuming that the market capitalization rate is 2.5% per quarter, work out the price of the firm’s stock assuming that the dividend expected to be paid at t=1, i.e., at the end of the first quarter is $2.25
.(b): Rework your answer assuming that gH, the rate at which the dividends are expected to grow for the first four quarters is 2.5% per quarter.
In: Accounting
Saint Nick Enterprises has 17,900 shares of common stock outstanding at a price of $71 per share. The company has two bond issues outstanding. The first issue has 9 years to maturity, a par value of $1,000 per bond, and sells for 102.5 percent of par. The second issue matures in 23 years, has a par value of $2,000 per bond, and sells for 107.5 percent of par. The total face value of the first issue is $270,000, while the total face value of the second issue is $370,000. What is the capital structure weight of debt? Select one: .3467 .4185 .3920 .2045 .3189
In: Finance
Saint Nick Enterprises has 15,500 shares of common stock outstanding at a price of $59 per share. The company has two bond issues outstanding. The first issue has 7 years to maturity, a par value of $1,000 per bond, and sells for 94 percent of par. The second issue matures in 21 years, has a par value of $2,000 per bond, and sells for 101.5 percent of par. The total face value of the first issue is $150,000, while the total face value of the second issue is $250,000. What is the capital structure weight of debt?
Multiple Choice
.2737
.3015
.3468
.3733
.1938
In: Finance
The first thing to notice about monopoly is that price exceeds the marginal cost of production: PM > MC. The price in a market reflects the value to society of another unit of output. Marginal cost reflects the cost to society of the resources needed to produce an additional unit of output. Since price exceeds marginal cost, the monopolist produces less output than is socially desirable. In effect, society would be willing to pay more for one more unit of output than it would cost to produce the unit. Yet the monopolist refuses to do so because it would reduce the firm’s profits. This is because marginal revenue for a monopolist lies below the demand curve, and thus MR ' MC at this level of output.
What does it mean by Marginal cost reflects the cost to society of the resources needed to produce an additional unit of output?
In: Economics