Question 4 [40 Marks] You have seven mornings per week. On each morning, you can either study, go to the rock climbing wall, or sculpt (i.e., make sculptures). If you rock climb, you must be a member of the club. The membership fee is 100 Bobos each week. And, as member, you pay 10 Bobos for each morning of climbing. If you sculpt, you must rent a studio which costs 100 Bobos per month. Each morning you sculp, you use 10 Bobos worth of material.

[15 Marks] Your economics professor has asked you to produce a table showing your marginal cost for each of 7 mornings you might sculpt during a normal week. Your uncle, who has never taken economics, has asked you to explain the table and why the values you wrote down make sense. Provide your answers in sections labelled The Table and The Explanation

[10 Marks] Assume that in October, you rationally climbed two times per week and sculpted three times per week. In November, you know that the daily climbing price will be 5 bobo per morning. Explain, using the costs and benefits of sculping, how you will decide whether to rent a studio in November. Provide your answer in a section labelled November

[9 Marks] Assume that in March you rationally climbed two times per week and sculpted three times per week. A climber from out of town is willing to pay you 50 Bobos per week for your April membership. If you sell, you cannot climb. If this is the only change the professor is aware of, what does your economics professor predict about how often you sculp in April? Explain. Provide your answer in a section labelled April

[6 Marks] Assume that the following March, you rationally climbed two times per week and sculpted three times per week. In April the membership fee for the climbing club will increase 150 bobos per week. If this is the only change the professor is aware of, what does your economics professor predict about how often you sculp in April? Explain. Provide your answer in a section labelled April, redux

Please conduct an independent-sample t-test, α = .05.  

Two persons are arguing about the size of different breeds of dogs. One believes that German Shepherds are larger than Huskies, while the other person believes the opposite is true. So they conducted a study to see which one of them is correct by randomly sampling and weighting 10 dogs of each breed they saw on a Sunday afternoon in their community. This is an independent-sample case. The data are as follows:

German Shepherds: 55, 72, 61, 43, 59, 70, 67, 49, 55, 63

Huskies: 48, 77, 46, 51, 60, 44, 53, 61, 52, 41

Lara, a 40-year old financial analyst and mother of two teenage children considers herself as a savvy investor. She has increased her investment portfolio considerably over the past five years. Although she has been fairly conservative with her investments, she now feels mor confident in her investment knowledge and would like to branch out into some new areas that could bring higher returns. She has between RM50,000 to RM100,000 to invest. She was considering an investment in 5000 shares of high-technology common stock in ACE market, currently is selling at RM6.55/share. After a discussion with her friend who is an economist with a major commercial bank, Lara believes that the long-running bull market due to cool off and thar economic activity will slow down. She analyses this stock has 10 million shares outstanding and the last year’s earnings per share was RM1.53. The firm’s stockholder equity is RM12 million and the total amount of dividend declared is RM750,000. The company sales of RM12 million and net profit margin of 6% with retention rate (dividend payout ratio) of 40%. Current net profit after taxes shows an increment of 20% from the last year. The growth rate of the dividend of the stock is 7% and the required rate of return is 15%. Required:

a. Compute the price earnings ratio. From the answer, what the indication of the firm?

b. How much the net income after tax of this stock in last year?

c. What is the ROE of the stock? Is the ROE gives you a good indication of this stock?

d. Compute the intrinsic value of the stock today.

e. What is your opinion of this stock and will you proceed to invest in this stock?

Stocks A and B have the following​ returns:

a. What are the expected returns of the two​ stocks?

b. What are the standard deviations of the returns of the two​ stocks?

c. If their correlation is 0.48​, what is the expected return and standard deviation of a portfolio of 56​% stock A and 44​% stock​ B?

An amusement park studied methods for decreasing the waiting time (minutes) for rides by loading and unloading riders more efficiently. Two alternative loading/unloading methods have been proposed. To account for potential differences due to the type of ride and the possible interaction between the method of loading and unloading and the type of ride, a factorial experiment was designed. Use the following data to test for any significant effect due to the loading and unloading method, the type of ride, and interaction. Use . Factor A is method of loading and unloading; Factor B is the type of ride.

Set up the ANOVA table (to whole number, but -value to 2 decimals and  value to 1 decimal, if necessary).

An amusement park studied methods for decreasing the waiting time (minutes) for rides by loading and unloading riders more efficiently. Two alternative loading/unloading methods have been proposed. To account for potential differences due to the type of ride and the possible interaction between the method of loading and unloading and the type of ride, a factorial experiment was designed. Use the following data to test for any significant effect due to the loading and unloading method, the type of ride, and interaction. Use . Factor A is method of loading and unloading; Factor B is the type of ride.

Set up the ANOVA table (to whole number, but -value to 2 decimals and  value to 1 decimal, if necessary).

Calculate a 90% confidence interval estimate for time (minutes) it takes to fill out form 4 by all people. Interpret your result. g) Assuming 102 minutes for population mean time for filling all forms and a standard deviation of 8 minutes. Design, conducts and conclude a hypothesis test that shows the mean time of filling form 1 differs from population mean. Interpret your result using both p-value and critical value approach. Alpha=0.05 h) Suppose, IRS is interested in the difference between the population mean of form 4 and 2. Develop a 90% confidence interval of the difference between the two population means. Can we conclude, using 0.05 level of significance that the population mean time of form 4 is greater than population mean time of form 2? Calculate and interpret your results. (hint: you can use the template in chapter 10 to calculate degrees of freedom and the standard error) i) Assuming individuals are not homogenous, can IRS assume that there are differences between the four types of forms at 1% significance level? Conduct the test hypothesis, interpret your result and make a conclusion out of your analysis.

An article in the journal PLOS ONE describes a study in which the oviposition preferences of Tecia solanivora, the Central American potato tuberworm or Guatemalan potato moth, are compared across different varieties of Solanum tuberosum (potato).

Suppose that Paul, a plant pathologist, collects a sample of 194 potato plants. Paul records the total number of T. solanivora eggs laid on and around each plant. The egg counts are provided in the data file.

CrunchIt!    CSV   Excel   JMP   Mac Text    Minitab   PC Text   R   SPSS   TI Calc  

Let ? be a random variable taking on values equal to the number of eggs laid on or around each plant.

Compute   x¯ , the mean number of eggs laid on or around each plant. Report your answer to at least two decimal places of precision.

x¯=

eggs

Compute  s , the sample standard deviation of the number of eggs laid on or around each plant. Report your answer to at least three decimal places of precision.

s=

eggs

"EGGCNT"
6
3
3
10
1
80
9
5
5
39
2
0
64
31
21
23
9
17
6
20
2
7
5
30
29
6
52
5
4
1
47
8
15
43
3
23
2
5
54
22
13
12
20
4
2
4
13
75
28
13
72
78
5
78
58
63
60
22
16
48
3
2
81
6
18
1
60
40
15
9
11
39
0
14
2
49
4
52
1
4
0
45
10
0
3
7
3
53
4
0
5
16
20
2
0
0
0
27
1
0
28
1
9
0
0
0
10
0
2
0
31
1
0
10
8
2
10
0
39
42
33
3
2
0
0
0
0
0
7
6
0
2
26
7
32
8
32
1
11
2
1
3
1
0
26
8
0
7
2
1
0
23
0
3
98
3
3
3
0
13
0
2
12
0
10
18
24
115
10
10
0
0
0
2
28
2
0
27
0
3
0
8
0
7
27
29
3
0
70
9
7
17
15
2

. Keller Corporation offers to issue zero-coupon bonds of $80,000 on January 1, Year One. The bonds will come due on December 31, Year Three. Keller and several potential creditors negotiate an annual interest rate of 7 percent on the bonds. The present value of $1 in 3 periods at an annual interest rate of 7 percent is $0.81630. The present value of an ordinary annuity of $1 for 3 periods at an annual interest rate of 7 percent is $2.62432. The present value of an annuity due of $1 for 3 periods at an annual interest rate of 7 percent is $2.80802.

a. Determine the amount the creditors will pay on January 1, Year One, for these bonds.

b. Record the issuance of the bonds on January 1, Year One.

c. Make the necessary adjusting entry at the end of Year One. What is the liability balance at the end of Year One?

d. Make the necessary adjusting entry at the end of Year Two. What is the liability balance at the

end of Year Two?

Suppose that the market for microprocessors is dominated by just two firms. All microprocessors produced are sold at the market-clearing price which depends on TOTAL industry output. The market demand was estimated to be P = 30 – Q_TOTAL, where Q_TOTAL is the combined output of two firms in million.

The only decision variable for each firm is how many microprocessors to produce. Each firm must decide whether to build a plant suited to produce high volume, low volume, or to produce no microprocessors at all. Once the output decision is made, it is final. Regardless of the volume of production, each microprocessor costs a firm $7 to produce.
High and low volumes are 10 million and 5 million microprocessors, respectively.

a. (6 pts) Suppose the game is played simultaneously. Present the game in the normal form, using the table below and expressing payoffs in TOTAL PROFIT amounts.

(Consider, for example, the case when Firm 1 produces 5 mln units and firm 2 produces 10 mln units. The total industry output is 15 million. According to the demand equation, the market price will be P = 30 – 15 = $15.

The profit margin is then (P–ATC) = 15 – 7 = $8 per microprocessor. Finally, the profits of the two firms are 8·5=$40mln and 8·10=$80mln, respectively… and so on.)

b. (2.5 pts) Does any of the firms have a dominant strategy? If so, state what those are.

c. (2.5 pts) Does any of the firms have a secure strategy? If so, state what those are.

d. (3 pts) You are Firm 1, and you are concerned only with your own profit. According to the textbook and the lecture, which strategy should you play? Explain your choice.

Next, suppose one of the firms is able to commit to a certain plant size first and make it known to the other firm.

e. (4 pts) Present this game in the extensive form (a tree). Make sure all the nodes, branches, and payoffs are properly labeled!

f. (4 pts) Identify the most likely outcome of the game presented in part e.
Does changing the rules of the game change your prediction about the most likely outcome? Comment briefly.