Explain the economic changes in northern states of the United States in the early 1800s. How did industrialization, urbanization, the market revolution, and the transportation revolution change America? What were its effects on society and culture?

The local movie theater industry has a demand curve of P=26-.2Q for a movie showing (please note the decimal in front of the 2). It has a supply curve (MC curve) of $2, because the theater figures for each customer there will be a cleanup cost afterwards. In reality, a theater might sell food and drinks for extra profits, but this one does not.

1. What is allocative efficiency? What is the price of a ticket and number of patrons (quantity) that will result in allocative efficiency? Why is this price not practical?
2. If the theater, the only one in town, wishes to price as a monopoly, what would the price of a ticket and quantity (number of patrons) be?
3. If this theater would like to price discriminate by charging some $20 and letting them sit in the front rows, regular customers the monopoly price, and senior citizens who do not sit in the front $5, by how much would the $20 price increase profits over a regular monopoly price? By how much would the $5 price increase profits over the regular monopoly price? By having three prices instead of one, how much would profit increase by? Explain your answers and demonstrate with a graph.
4. Assume another theater opens so there are two theaters in town. The marginal cost and demand curve remain the same for the industry, but there are now two firms instead of one. Use the Cournot model of duopoly to determine the new movie theater ticket price with two theaters instead of one. Explain your answer and include a graph.
5. What would be the Lerner Index for these two theaters? What does this number measure?

The local movie theater industry has a demand curve of P=26-.2Q for a movie showing (please note the decimal in front of the 2). It has a supply curve (MC curve) of $2, because the theater figures for each customer there will be a cleanup cost afterwards. In reality, a theater might sell food and drinks for extra profits, but this one does not.

1. What is allocative efficiency? What is the price of a ticket and number of patrons (quantity) that will result in allocative efficiency? Why is this price not practical?
2. If the theater, the only one in town, wishes to price as a monopoly, what would the price of a ticket and quantity (number of patrons) be?
3. If this theater would like to price discriminate by charging some $20 and letting them sit in the front rows, regular customers the monopoly price, and senior citizens who do not sit in the front $5, by how much would the $20 price increase profits over a regular monopoly price? By how much would the $5 price increase profits over the regular monopoly price? By having three prices instead of one, how much would profit increase by? Explain your answers and demonstrate with a graph.
4. Assume another theater opens so there are two theaters in town. The marginal cost and demand curve remain the same for the industry, but there are now two firms instead of one. Use the Cournot model of duopoly to determine the new movie theater ticket price with two theaters instead of one. Explain your answer and include a graph.
5. What would be the Lerner Index for these two theaters? What does this number measure?

A professor states that in the United States the proportion of college students who own iPhones is .66. She then splits the class into two groups: Group 1 with students whose last name begins with A-K and Group 2 with students whose last name begins with L-Z. She then asks each group to count how many in that group own iPhones and to calculate the group proportion of iPhone ownership. For Group 1 the proportion is p1 and for Group 2 the proportion is p2. To calculate the proportion you take the number of iPhone owners and divide by the total number of students in the group. You will get a number between 0 and 1.

• What would you expect p1 and p2 to be?
• Do you expect either of these proportions to be vastly different from the population proportion of .66?
• Would you be surprised if p1 was different than p2?
• Would you be surprised if they were the same or similar?
• What statistical concept describes the relationship between the first letter of someone's last name and whether or not they own an iPhone?

From the data for 46 states in the United States for 1992, Baltagi obtained the following regression results:

                                              LogC=  4.3- 1.34 log P +0.17 log Y

                                                    Se=(0.91)  (0.32)       (0.20)                                    R²=0.27

Where C= cigarette consumption, Packs per year

              P= real price per pack

              Y= real disposable income per capita

1. What is the elasticity of demand for cigarettes with respect to price? Is it statistically significant?
2. What is the income elasticity of demand for cigarettes? Is it statistically significant?
3. What is the overall significance of the regression? Which test do you use?  

From the data for 46 states in the United States for 1992, Baltagi obtained the following regression results:

                                              LogC=  4.3- 1.34 log P +0.17 log Y

                                                    Se=(0.91)  (0.32)       (0.20)                                    R²=0.27

Where C= cigarette consumption, Packs per year

              P= real price per pack

              Y= real disposable income per capita

1. What is the elasticity of demand for cigarettes with respect to price? Is it statistically significant?
2. What is the income elasticity of demand for cigarettes? Is it statistically significant?
3. What is the overall significance of the regression? Which test do you use?  

A professor states that in the United States the proportion of college students who own iPhones is .66. She then splits the class into two groups: Group 1 with students whose last name begins with A-K and Group 2 with students whose last name begins with L-Z. She then asks each group to count how many in that group own iPhones and to calculate the group proportion of iPhone ownership. For Group 1 the proportion is p1 and for Group 2 the proportion is p2. To calculate the proportion you take the number of iPhone owners and divide by the total number of students in the group. You will get a number between 0 and 1. What would you expect p1 and p2 to be? Do you expect either of these proportions to be vastly different from the population proportion of .66? Would you be surprised if p1 was different than p2? Would you be surprised if they were the same or similar? What statistical concept describes the relationship between the first letter of someone's last name and whether or not they own an iPhone?

A professor states that in the United States the proportion of college students who own iPhones is .66. She then splits the class into two groups: Group 1 with students whose last name begins with A-K and Group 2 with students whose last name begins with L-Z. She then asks each group to count how many in that group own iPhones and to calculate the group proportion of iPhone ownership. For Group 1 the proportion is p1 and for Group 2 the proportion is p2. To calculate the proportion you take the number of iPhone owners and divide by the total number of students in the group. You will get a number between 0 and 1.

• What would you expect p1 and p2 to be?
• Do you expect either of these proportions to be vastly different from the population proportion of .66?
• Would you be surprised if p1 was different than p2?
• Would you be surprised if they were the same or similar?
• What statistical concept describes the relationship between the first letter of someone's last name and whether or not they own an iPhone?

CASE: HAROLD DAVIS and ENID DAVIS, Plaintiffs-Appellants, v. UNITED STATES OF AMERICA, Defendant-Appellee UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 861 F.2d 558 November 14, 1988 Plaintiff-appellants Harold and Enid Davis claimed charitable deductions under IRC section 170 for funds they sent to their two sons for their support while they served as full-time unpaid missionaries for the Church of Jesus Christ of LatterDay-Saints at the New York City Mission and at the New Zealand/Cook Islands Mission. These deductions were disallowed by the IRS. BACKGROUND A primary activity of the Church is its worldwide missionary program. Over 25,000 individuals have participated annually since 1977. Missionaries typically serve the Church for two years at a location assigned by the Church. Missionary work is uncompensated, but the Church will pay mission-related expenses if the missionary is unable to support himself or obtain the necessary funds from his family. Most missionaries are between the ages of nineteen and twenty-two; many receive payments from their parents to defray their living expenses. After an individual is "called" by the Church to serve as a missionary the Church advises parents of the amount that it believes will be necessary to provide for the missionary's support and requests their assistance. The life of a missionary is closely supervised. Mission rules prohibit missionaries from dating, attending movies or plays, or engaging in various sports or other activities. Missionaries are required to submit weekly reports detailing the time spent in Church service and explaining their expenses for the week. The Missionary Handbook contains the following admonition: "The money received for your support is sacred and should be spent wisely and only for necessary work. Keep expenses at a minimum. Keep records of all expenditures." The Church gives several reasons for its preference not to collect and distribute contributions for its missionaries. First, the Church feels that direct contributions to missionaries foster the Church doctrine of sacrifice and consecration. Second, the Church believes that direct transmittal promotes frugality by missionaries because of their awareness of the personal sacrifices that are being made on their behalf. Third, direct transmittal reduces the administrative and bookkeeping expenses that would otherwise be imposed on the Church. The appellants' sons, Benjamin and Cecil, both were "called" by the Church to serve as missionaries when they became nineteen years old. During 1980 and 1981 the appellants transferred $3480 and $4135 to Benjamin. Benjamin used this money primarily for living expenses. During 1981 appellants transferred $1518 to Cecil. Cecil also used this money primarily to pay his living expenses. The appellants filed two amended tax returns for 1980 and 1981, claiming as charitable contributions the full amounts they sent to their sons. DISCUSSION A. Applicable Law We take judicial notice of the fact that the Church is a qualified religious organization to which deductible contributions can be made. Internal Revenue Service Publication No. 78, Cumulative List of Organizations 216 (1984). Under Section 170, deductions are allowed for contributions "to or for the use of" qualified organizations. The requisite elements are that (1) the transfer of property is made with no expectation of a quid pro quo, (2) it is made to a qualified recipient, and (3) it is made "to or for the use of" the qualified recipient. The appellants argue that the payments to their sons were "for the use of" the Church and therefore deductible as charitable contributions. The government argues that the expenditures were not charitable contributions because they were never within the physical control of the Church. B. Charitable Contributions In situations where a taxpayer has claimed a charitable deduction for funds that have been earmarked for a specific individual, courts have considered whether the charity exercises control over the use of the funds. The appellants claim that actual control by the charity is a factor to be considered, but should not be required in all cases. The government responds that the deduction should be disallowed because the contributions were received directly by the missionaries from the taxpayer parents and were neither to nor for the use of the Church. The better reasoned approach, we feel, is to require that the recipient charity have control over the donated funds. The control gauge stems from the basic requirement that the beneficiary of a charitable contribution must be indefinite. When a taxpayer intends a contribution for a specific purpose, or even a specific individual, but the charity retains control over the funds, this requirement is satisfied. But when a taxpayer makes a contribution directly to the intended beneficiary so that the charity never possesses the funds, let alone controls their use, there can be no guarantee that the beneficiary will be indefinite. See Barry's Estate v. Commissioner, 311 F.2d 681 (9th Cir. 1982) (property bequeathed to member of Jesuit Order, as opposed to Order itself, not deductible though legatee obligated by Canon law to transfer property acquired to the Order). Here the charity lacked actual control over the funds. Contributions were deposited directly into the personal checking accounts of the taxpayers' sons. While the Church admonished the missionaries to spend their money wisely, the use to which the funds were put was solely within the control of the missionaries. CONCLUSION We do not question the high ideals of the Church or the valuable services it performs in connection with its missionary program. We are constrained by the law, however; and it is up to the legislature to provide the remedy that is sought by the appellants. The decision of the lower court is affirmed.

Question: The brothers Davis bravely did missionary work for the LDS Church. Their parents supported them financially. Discuss how you, as the Davis family’s CPA, would have argued to the IRS auditor (or the court) that the amounts paid by the Davis parents were properly deductible as charitable contributions.