An economy produces two goods: food and ovens. There are 50 workers, each of whom can produce 100 units of food OR 1 oven in a year. Wages are $800 per worker per year. The price of a unit of food is $10, and the price of an oven is $1000. Currently, 30 workers produce food and the rest produce ovens. The government buys 200 units of food a year. There is no depreciation or ROW sector in this economy. a. Calculate the level of consumption, investment and government expenditures, and national product in this economy. b. What are the sales, costs, profits, investments, and dividends? c. Assume that no profits are distributed to the households. The government taxes the income of households only at 10%. Calculate the tax revenue, and write down the budget of the government. Is the government running a deficit or a surplus? d. Show that national income = national product in this economy e. Write down the national Savings =Net Investment relationship and verify it.
In: Economics
Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government will sell 40 pollution permits for $75 each. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. Neither firm produces any less output, but they both conform to the law. It is likely that between the cost of permits and the cost of additional pollution abatement,
a. Firm B will spend $3,500.
b. Firm B will spend $3,000.
c. Firm A will spend $4,000.
d. Firm A will spend $4,500.
In: Economics
Helen has two children. Assume that the probability of each child being a girl is 50%, and is independent with the gender of the other child. Given that at least one of Helen’s children is a girl, what is the probability that the other child is a boy?
(A) 1/3 (B) 1/2 (C) 2/3 (D) 3/4 (SHOW WORK)
In: Statistics and Probability
Currently Zebe Corporation stock is trading at a price of $50. You are considering two options that expire in January 2019.
a. As a function of Zebe Corp’s stock price at expiration, draw a payoff diagram for a call option with a strike price of $60.
b. As a function of Zebe Corp’s stock price at expiration, draw a payoff diagram for a put option with a strike price of $60.
c. Suppose the call option in (a) trades at a price of $2, while the put in (b) trades at $14. For each of the options, compute the break even price of the stock such that the cost of the option is retrieved by the option buyer.
d. Using a payoff diagram, show how a put option can be used to provide portfolio insurance.
e. A long straddle involves purchasing both a call and put option on the same stock at the same strike price and expire at the same time. Draw a payoff diagram for a long straddle.
f. When might an investor use a long straddle?
In: Finance
A stock is currently at $50. Over each of the next two 6-month periods, the stock may move up to a factor 1.2 or down by a factor of 0.8 in each period. A European put option with strike price of $48 and maturity of one year is available. The current risk-free rate is 4.0% per year.
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European put option?
c. Find the time value for this put option.
d. What is the price of a European call option with the same strike price and maturity?
e. Is the call option in the money or out of the money? Explain f. Find the time value for this call option.
In: Finance
A stock is currently at $50. Over each of the next two 6-month periods, the stock may move up to a factor 1.2 or down by a factor of 0.8 in each period. A European put option with strike price of $48 and maturity of one year is available. The current risk-free rate is 4.0% per year .
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European put option?
c. Find the time value for this put option.
d. What is the price of a European call option with the same strike price and maturity?
e. Is the call option in the money or out of the money? Explain f. Find the time value for this call option.
In: Finance
two aqueous solutions are prepared. Solution A is prepared by dissolving 50 grams of ethylene glycol (62.07 g/mol) into 1 kg of water. Solution B is prepared by dissolving 50 grams of propylene glycol (76.09 g/mol) into 1 kg of water. Calculate the freezing points for each.
In: Chemistry
You are a profit-maximizing firm. Suppose there are two types of customers (50% of 1 type, 50% of the other) who shop in your specialty clothing store. Consumers of type R will pay $80 for a coat and $60 for pants. Consumers of type S will pay $60 for a coat and $75 for pants. Your firm faces no competition and but it does pay for the clothing, $30 per coat and $50 per pair of pants, i.e. MCcoat = $30 and MCpants= $50. You can’t price discriminate. You offer the same prices to all your customers.
(Show your work)
(A) Suppose you post a price for a coat and a price for pants. What are the profit-maximizing prices to charge?
Answer: Price for coat = $_______ ; Answer: Price for pants =$_________
(Show your work)
(B) Suppose instead that you only offer a bundle of one coat and one pair of pants (which we would call a suit.) What is the profit-maximizing price to charge for the suit?
Answer: Price for suit = $_______
(Show your work)
( C) Answer True or False and then show or explain how you reached your conclusion.: Profits in Part (B) with bundling are higher than in Part (A) of this problem.
Answer: ________________
(Show your work)
In: Economics
You are a profit-maximizing firm. Suppose there are two types of customers (50% of 1 type, 50% of the other) who shop in your specialty clothing store. Consumers of type R will pay $80 for a coat and $60 for pants. Consumers of type S will pay $60 for a coat and $75 for pants. Your firm faces no competition and but it does pay for the clothing, $50 per coat and $30 per pair of pants, i.e. MCcoat = $50 and MCpants= $30. You can't price discriminate. You offer the same prices to all your customers. (Show your work)
(A) Suppose you post a price for a coat and a price for pants. What are the profit-maximizing prices to charge? Answer: Price for coat = $_______ ; Answer: Price for pants =$_________
Suppose instead that you only offer a bundle of one coat and one pair of pants (which we would call a suit.) What is the profit-maximizing price to charge for the suit? Answer: Price for suit = $_______
Answer True or False and then show or explain how you reached your conclusion: Profits in Part (B) with bundling are higher than in Part (A) of this problem. Answer: ________________
In: Economics
2. Suppose that a box is known to contain 50 red and 25 blue marbles. Two marbles are to be drawn in succession. The first marble is set aside and its color noted. It is not placed back into the box before the second marble is drawn.
a. Sketch a probability tree which represents this situation.
b. What is the probability that the second marble is red, if the first marble is red?
c. If the second marble is blue, what is the probability that the first marble is red?
In: Statistics and Probability