Fork Company is a rapidly growing start-up business. The bookkeeper, who was hired ten months ago, left Hong Kong after the company's manager discovered that a large sum of money had disappeared over the past two months. An audit discovered that the bookkeeper had written and signed several checks made payable to his girlfriend and then recorded the checks as salaries expense. The girlfriend, who cashed the checks had never worked for the company, left Hong Kong with the bookkeeper. As a result, the company incurred an uninsured loss of $110,000.

Discuss which principles of internal control appear to have been ignored for the For Company.

An increase of tariff on steel in the US will increase domestic steel production and will reduce the quantity of steel imports in the US. Domestic producers of steel in the US will be better off, and domestic consumers of steel in the US will be worse off. With a tariff, the sum of the producers’ and the consumers’ surplus in the US steel market will decrease by an amount referred to as a deadweight loss. Is it true? Please explain, why?

6. You are interested in an International Portfolio made up of US and Canadian securities. The return on US is 15% and the return on Canada is 20%. The standard deviation of returns for US is 30% while that of Canada is 20%. If the correlation between US and Canada is -1, obtain the relevant weights for US and Canada to construct an international portfolio with zero risk. Compute the expected return on such a portfolio.

A POLYGRAPH (LIE DETECTOR) IS AN INSTRUMENT USED TO DETERMINE IF AN INDIVIDUAL IS TELLING THE TRUTH. THESE TESTS ARE CONSIDERED TO BE 95 % RELIABLE. IN OTHER WORDS, IF AN INDIVIDUAL LIES, THERE IS A .95 PROBABILITY THAT THE TEST WILL DETECT A LIE. LET THERE ALSO BE A .025 PROBABILITY THAT THE TEST ERRONEOUSLY DETECTS A LIE EVEN WHEN THE INDIVIDUAL IS ACTUALLY TELLING THE TRUTH. CONSIDER THE NULL HYPOTHESIS, "THE INDIVIDUAL IS TELLING THE TRUTH, THE ANSWER THE FOLLOWING QUESTIONS

WHAT IS THE POBABLITY OF A TYPE I ERROR?

WHAT IS THE PROBABILITY OF A TYPE II ERROR

5. Which of the following is NOT considered when the government determines whether someone is unemployed?

a. Whether the individual is 16 or older

b. The wage the individual is paid

c. Whether the individual has looked for work

d. Whether the individual is currently employed

6. Suppose the civilian non-institutional population equals 150,000; there are 70,000 employed persons and 10,000 unemployed persons. How many people are not in the labor force?

a. 10,000

b. 60,000

c. 70,000

d. 80,000

During most of the 1800s the US government only protected copyrights for US citizens. In particular, books written by British authors, which were very popular in the US, could be printed and sold by US publishers without paying royalties to British authors. Because the US did not enforce copyright for British authors, the United Kingdom did not enforce copyright for US authors, meaning that British publishers could print and sell books by US authors without paying any royalties to them. It was well understood, however, that if the US government would begin to enforce copyright for British authors, the British would reciprocate, and enforce copyright for US authors.

Consider the position of a US Congressman in the late 1800s, considering a bill that would extend copyright protection to British authors (and gain British protection for US authors in return). Assume that his goal is to improve the overall welfare of US citizens. He understands that extending copyright to works of British authors will raise the price that US citizens have to pay for those books. He also understands that the purpose of copyright is to encourage the production of creative works (in this case, works of literature as well as nonfiction scholarship, like science, philosophy and history), by making it more lucrative to be an author of creative works. So, he has to consider the marginal impact of this bill on the supply of new books by English language authors, both British and American.

a. Below are two facts. Say whether each one of these facts would make him more or less likely to vote for the bill, and explain why. (Think in terms of how each of these facts affects the marginal benefits to US citizens and/or the marginal costs to US citizens of a policy honoring British copyrights, and getting the British to honor US copyrights in return.)

(i). Works by British authors are very popular in the US, and US scientists, engineers, and school teachers rely heavily on the scholarly works produced by the British.

(ii). American literature has never been very popular in Britain, and the US, as a young and largely agrarian nation, does not produce much research.

b. A group of American authors of fiction sends a letter to the Congressman, trying to affect his vote. Would you expect this group to support or oppose the bill? Explain (Hint: Books by British authors are notably cheaper at US bookstores than books by American authors).