Partnership P ("P") has two individual partners (A and B).  Each are 50% owners in P.  At the beginning of Year 1, A's outside basis was $1,000 and B's outside basis was $10,000.  During Year 1 P earned $2,000 of income from operations, $1,000 of tax exempt income, and paid off $10,000 of a recourse liability.  What income, gain or loss, if any, will A report on A's individual income tax return (for Year 1) as a result of being a partner in P?

Rob consumes two goods, x and y. He has an allowance of $50 per week and is not endowed with either of the goods. If the price of good x increases and his substitution and income effects change demand in opposite directions,

a. good x must be a Giffen good.

b. good x must be an inferior good.

c. WARP is violated.

d. good x must be a normal good.

e. There is not enough information to judge whether good x is a normal or inferior good.

PLEASE SHOW ALL WORK

The current price of a non-dividend paying stock is $50. Use a two-step tree to value a European put option on the stock with a strike price of $48 that expires in 12 months. Each step is 6 months, the risk free rate is 5% per annum, and the volatility is 50%. What is the value of the option according to the two-step binomial model. Please enter your answer rounded to two decimal places (and no dollar sign).

2. [Uncertainty and risk] A DM is presented with two jars. Jar 1 has 50 red and 50 blue balls. Jar 2 consists of 100 total balls each of which is either red or blue but the colors are in an unknown proportion. An experiment consists of drawing a single ball from each jar. The DM faces the following two choices. Choice 1 is between option 1a which pays $100 if the Jar 1 ball is red, and option 1b which pays $100 if the Jar 2 ball is red (and $0 otherwise). Choice 2 is between option 2a which pays $100 if the Jar 1 ball is blue, and option 2b which pays $100 if the Jar 2 ball is blue (and $0 otherwise). Suppose the DM chooses 1a over 1b and 2a over 2b (and has a strict preference in each case).

Are these choices consistent with subjective EU? In other words, does there exist a probability distribution over the contents of Jar 2 (that is, a belief that the proportion of Red balls is p and of Blue balls is 1-p) such that, given these beliefs, the choices of the DM can be rationalized by expected utility? If so, provide the subjective probabilities that rationalize the choices. If not, argue that there are no such probabilities. [Note: Because the outcomes are only $0 and $100, risk preferences play no role here. That is, all utility functions for which u($100) > u($0) are observationally equivalent on these choices. Notice that in order for the curvature of the utility function to be relevant, one would need to consider at least three wealth levels. This is the reason that I am asking only about probabilities and not also about the utility function in this question.]

Two firms face the following demand curve: P = 50 – 5Q, where Q = Q₁ + Q₂.

The firms cost functions are C₁ (Q₁) = 20 + 10Q₁ for firm 1 and C₂ (Q₂)= 10 + 12Q₂ for firm 2.

1. Suppose both firms have entered the industry. What is the joint profit maximizing level of output?                                                                                                                    [5Marks]
2. What is each firms equilibrium output and profit if they behave non-cooperatively? Use the Cournot model.                                                                                                 [5Marks]

c. How much should Firm 1 be willing to pay to purchase Firm 2 if collusion is illegal but a takeover is not?     [5Marks]

The AC Partnership has two partners - Amanda and Cheryl. Each partner has a 50% interest in the partnership. Amanda also owns 80% (80 shares) of the ZZZ Corporation. The other 20% of ZZZ are owned by Wendy who is not related to Amanda or Cheryl. Based on these facts, the AC partnership will be deemed to own ______ shares of ZZZ and Cheryl will be deemed to own _____ shares of ZZZ.

b. 20 shares, 20 shares.

c. 80 shares, 20 shares.

d. 80 shares, zero shares.

e. none of the above.

What are two reports that can be used to reconcile a cash register? Explain (50–80 words) the distinguishing features of each.

Consider the process of manufacturing orange juice concentrates. The facility operated at capacity, with one 8-hour shift per-day, six days a week, for a total of 36 weeks per year during the prime orange growing season. To simplify, capacity was measured in terms of the equivalent amount of finished juice concentrate. The key elements of the continuous production process are as follows:

(1) Storage: There are three sizes of oranges (small, medium and large) each stored separately in a bin with a capacity of 80,000 pounds.

(2) Juice Extraction: The extractor can process oranges of only one size at a time. The changeover time from one size to the other is 20 minutes. Irrespective of the size of the oranges, the extractor had the capacity to produce up to 20,000 pounds/hour of finished juice concentrate.

(3) Juice Filtration: Here seeds and small pieces of orange peel were filtered from the juice and discarded. The processing capacity of this step is 20,000 pounds/hour of finished concentrate. After it ran for 90 minutes, the machine’s filter had to be changed to clear the debris. The setup time (the time required to shut down the machine, change the filter, and restart the machine) is 30 minutes.

(4) Juice Concentration: Here, some of the water in the juice was removed as it flowed through the machine. No setups were required for this operation and had a capacity of up to 18,000 pounds of finished concentrate per hour. (5) Juice Testing and Storage: Here concentrated juice is tested for color and sugar content and separated into one of four large storage tanks. The total capacity of these four tanks is 250,000 pounds of concentrate. (6) Blending: The blending operation mixed juice concentrate from these four tanks (the proportion depended on each customer’s specification) at a rate of up to 22,000 pounds of finished product per hour. A 40-minute setup time was required to change from one blend to another.

The movement of oranges from delivery to storage bins and bins to extraction occurred with conveyer belts. Following extraction, the juice was pumped through pipes from one process step to another. The residue from extraction was removed and discarded continuously during the extraction. Assume that the production system was running only ONE size of oranges. Consider just the process steps two through four: extraction, filtration, and concentration.

Answer the following questions:

1. How much orange juice concentrate can be processed in one 8-hour workday?

2. Assume extraction had previously been setup for the size oranges being processed. How much idle time will there be in the extraction operation during one 8-hour workday?

3. If you could add storage capacity somewhere between steps two and four in this production line in order to increase daily output, where would you place it? How much storage would you add? Why?

4. If the cost of adding storage was $30/pound and the cost of reducing setup time by 50% using additional fixtures was $20,000 for the filter process and $10,000 for the extraction process, what action would you recommend in order to maximize the output of this production line?

5. How much will you recommend improvement(s) cost? How much additional capacity do you create?

The following events are considered for a throw with two dice:
A: The total of eyes is greater than 7.
B: Exactly one of the two numbers is a 5.
C: No 1 is rolled.
a) Calculate the probabilities
P (A), P (B), P (C), P (A ∩ B), P (A ∩ C), P (B ∩ C), P (A ∪ B), P (A | B), P (A | C), P (C | A), P (B | C).
b) Are events A and B independent or disjoint?

Match the following passages with the fallacy committed. Only one instance of a fallacy is used(False DilemmaImproper,Appeal to Authority,Post Hoc,Appeal to Ignorance,Hasty Generalization,or Two Wrongs)