Demand and supply are Key elements of the U.S. economic system. So, too, is competition. This exercise will challenge you to better understand the ethical dimensions of a system that relies on demand, supply, and competition.

The Situation

You are a businessperson in a small town, where you run one of two local pharmacies. The population and economics base are fairly stable. Each pharmacy controls about 50 percent of the market. Each is reasonably profitable, generating solid if unspectacular revenues.

The Dilemma

You have just been approached by the owner of the other pharmacy. He has indicated an interest either in buying your pharmacy or in selling his to you. He argues that neither of you can substantially increase your profits and complains that if one pharmacy raises its prices, customers will simply go to the other one. He tells you outright that if you sell to him, he plans to raise prices by 10 percent. He believes that the local market will have to accept the increase for two reasons: (1) The town is too small to attract national competitors, such as Walgreens, and (2) locals customers can’t go elsewhere to shop because the nearest town with a pharmacy is 40 miles away.

Questions for Discussion -

1. What are the roles of supply, demand, and competition in this scenario?

2. What are the underlying ethical issues?

3. What would you do if you were actually faced with this situation?

2. The table below gives information on the distance from various nearby towns to the famous Cupcake Town Lake (distance is in miles). There is no admission fee. The only cost of visiting Cupcake Lake is the travel cost, which costs $1/mile. The researcher estimates the relationship between the number of visits per capita (per person), x, and the one-way travel cost from the town in which people live, p. He finds this demand function to be: x = 30 – 1.2*p .

CITY OF ORIGIN POPULATION DISTANCE

ALABASTER 2000 12

BEAUTIFUL 4000 18

CORNUCOPIA 3000 20

DELIGHT 5000 30

(a) What is the cutoff price (the price at which demand falls to zero) with this demand function?

(b) Add columns to the table above identifying the cost of a visit to Cupcake Lake from each town, the predicted number of visits per capita from that town, and the total number of visits from the town (i.e., the visits per capita multiplied by the population).

(c) Why doesn’t the researcher observe anyone coming from certain places to Cupcake Lake?

(d) The authorities decide to make improvements at Cupcake Lake (they build a boathouse), which only residents of Alabaster are allowed to use. In consequence, Alabaster resident’s 2 demand function for Cupcake lake changes to x = 50 – 1.2p. The demand functions of residents of the other towns do not change. What is the economic value of this improvement to Alabaster residents?

Joe​ Henry's machine shop uses 2510 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the​ brackets: Annual demand 2510 Holding cost per bracket per year $ 1.60 Order cost per order $ 19.00 Lead time 2 days Working days per year 250 ​a) What is the​ EOQ? nothing units ​(round your response to two decimal​ places). ​b) What is the average inventory if the EOQ is​ used? nothing units ​(round your response to two decimal​ places). What would be the annual inventory holding​ cost? ​$ nothing ​(round your response to two decimal​ places). ​c) Given the​ EOQ, how many orders will be made​ annually? nothing orders ​(round your response to two decimal​ places). What would be the annual order​ cost? ​$ nothing ​(round your response to two decimal​ places). ​d) Given the​ EOQ, what is the total annual cost of managing​ (ordering and​ holding) the​ inventory? ​$ nothing ​(round your response to two decimal​ places). ​e) What is the time between​ orders? nothing days ​(round your response to two decimal​ places). ​f) What is the reorder point​ (ROP)? nothing units ​(round your response to two decimal​ places). Enter your answer in each of the answer boxes.

Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $38,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last her about 5 years, and she expects to drive it for 100,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $6,500. Assume that she will buy the van on August 15, 2015, and it will be ready for use on September 1, 2015. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. (what impact will the three methods of depreciation on Natalie's balance sheet at December 31 2017)

Lowest amount of net income =

Lowest amount of owner's equity=

Lowest net book value =

Greatest amount of net income =

Greatest amount of owner's equity=

Greatest net book value =

A consumer products testing group is evaluating two competing brands of tires, Brand 1 and Brand 2. Though the two brands have been comparable in the past, some technological advances were recently made in the Brand 2 manufacturing process, and the consumer group is testing to see if Brand 2 will outperform Brand 1. Tread wear can vary considerably depending on the type of car, and the group is trying to eliminate this effect by installing the two brands on the same random sample of 10 cars. In particular, each car has one tire of each brand on its front wheels, with half of the cars chosen at random to have Brand 1 on the left front wheel, and the rest to have Brand 2 there. After all of the cars are driven over the standard test course for 20,000 miles, the amount of tread wear (in inches) is recorded, as shown in Table 1.

According to Wikipedia, the speed of an adult cheetah varies Normally with a mean of 71.5 mph (miles per hour) and a standard deviation of 3.5 mph.

Hint: For each question ask yourself if the question is about the population information or Sampling distribution of sample means.

QUESTIONS BELOW:

1.What is the probability that a randomly chosen cheetah will run faster than 77.77mph? (Draw a picture with relevant values (x,z,p center, spread) and inflection points identified, and an appropriate label to support your full-sentence answer.)

2.What is the probability that a random selection of 16 cheetahs will have an average speed of 77.77 mph or slower? (Draw a picture with relevant values (x,z,p center, spread) and inflection points identified, and an appropriate label to support your full-sentence answer.)

3.How fast does a cheetah have to run to be in the top 10% of fastest cheetahs? (Draw a picture with relevant values (x,z,p center, spread) and inflection points identified, and an appropriate label to support your full-sentence answer.)

4.What is the probability that a random selection of 25 cheetahs will have an average speed between 65 and 80mph? (Draw a picture with relevant values (x,z,p center, spread) and inflection points identified, and an appropriate label to support your full-sentence answer.)

Based on what you observe here, would you recommend changing or keeping the warranty that goes along with this type of tire? If you change it, what would you recommend it to be? You must explain what are the possible pros and cons of your recommendations? While you don't need to do a financial analysis, present some of the costs that you considered in making your decisions. A tire company is testing their mileage warranty of 30,000 miles.

1. Some data gathered by the Department of Education which relates education levels based on

scores: achievement tests given to high school students for example

urban: factor. Is the school located in an urban area?

distance: distance from a 4-year college (in 10 miles)

tuition: average state 4year college tuition (in 1000 USD).

        Coefficients:

               Estimate Std. Error t value Pr(>|t|)    

        (Intercept)  9.141015   0.148905  61.388  < 2e-16 ***

        score        0.095596   0.002679  35.686  < 2e-16 ***

        urbanyes     0.025619   0.057090   0.449   0.6536    

        distance    -0.048723   0.010539  -4.623 3.88e-06 ***

        tuition     -0.142627   0.068517  -2.082   0.0374 *  

        ---

        Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

        Residual standard error: 1.58 on 4734 degrees of freedom

        Multiple R-squared:  0.221,   Adjusted R-squared:  0.2203 

        F-statistic: 335.7 on 4 and 4734 DF, p-value: < 2.2e-16

1. What is the estimated regression equation?
2. What variables are significant?
3. How do you interpret the variable urban (yes/no)?
4. How much of the variance in the model can be explained by the variables that you included?
5. In general what information does VIF regression give you in assessing a model?
6. An output from R shown below, gives the Variance Inflation Factors for your model. What do these numbers tell you?

        score     urban     distance  tuition 

        1.031628  1.105871  1.112577  1.027281 

2.32 The following are the grades that 50 students obtained on an accounting test:

Convert the distribution from classes 30-39, 40-49, 50-59, …, and 90-99 into cumulative “less than” distribution, beginning with “less than 30”.

2.34The following are the miles per gallon obtained with 40 tankful of gas:

Group these figures into a distribution having the classes 23.0-23.4, 23.5-23.9, 24.0-24.4, 24.5-24.9, 25.0-25.4, and 25.5-25.9.

b) Convert the distribution obtained in part (a) into a cumulative "or more" distribution, beginning with "23.0 or more" and ending with "26.0 or more."