The following operating information reports the results of Riverbed Company’s production and sale of 12,500 air-conditioned motorcycle helmets last year. Based on early market forecasts, Riverbed expects the same results this year.

The American Motorcycle Club has offered to purchase 2,000 helmets at a price of $100 each. Riverbed has sufficient idle capacity to fill the order, which would not affect the company’s cost structure or regular sales.

If Riverbed accepts this order, by how much will its income increase or decrease?

Public Goods

Two people living in the same small neighborhood make up the total demand for streetlights:

P1= 200-2Q

P2= 100-Q

assume streetlights in the area a pure public good.

A. Define Pure Public good. Briefly explain why the private sector might fail to produce enough pure public goods.

B. Assume the streetlights can be provided at $240 per unit. Why would it be inefficient to just charge each person $120 per lighthouse (split the cost between them)?

C. What is the efficient number of lighthouses to build, and what should each person pay per lighthouse (Lindahl price)? Draw and solve.

A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 270 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Required:

Prepare the journal entry to recognize the sale of 10 new subscriptions, clearly identifying the revenue or unearned revenue associated with each performance obligation.

1. Suppose that a simple economy produced only three goods: wheat, automobiles, and chairs. The table below lists the quantity and prices for each of the goods for year 2000 and 2010. Based on table, answer the following questions

1. Calculate nominal GDP in year 2000.
2. Suppose prices doubled by 2010 but production stayed the same. Calculate the nominal value of GDP in 2010.
3. Suppose production in wheat and chairs rose by 10 percent in 2010 compared to 2000. Automobile production fell by 5 percent. If prices remain unchanged over this period, what is nominal value of GDP in 2010?

Question 2

Consider the demand schedule for the product produced by a monopolist in Table 2.

Table 2:

a) Complete the table.

                                                                                                                              [14 marks]

b) What do the data in the table indicate about the relationship between total revenue and

    marginal revenue?                                      

                                                                                                                                [3 marks]

c) What do the data in the table indicate about the elasticity of demand?

                                                                                                                                [3 marks]

                                                                                                                  [Total marks: 40]

On January 1, 2017, Wilcorp, Inc. (WINK), had:

200,000 common shares outstanding

10,000 8% preferred shares outstanding with a $100 par amount

On March 1, 2017 WINK issued another 25,000 common shares. Also assume that WINK had issued options in 2017 to buy 25,000 shares of common stock at $45 per share and that the market price is $50 per share. Net income for WINK was $600,000 in 2017.

Calculate Basic EPS. To receive full credit, you must show all of your work in the space provided below.

Calculate Diluted EPS. To receive full credit, you must show all of your work in the space provided below.

Blue Co has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other outlet for sales.

Current information relating to Division A is as follows:

Green Co has offered to sell the component to Division B for €140 per unit.

If Division B accepts this offer, Division A will be closed. If Division B accepts Green Co’s offer, what will be the impact on profits per year for the group as a whole?

Suppose AD in a country is given by P=210-.02Y, SRAS is given by P=100, and potential output is equal to 7000. The marginal propensity to consume is .4.

A. What type of output gap exists and what is the size of the gap?

B. If the government wanted to push the economy back towards LR-equilibrium by changing taxes and they changed net taxes such that the new AD curve is equal to P=250-.02Y, by how much did they change net taxes?

C. What happens to real GDP and the price level in the short-run?

D. If they had perfect information about the economy, by how much would they have changed net taxes?

E. What is the corresponding AD curve?

Suppose output, Q, is produced by labor, L, and capital, K, according to the following function: Q = K ½ L½.. Suppose the firm sells each unit of output in a competitive market for a price P = $100. Suppose the firm hires each unit of labor in a competitive market for a wage W = $25. Suppose the firm has to make do for now with a stock of capital K = 49; moreover, suppose each unit of capital costs R = $75.

A. How much labor will be demanded by the firm? Demonstrate and explain.

B. At the “optimal” quantity of labor, what is the capital-to-labor ratio K/L? Demonstrate and explain.

C. Utilizing the “optimal” quantity of labor, how much profit will the firm earn?

part 1. You have been negotiating the purchase of real estate all day and the negotiations have turned nasty. The remaining issue is the purchase price for the real estate. The seller is screaming at you that this land has been in his family for 100 years and you do not understand its market value. How would you handle his screaming and what other steps would you take to finalize these negotiations?

part 2. Suzie has been asked to lead a team traveling to Peru to negotiate a purchase agreement for a key component to your company’s major product line. What pre-negotiation steps should Suzie take before departing for the trip?