In 2018, the Chicago Transit Authority (CTA) faced a large budget shortfall, due to state-wide budget cuts. In an effort to balance their budget, CTA raised the fare for one train ride from $2.25 to $2.50 on January 1, 2018. In 2017, prior to the fare hike, annual ridership was about 225 (measured in millions). CTA also conducted a study that year and found that the price elasticity of demand was ???? = −0.5. a) Estimate a linear market demand function for train rides in Chicago. Graph the (inverse) market demand curve and show the price/quantity point where the price of a ride is $2.25. What is the price elasticity of demand at that point? Did the increase in fare increase or decrease revenue in the short run, based on the information provided? Can you justify your answer without actually finding the new revenue? b) What is the predicted number of riders (in millions) in 2018? Show this price/quantity point on your graph. Suppose we also know that in 2018, gas prices were low and Uber and Lyft availability increased in Chicago. Would this information change your predicted ridership for 2018? If so, demonstrate this change on your graph, and explain why your graph is consistent with the information given. (Note: Do not try to find a new value for ridership; just describe whether it would be higher or lower than your original projection).

4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.

B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new graph. Label it “budget line B.” Once again, preferences are perfect complements: utility = min{X,Y}. Both are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.

C. Herman Cain ran for president in the year 2000. He made the following policy proposal: Reduce the federal income tax, and make up the federal revenue shortfall with a new national sales tax charged, in addition to the state and local sales tax. Total federal tax revenue would be unchanged. Herman Cain stated that the average person would be better off. Use the objective of the consumer (utility maximization, as illustrated in parts A and B) to explain and evaluate if Herman Cain was right or wrong.

The following trial balance was prepared from the ledger accounts of Ricardo Company: RICARDO COMPANY Trial Balance April 30, Year 1 Account Titles Debit Credit Cash $ 78,400 Accounts receivable 49,000 Supplies 3,700 Prepaid insurance 5,500 Land $ 10,000 Accounts payable 11,500 Common stock 100,000 Retained earnings 34,255 Dividends 9,900 Service revenue 93,000 Rent expense 11,500 Salaries expense 35,300 Operating expense 36,200 Totals $ 229,500 $ 248,755 When the trial balance failed to balance, the accountant reviewed the records and discovered the following errors: 1. The company received $655 as payment for services rendered. The credit to Service Revenue was recorded correctly, but the debit to Cash was recorded as $1,030. 2. A $1,850 receipt of cash that was received from a customer on accounts receivable was not recorded. 3. A $370 purchase of supplies on account was properly recorded as a debit to the Supplies account. However, the credit to Accounts Payable was not recorded. 4. Land valued at $10,000 was contributed to the business in exchange for common stock. The entry to record the transaction was recorded as a $10,000 credit to both the Land account and the Common Stock account. 5. A $1,450 rent payment was properly recorded as a credit to Cash. However, the Salaries Expense account was incorrectly debited for $1,450. Required Prepare a corrected trial balance for Ricardo Company.

A tax on a good
A. gives buyers an incentive to buy less of the good than they otherwise would buy.
B. gives sellers an incentive to produce less of the good than they otherwise would produce.
C. creates a benefit to the government, the size of which exceeds the loss in total surplus to buyers and sellers.
D. All of the above are correct.
E. A and B, only

When a tax is levied on sellers of a good,
A. government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax.
B. a wedge is placed between the price buyers pay and the price sellers effectively receive (and keep).
C. the effective price to buyers decreases because the demand curve shifts leftward.
D. there is an increase in the quantity of the good supplied.
E. None of the above

Which of the following statement(s) is correct?
(x) Deadweight loss measures the loss in a market to buyers and sellers that is not offset by an increase in government revenue.
(y) Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade due to marginal buyers and sellers leaving the market.
(z) The deadweight loss from taxes is lower when tax rates are lower than when tax rates are higher.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

1.

If the marginal product is _____, the value of marginal product must be _____.

Select one:

a. rising; zero

b. falling; falling

c. rising; falling

d. falling; rising

2.

The amount by which an additional unit of a factor increases a firm's total _____ during a period is the _____.

Select one:

a. cost; value of marginal product

b. revenue; marginal factor cost

c. cost; marginal product

d. revenue; value of the marginal product

3.

The demand for factors of production is called a derived demand because it is:

Select one:

a. derived from the demand for the outputs that are produced by the factors of production.

b. not easy to determine and must be derived by a technical (and often complicated) process.

c. derived on the basis of questions posed to residents during the census.

d. derived from the available supply of factors, such as land, that can be overexploited.

4.

A firm's demand curve for labor is:

Select one:

a. its marginal cost curve.

b. its marginal product curve.

c. its value of the marginal product of labor curve.

d. horizontal if it is in perfect competition.

5.

When a firm is a perfect competitor in the product market, its demand curve for labor will _____ because the _____ product declines as additional workers are hired.

Select one:

a. slope downward; marginal

b. be horizontal; average

c. slope downward; average

d. slope upward; marginal

Jordan Company’s annual accounting year ends on December 31. It is now December 31, 2015, and all of the 2015 entries have been made except for the following:

a. The company owes interest of $600 on a bank loan. The interest will be paid when the loan is repaid on September 30, 2016. No interest has been recorded.

b. On September 1, 2015, Jordan collected six months’ rent of $4,200 on storage space. At that date, Jordan debited Cash and credited Unearned Revenue for $4,200.

c. The company earned service revenue of $2,300 on a special job that was completed December 29, 2015. Collection will be made during January 2016. No entry has been recorded.

d. On November 1, 2015, Jordan paid a one-year premium for property insurance of $3,600, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.

e. At December 31, 2015, wages earned by employees but not yet paid totaled $1,000. The employees will be paid on the next payroll date, January 15, 2016. f. Depreciation of $1,200 must be recognized on a service truck purchased this year. g. The income after all adjustments other than income taxes was $29,000. The company's income tax rate is 25%. Compute and record income tax expense.

Determine the accounting equation effects of each required adjustment.

Intangibles: Balance Sheet Presentation and Income Statement Effects Clinton Company has provided information on intangible assets as follows: A patent was purchased from Lou Company for $1,140,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of $900,000 when Lou sold it to Clinton. During 2019, a franchise was purchased from Rink Company for $460,000. In addition, 6% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $1,700,000. Clinton estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase. Clinton incurred R&D costs in 2019 as follows: Materials and equipment $133,000 Personnel 144,000 Indirect costs 53,000 $330,000 Clinton estimates that these costs will be recouped by December 31, 2020. On January 1, 2019, Clinton estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 10 years from January 1, 2019.

Required: 1. Prepare a schedule showing the intangibles section of Clinton's balance sheet at December 31, 2019.

2. Prepare a schedule showing the income statement effects for the year ended December 31, 2019, as a result of the previously mentioned facts.

Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2013. Assume that all balance sheet items reflect account balances at December 31, 2013, and that all income statement items reflect activities that occurred during the year then ended. Accounts receivable $ 30,100 Depreciation expense 11,800 Land 25,000 Cost of goods sold 89,500 Retained earnings 60,000 Cash 9,900 Equipment 70,500 Supplies 5,900 Accounts payable 22,400 Service revenue 24,800 Interest expense 1,300 Common stock 8,000 Income tax expense 14,586 Accumulated depreciation 42,000 Long-term debt 38,000 Supplies expense 13,100 Merchandise inventory 29,000 Sales revenue 147,000 Required: a. Calculate the total current assets at December 31, 2013. Loading... b. Calculate the total liabilities and stockholders’ equity at December 31, 2013. Loading... c. Calculate the earnings from operations (operating income) for the year ended December 31, 2013. Loading... d. Calculate the net income (or loss) for the year ended December 31, 2013. Loading... e. What was the average income tax rate for Pope’s Garage for 2013? Loading... f. If $17,500 of dividends had been declared and paid during the year, what was the January 1, 2013, balance of retained earnings? Loading...

Chirp Hearing is owned by Christina Howell and provides hearing aids and other auditory services. At the end of November 2018, the company had the following adjustments.

Nov 30 Interest on the bank loan is set at 10%, one month of interest has accrued

Nov 30 The balance of the prepaid insurance is for the remaining 10 months of the insurance policy, one month of insurance has been used

Nov 30 The equipment was purchased on September 1,2018 and will have a useful life of seven years, after which it will have no residual value, depreciation is recorded every month, record depreciation for November

Nov 30 Chirp hearing completed 650 of work that was previously unearned

Nov 30 Office supplies used during the month totaled 400

Use the following trial balance, complete the adjustments and the adjusted trial balance in the spreadsheet