Q1 Choose the correct option

A)Is there a problem, from an efficiency standpoint, of rationing a good via lottery?

        1. no, random, luck-of-the-draw ensures the good goes to the person who values it the most

        2. yes, nothing productive is done to get the good

        3. yes, but lotteries have never been used to ration something in the United States

        4. no, all rationing methods are equally good, from an efficiency standpoint

B)Suppose that after the Federal government requires cares to be equipped with airbags, people respond to airbags by not wearing their seatbelts. After all, seatbelts are uncomfortable! As a result of this, deaths in traffic accidents actually increased following the air bag mandate. This is an example of

        1. incentives do not influence individual behavior.

        2. demand curves sloping down.
3. the law of unintended consequences.      
4. people failing to consider make decisions "on the margin" (comparing marginal benefit with marginal cost).

C) Which method of rationing is the most efficient?

1. price   
2. waiting-in-line
3. lottery
4. rationing via the political process (voting)

D) Adam Smith coined something called the "diamond-water paradox" which says it is weird that diamonds cost more than water. After all, diamonds are a luxury good whereas water is a necessity. Using our guideposts to economic thinking, what can explain this paradox?

1.Producers of diamonds have more market power than producers of water
2; The opportunity cost of water is lower than the opportunity cost of diamonds.   
3. The marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
4. Water prices are held low by governments, since water is necessary for life.

Use the Article to answer the questions please: Social Distancing to Test If Technology Can Solve the Loneliness Epidemic By NICOLE VAN GRONINGEN

Article link: https://www.statnews.com/2020/04/07/using-social-distancing-to-test-if-technology-can-solve-the-loneliness-epidemic/

1) Who do you think is the intended audience (reader) of this article? That is, who is the author, Nicole Groningen, writing the article for? Explain your answer in 1-2 sentences.

2) What is the purpose of this article? What verb (argue, explain, suggest, or another verb) best describes what she is doing, and how can you tell? Explain your answer in 1-2 sentences.

3) According to paragraphs 11 and 12, how might technology companies benefit from this period of social distancing during COVID-19? Explain your answer in 1-2 sentences.

4) Based on the article, which of the following does NOT appear to be an interest of the author’s:

1. the wellbeing of the elderly

2. the finances of technology companies

3. the loneliness epidemic in the United States

4. Americans’ physical health

Explain your answer in several sentences by discussing how she addresses the other three topics in her article. You are not required to use paragraph # citations, but you may if you want to.

5) In one sentence and using your own words, explain the overall main idea of the article

6) Explain your reaction to this article. What stuck out to you? What connections did you make (text-to-text, text-to-self, text-to-world)? What questions did you have while reading? What was interesting? Did anything surprise you? Does it match your experience with technology? Share your reactions to the article in a paragraph of at least four sentences.

On December 31 last year, China alerted the WHO to several cases of unusual pneumonia in Wuhan, a city of 11 million people. The virus was unknown. Several of those infected worked at the city's Huanan Seafood Wholesale Market, which was shut down on January 1. As health experts worked to identify the virus amid growing alarm, today, more than 8.5 million coronavirus cases confirmed worldwide, with at least 450,000 deaths and 4 million recoveries. The disease was confirmed to have reached Turkey on 11 March 2020, after a man who had returned to Turkey from Europe, tested positive.

As many countries and world capitals have been put under strict lockdown, major industrial production chains have been brought to a halt. Governments around the world have urged employees to work from home where possible. The travel industry has been badly damaged, with airlines cutting flights and customers cancelling business trips and holidays. In the United States, the price of a barrel of petrol turned negative for the first time in history.Together, we observed that the health crisis gradually turned into an economic crisis.

After this short reminder at the top; write an essay discussing the economic impacts of the shock on Turkey’s economy. In your article, discuss the effects of this economic shock on Turkish economy using the concepts of GDP, growth, inflation, unemployment, money markets, interest rates, aggregate supply and aggregate demand. Use a narrative based on the economic theories we saw in the course. Connect your ideas to each other with a scientific background. Give policy suggestions to shorten the effect of this shock on Turkish economy. While giving the policies keep in mind and state the constraints that the Turkish economy currently facing. Articles that are not scientifically written or written on internet slogans may not bring you the points you want

On December 31 last year, China alerted the WHO to several cases of unusual pneumonia in Wuhan, a city of 11 million people. The virus was unknown. Several of those infected worked at the city's Huanan Seafood Wholesale Market, which was shut down on January 1. As health experts worked to identify the virus amid growing alarm, today, more than 8.5 million coronavirus cases confirmed worldwide, with at least 450,000 deaths and 4 million recoveries. The disease was confirmed to have reached Turkey on 11 March 2020, after a man who had returned to Turkey from Europe, tested positive.

As many countries and world capitals have been put under strict lockdown, major industrial production chains have been brought to a halt. Governments around the world have urged employees to work from home where possible. The travel industry has been badly damaged, with airlines cutting flights and customers cancelling business trips and holidays. In the United States, the price of a barrel of petrol turned negative for the first time in history.Together, we observed that the health crisis gradually turned into an economic crisis.

After this short reminder at the top; write an essay discussing the economic impacts of the shock on Turkey’s economy. In your article, discuss the effects of this economic shock on Turkish economy using the concepts of GDP, growth, inflation, unemployment, money markets, interest rates, aggregate supply and aggregate demand. Use a narrative based on the economic theories we saw in the course. Connect your ideas to each other with a scientific background. Give policy suggestions to shorten the effect of this shock on Turkish economy. While giving the policies keep in mind and state the constraints that the Turkish economy currently facing. Articles that are not scientifically written or written on internet slogans may not bring you the points you want

Natural Mosaic Company (U.S.) is considering investing Rs50,000,000 in India to create a wholly owned tile manufacturing plant to export to the European market. After five years, the subsidiary would be sold to Indian investors for Rs100,000,000. A pro forma income statement for the Indian operation predicts the generation of Rs7,000,000 of annual cash flow, is listed in the following table.

Sales revenue    30,000,000

Less cash operating expenses (17,000,000)

   ----------------

Gross income 13,000,000

Less depreciation expenses (1,000,000)

   ---------------

Earnings before interest and taxes 12,000,000

Less Indian taxes at 50%    (6,000,000)

-----------------

Net income 6,000,000

Add back depreciation 1,000,000

   -------------

Annual cash flow 7,000,000

The initial investment will be made on December 31, 2011, and cash flows will occur on December 31st of each succeeding year. Annual cash dividends to Philadelphia Composite from India will equal 75% of accounting income. The U.S. corporate tax rate is 40% and the Indian corporate tax rate is 50%. Because the Indian tax rate is greater than the U.S. tax rate, annual dividends paid to Natural Mosaic will not be subject to additional taxes in the United States. There are no capital gains taxes on the final sale. Natural Mosaic uses a weighted average cost of capital of 14% on domestic investments, but will add six percentage points for the Indian investment because of perceived greater risk. Natural Mosaic forecasts the rupee/dollar exchange rate for December 31st on the next six years are listed below.

R$/$    R$/$   

(2011) 50    (2014) 62

(2012) 54 (2015)    66

(2013) 58 (2016)    70

What is the net present value and internal rate of return on this investment?

Comment:

1. You have to do this problem from the viewpoint of the parent.

Thank you,

a. Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting €0.855/$1.00 Credit Suisse is offering SF1.1825/$1.00. UBS’s current direct quoting €/SF currently @ € 0.754/SF

i. (4pts) Prove and explain whether at these quoted rates there a chance for triangular arbitrage (Hint: Use the no arbitrage cross exchange rate here).

ii. (8pts) Show and explain how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) Assume you have $5,000,000 with which to conduct the arbitrage. If your answer in a is that there is no chance of arbitrage profits please say so.

b. (8 pts) Assume the following information: You have $400,000 to invest: Current spot rate of Sudanese dinar (SDD) = $.00570 90-day forward rate of the dinar = $.00569 90-day interest rate in the U.S. = 4.0% 90-day interest rate in Sudan = 4.2% Show and explain how given the information above you will conduct covered interest arbitrage, what amount will you have after 90 days.

c. (14 pts) Lakonisho Equipment has an investment opportunity in Europe. The project costs €10.5 million and it is expected to produce cash flows of €1.7 million, €2.4 million, and €3.3 million, for years 1, 2 and 3 respectively. The current spot exchange rate is $1.36/€; the current risk-free rate in the United States is 2.3%, compared to that in Europe of 1.8%. The appropriate discount rate for the project is estimated to be 13%, the U.S. cost of capital for the company. In addition, the subsidiary can be sold at the end of the 3 years for an estimated €7.5 million. What is the NPV of the project? What is the IRR of the project? Should Lakonisho Invest in this project?

Each of the following scenarios describes a correlation between two variables. State whether the correlation is most likely due to a coincidence, a common underlying cause, or a direct cause. If there is an underlying cause, state what you think it is. If you believe that one variable directly causes the other, suggest possible physical causation.

1. Sales of winter boots are positively correlated with the sale of sidewalk salt.

2. I’ve noticed that the more hours I work each week, the more “Happy Meals” toys (from McDonald’s Restaurants) we collect at home.

3. A Kindergarten teacher noted that the amount of money he spends on art supplies each year is positively correlated with the amount he spends buying snacks for the class.

4. If I remember to bring my umbrella to work it doesn’t rain, but if I forget it at home it does. Sigh.

5. A large company notices that since it changed to more flexible hours, its absentee rate has fallen dramatically.

6. My neighbor the roofer hates when it rains. He says that the more days it rains, the less he earns a year.

7. The day on which we begin daylight savings time each fall was recently changed from mid-fall to early November and candy companies nationwide reported higher than usual sales in October.

8. People who drive red cars get caught speeding more often than those who drive other color cars.

9. Augsburg’s women’s hockey team wins more games when the three captains play.

10. The divorce rate in Maine is closely correlated to the per capita consumption of margarine in the United States. (This is actually a strong positive correlation.)

1) Recently, McDonald's re-introduced its Szechuan dipping sauce as an option at its restaurants located across the United States. Suppose that the U.S. government considers the Szechuan sauce market as a potential source of government revenue and that the government decides to levy an excise tax on Szechuan dipping sauce of $.80 per unit of sauce. The market clearing price before the excise tax is levied is $1.20 and the equilibrium quantity is 1500 units of Szechuan dipping sauce. After the excise tax is levied the consumer will pay $1.80 and the equilibrium quantity in the market will drop to 1200 units of Szechuan dipping sauce.

a. Given the above information, derive the equations for the supply curve and the demand curve in Szechuan source market.

b. Consider this market prior to the implementation of the excise tax. Calculate the values of Consumer Surplus (CS), Producer Surplus (PS) and Total Surplus (TS) when this market is initially at equilibrium.

c. Now, consider this market after the implementation of the excise tax. Calculate the value of Consumer Surplus with the excise tax (CSt), Producer Surplus with the excise tax (PSt), the tax revenue the government receives from implementing the tax (Tax Revenue), Total Surplus in this market after the excise tax is implemented (TSt) and the Deadweight Loss (DWL) due to the implementation of this excise tax. 2

d. Consider this market after the implementation of the excise tax. Calculate the Consumer Tax Incidence(CTI) and Producer Tax Incidence(PTI) of this excise tax. Which one is larger? If the demand curve became more elastic (eg: if the new demand curve was “flatter” but went through the initial equilibrium point before the excise tax was levied), would consumers pay a higher or lower share of the total taxes collected? What conclusion can you make about the relationship between elasticity and tax incidence?

Case Study: ( 6 marks)

Major "Big 6" Certified Public Accounting firms have three sources of revenue or three divisions: Audit, tax, and Management Consulting. But the real power resides in the Audit Department because the Audit Partners earn between $100,000-750,000 per year. An annual audit of a large U.S. corporation can cost over $500,000 each year.

The Securities and Exchange Commission (SEC) of the federal government requires that all corporations selling stock on the New York Stock Exchange be audited annually by an independent national CPA firm. The Audit Partner in-charge of the engagement directs the staff auditors to keep audit workpapers for evidence in case of a law suit. These workpapers show that the corporation is or is not maintaining generally accepted accounting principles (GAAP).

During an audit in Hollywood, California a staff auditor was completing an audit of a home health care corporation. During the investigation it was noticed that some of the accounting records were missing. It was common knowledge that the prior corporate controller had embezzled hundreds of thousands of dollars from the corporation and had fled the United States. The staff auditor commented in the workpapers that the missing files could be due to the embezzlement. Upon reviewing the workpapers, the Audit Manager rebuked the staff auditor for mentioning the embezzlement in the workpapers.

Questions:

1          What are the issues involved here? Explain in your own words

2          Should the audit workpapers be re-done? Explain in your own words

3          What would you do? Explain in your own words

4          What are the short and long term consequences of not reporting the embezzlement in the workpapers? Explain in your own words

5          What are the legal ramifications of this case? Explain in your own words

6          Who is affected by the note in the papers: stockholders, employees, auditors, the community in general? Explain in your own words

Major "Big 6" Certified Public Accounting firms have three sources of revenue or three divisions: Audit, tax, and Management Consulting. But the real power resides in the Audit Department because the Audit Partners earn between $100,000-750,000 per year. An annual audit of a large U.S. corporation can cost over $500,000 each year. The Securities and Exchange Commission (SEC) of the federal government requires that all corporations selling stock on the New York Stock Exchange be audited annually by an independent national CPA firm. The Audit Partner in-charge of the engagement directs the staff auditors to keep audit workpapers for evidence in case of a law suit. These workpapers show that the corporation is or is not maintaining generally accepted accounting principles (GAAP). During an audit in Hollywood, California a staff auditor was completing an audit of a home health care corporation. During the investigation it was noticed that some of the accounting records were missing. It was common knowledge that the prior corporate controller had embezzled hundreds of thousands of dollars from the corporation and had fled the United States. The staff auditor commented in the workpapers that the missing files could be due to the embezzlement. Upon reviewing the workpapers, the Audit Manager rebuked the staff auditor for mentioning the embezzlement in the workpapers. Questions:

1 What are the issues involved here? Explain in your own words ?

2 Should the audit workpapers be re-done? Explain in your own words?

3 What would you do? Explain in your own words?

4 What are the short and long term consequences of not reporting the embezzlement in the workpapers? Explain in your own words ?

5 What are the legal ramifications of this case? Explain in your own words?

6 Who is affected by the note in the papers: stockholders, employees, auditors, the community in general? Explain in your own words