Suppose the 180-day S&P 500 futures price is 1,407.32, while the cash price is 1,389.43. What is the implied dividend yield on the S&P 500 if the risk free interest rate is 4.6 percent? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

XYZ stock price and dividend history are as follows:

An investor buys six shares of XYZ at the beginning of 2015, buys another two shares at the beginning of 2016, sells one share at the beginning of 2017, and sells all seven remaining shares at the beginning of 2018.

b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2015, to January 1, 2018. (Negative amounts should be indicated by a minus sign.)

b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus sign. Round your answer to 4 decimal places.)

Building the Supply and Demand Model Homework

1. Explain the difference between a change in the quantity demanded (Q_d) and demand (D).

A change in quantity demanded refers to a movement along the demand curve, which is caused only by a chance in price. A change in demand means that the entire demand curve shifts either left or right.

2. Explain the difference between a change in the quantity supplied (Q_s) and supply (S).

A change in quantity supplied will imply a movement along the supply curve, while a change in supply refers to a shift in the supply curve. A change in quantity supplied is usually caused by a change in the unit price while a change in supply is caused by new methods of production.

3.

A. Using the individual demand data in the table above, determine the market demand for broccoli soup – fill in the market demand column of the table.

B. Graph the market demand curve.

C. The broccoli growers industry group launches a successful national marketing campaign highlighting the positive health effects of broccoli consumption. What will likely happen to the market demand for broccoli? Demonstrate your answer in the graph you drew for B.

4. Give 3 real world scenarios that would likely increase the demand for chickpeas.

5. Give 3 real work scenarios that would likely decrease the supply of Atlantic salmon.

6. Draw hypothetical supply and demand curves for coffee. Show how the equilibrium price and quantity will be affected by the following events. Use a separate graph to demonstrate each event. Show the equilibrium price and quantity before, and after, the event.

A. The New England Journal of Medicine publishes an article highlighting a direct correlation between coffee consumption and liver cancer.

B. The coffee growing regions of South and Central America experience optimal coffee growing weather.

C. A regional war breaks out in the coffee growing countries of East Africa.

D. Widespread media reports highlight major labor abuses in coffee growing regions around the world, including child labor, slave labor, and the widespread sexual assault of coffee plantation workers.

7. President Trump signs a law that imposes a 30% tax on oil exports from the United States.

A. Demonstrate the likely effect on the domestic oil market using supply and demand curves.

B. What we will be the likely effect on oil prices in the US?

8. Assume the individual demand and supply below represent the entire market. Answer the questions based on the following tables.

A. Draw the market demand and market supply curves.

B. Label the market equilibrium price and quantity.

C. What is the excess quantity supplied at a price of $250?

D. What is the excess quantity demanded at a price of $150?

9. Explain the likely affect of the following events on the market equilibrium price and quantity:

A. Global soybean market: An infestation of the Helicoverpa armigera worm in Brazil’s soybean growing regions. Brazil is the world’s largest producer of soybeans.

B. Global toy market: A 105% increase in the minimum wage in China. China is the world’s largest manufacturer of toys.

C. Global pineapple market: Both PepsiCo and the Coca Cola company develop blockbuster pineapple flavored sodas.

D. US energy drink market: Congress imposes a 25% excise tax on energy drinks due to the adverse health effects of excessive caffeine consumption. The excise tax will be paid by the manufacturers of the drinks.

E. Local Sinha Stout (popular Sri Lankan beer) market in Poughkeepsie: Four thousand Sri Lankan immigrants settle in the city of Poughkeepsie.

F. Horn rimmed glasses local market Hyde Park: Hyde Park becomes a popular location for weekend homes for Brooklyn hipsters.

G. Fuji apple market: The price of red delicious apples increases by 67%.

H. Chef’s knife market: The demand for culinary education increases dramatically.

J. Kiwi market: Kiwi sellers raise the price of kiwis by 29%. There are no other changes in the market.

K. Wheat market: A new technology significantly increases planting productivity.

1. Which of the following does not contribute to the existence of monopoly power?

   		A continuously decreasing long-run average cost curve
   		The possession of a patent
   		The control of essential inputs in the production process
   		A pure cost or quality advantage
   		A relatively inelastic market demand curve

10 points   

QUESTION 2

1. Industry demand is given by P = 200 – 0.6Q. The long-run industry costs are such that: LAC = LMC = $40. Based on this information, the number of units bought/sold under pure monopoly in the long run is ____.

   Hint: Write your answer to two decimal places.

10 points   

QUESTION 3

1. Which of the following is true of a pure monopoly?

   		A pure monopoly can raise the market price indefinitely.
   		A pure monopoly is typically more efficient than other firms in the market.
   		A pure monopoly faces a horizontal demand curve.
   		A pure monopoly restricts output below the competitive level.
   		A pure monopoly produces at the level where price equals marginal cost.

10 points   

QUESTION 4

1. A monopolist produces and sells 300 units at a price of $38 per unit. The monopolist’s marginal cost is equal to $15 and average cost is equal to $26. The monopolist’s profit is:

10 points   

QUESTION 5

1. Industry demand is given by P = 200 – 1Q. The long-run industry costs are such that: LAC = LMC = $40. Based on this information, the number of units bought/sold under perfect competition in the long run is ____.

   Hint: Write your answer to two decimal places.

10 points   

QUESTION 6

1. A market is considered a pure monopoly when:

   		all firms in the market sell homogeneous goods.
   		there is a single buyer for the goods produced in the market.
   		the firm produces a good that has imperfect substitutes.
   		a single firm produces a good that has no close substitutes.
   		there are low entry barriers in the market.

10 points   

QUESTION 7

1. Under patent protection, a firm has a monopoly in the production of a high-tech component. Market demand is estimated to be P = 100 – 0.4Q. The firm’s economic costs are given by AC = MC = $30 per component. The deadweight loss from the monopoly of this patent compared to the perfectly competitive outcome is ____.

   Hint: Write your answer to two decimal places.

   Hint two: Calculate the quantities/prices for the monopoly case and the pure competition case to solve.

10 points   

QUESTION 8

1. Compared to a perfectly competitive industry, a monopolist will generally produce:

   		a greater level of output a lower price.
   		a greater level of output at a higher price.
   		a smaller level of output a lower price
   		a smaller level of output at a higher price.
   		roughly the same level of output but at a higher price.

ABC Inc.

ABC Inc. (“ABC” or “the Company”), an SEC registrant, is a retailer that sells men’s and women’s clothing and accessories. As an incentive to its employees, the Company established a compensation incentive plan in which a total of 100,000 options were granted on January 1, 20X1. On that date (the grant date), ABC’s stock price was $15.00 per share.

The significant terms of the incentive plan are as follows:

• The options have a $15.00 “strike” or exercise price (the price the employee would pay to purchase a share of stock if the options vest).

• For the options to vest, the following must occur:

• The employee must continue to provide service to the Company throughout the entire explicit service period of five years (i.e., a five-year “cliff-vesting” award).

• The Company must achieve annual sales of at least $20 million during the fifth year of the explicit service period.

• The Company’s share price must increase by at least 25 percent over the five-year explicit service period.

• In addition, if the Company achieves sales of at least $25 million during the fifth year of the explicit vesting period, the strike price of the options will decrease from $15 to $10.

• The options expire after 10 years following the grant date.

• The options are classified as equity awards.

Additional Facts:

• Assume it is probable at all times that 100 percent of the employees receiving the awards will continue providing service to the Company as employees for the entire five-year explicit service period and that the five-year explicit service period is determined to be the requisite service period.

• On the grant date, ABC’s management determined that it is probable that the Company’s sales in year 5 will be $30 million, and therefore it is probable on the grant date that sales are greater than or equal to at least $25 million.

• The grant-date fair value of the options assuming a strike price of $15 is $8 per option. The grant-date fair value assuming a strike price of $10 per option is $12 per option.

Required:

1. As described above, on January 1, 20X1 (the grant date), $30 million of sales were probable for year 5. During years 1, 2, and 3, $30 million of sales for year 5 remained probable. At the beginning of year 4, management determines that it is probable that only $22 million of sales will occur for year 5. What are the proper accounting treatment and journal entries for each year?

2. Through the end of year 5, ABC’s share price remained at $15 and therefore the market condition was not met. What is the accounting impact of the market condition not having been met?

BACKGROUND

In the coming fiscal year, the Chief Procurement Officer (CPO) of a large metropolitan county will be responsible for contracts that are worth more than $100 million in construction and facility renovation. The county procurement staff will be taxed to award all of these projects in the time allotted. The CPO attended a presentation on Job Order Contracting (JOC) at a recent national procurement forum. JOC is a competitively bid, firm fixed price contract with indefinite quantity designed to accomplish small to medium multi-trade maintenance, repair and minor new construction projects. The procurement department plans to issue a Request for Proposals containing a Unit Price Book, which contains a comprehensive listing of specific construction related tasks together with specific units of measurement and unit prices that are fixed for the duration of the contract. Each unit price is comprised of the labor, equipment and material costs to accomplish each specific task. Contractors will submit price adjustments to the unit prices as published in the Unit Price Book. The Unit Price Book reflects labor rates, construction material, and construction procurement costs in the area. Contractors must bid three adjustment factors; one for work to be accomplished during normal working hours, one for work to be performed during other than normal working hours and one for work to be performed during premium working hours. All adjustment factors are expressed as an increase or decrease from the published prices. Award will be made to the qualified contractor submitting the overall lowest pricing structure. The awarded contractor will receive Job Orders for specific projects they submitted proposals for, based on the Unit Price Book and adjustment factors. The contractor will be responsible for all subcontractors and satisfactory completion of all work in the agreed time. The County Commission has made it clear that the preponderance of these projects should be awarded to local businesses with particular emphasis on awards to small, woman and minority owned businesses.

DISCUSSION

The CPO believes that using JOC may be a way to quickly move the large number of projects forward during the fiscal year. There are several large, national firms with extensive experience in JOC. There are also nationally recognized indexes of construction tasks and unit prices that are updated periodically to use as the Unit Price Book. However, the CPO is not aware of any local firms or governments that have used this method of contracting.

QUESTIONS

1. How would JOC support each of the goals of public procurement?

2. Which goals might be more likely to be supported? Are there tradeoffs to consider?

3. What legal, procedural, political and management issues would confront the procurement department?

4. What might be the reaction of the County Commission to this form of contracting?

Question 1:

A football club is the only one in its region and is therefore able to behave like a monopolist.

It sells tickets to Adults (?) and Juniors (?), whose demand curves are given by:

?_! = 100−?_!

?_" = 80−?_"

Additionally, the club’s total costs are given by ?? = 10?

1. Initially, the club sets its price by charging all supporters the same price, according to the aggregate market demand curve. Calculate the maximising output, price and the resulting profit for the club as well as consumer surplus.

2. The club hires an economist to consider its pricing strategy and receives the advice that it should charge different prices to each type of supporter. Find the prices it sets in both markets, the sales (output) in each and its overall level of profit and illustrate profit maximising outputs and prices of each consumer type on a graph (one graph for each type of consumer). Calculate consumer surplus in this case.

3. What conditions must be satisfied for a producer to be able to implement a policy of price discrimination?

Question 2:

The following table presents the price, output and profits for identical firms at industry and firm level. Suppose there are currently four firms in the market and two are proposing to merge (firm 3 and 4). Assume that the remaining three (the one merged firm plus the two unmerged firms) continue to exhibit Cournot behavior.

a) Explain the merger paradox using data from the table below. How the merged firm (firm 3 and 4) will be worse off?

b) How would this outcome differ if all four firms merged?

c) Explain what is the motivation for two firms to merge.

Output is measured in thousands of units and profits are measured in thousands of pounds per week.

Question 3:

Consider a market with two identical firms, Firm A and Firm B. The market demand is ? = 20−^#$ ?, where ? = ?_% +?_& . The cost conditions are ??_% = ??_& = 16.

a) Assume this market has a Stackelberg leader, Firm A. Solve for the quantity, price and profit for each firm. Explain your calculations.

b) How does this compare to the Cournot-Nash equilibrium quantity, price and profit? Explain your calculations.

c) Present the Stackelberg and Cournot equilibrium output using a diagram.

4. The crude oil market can be described as a Nash-Cournot market, in which Saudi Arabia acts as Stackelberg leader. Do you agree with this statement?

To determine whether the pipe welds in a nuclear power plant meet specifications, a random sample of welds is selected, and tests are conducted on each weld in the sample. Weld strength is measured as the force required to break the weld. Suppose the specifications state that mean strength of welds should exceed 100 lb/sq in; the inspection team decides to test    H0 ;    μ=100 versus Ha    ;μ > 100.+  Explain why it might be preferable to use this    Ha rather than μ+ < +100.

1. (a) A statistician randomly sampled 100 observations and found

= 106 and s = 35. Calculate the t-statistic and p-value for testing

H₀: μ = 100 vs H_A: μ > 100.

Carry out the test at the 1% level of significance.

(b) Repeat part (a), with s = 25.

(c) Repeat part (a), with s = 15.

(d) Discuss what happens to the t-statistic and the p-value when the standard deviation decreases.

2. Repeat Question 1 using H_A: μ ≠ 100.

Need as much details as possible. Microeconomics.

A firm produces output using a single input L. The firm’s marginal productivity is increasing in L. The firm currently produces 50 units at the marginal cost of 100. If the firm were to produce 60 units,

a. We cannot determine how the marginal cost changes.

b. The marginal cost would be less than 100.

c. The marginal cost would be greater than 100.

d. The marginal cost would equal 100.