Answer:
The Journal entries are as follows:
(i) Manufacturing overhead A/c Dr. $87,000
To various accounts $87,000
(To record the Manufacturing Overhead costs incurred)
(ii) Work in process A/c Dr. $85,000
To Manufacturing overhead $85,000
(To record the manufacturing overhead applied to work in process)
Final answer:
The question involves preparing journal entries for the incurrence and application of manufacturing overhead costs at Moulding Corporation. Two journal entries are required: one to record the $87,000 in actual overhead costs incurred and another to apply $85,000 of these costs to Work in Process.
Explanation:
The question involves preparing journal entries for the incurrence and application of manufacturing overhead costs in a manufacturing company. In December, Moulding Corporation incurred $87,000 of actual manufacturing overhead costs and applied $85,000 of manufacturing overhead to Work in Process. The necessary journal entries to reflect these transactions are as follows:
For the incurrence of manufacturing overhead costs:
Debit Manufacturing Overhead $87,000
Credit Various Accounts $87,000
For the application of manufacturing overhead to Work in Process:
Debit Work in Process $85,000
Credit Manufacturing Overhead $85,000
The first entry records the actual overhead costs incurred, including costs such as utility bills, rent, and indirect labor. The second entry reflects the application (allocation) of these costs to the Work in Process account, based on the company's overhead allocation method. This process is crucial for accurately assigning production costs to products.
Which of the following functions includes identifying the sources of risk and may include offering advice on controls that can reduce risk?Risk managementRisk assessmentSystems testingVulnerability assessment
Answer:
It is Risk Assessment
Explanation:
Risk Assessment is process of identifying and analyzing potential events that may negatively impact on the business either as individual or in aggregate and prevent the company from achieving its objectives.
Each business has its own inherent risks and a conscious efforts must be made to identify and analyse them using impact assessment. Necessary measures must be put in place to prevent or reduce their impacts.
Beth sells candles from her website. She can get a candle from her suppliers at a cost of $3 to her. The candles have been selling for $5, and at this price, consumers have been buying a steady 4000 per month. Beth would like to raise prices, but a market surveyor told her that for each increase of $1 in the price of an candle, she would lose 300 more sales each month. At what price should she sell the candles to maximize her profit?
Answer:
$10.67
Explanation:
Data provided in the question:
Initial cost = $3
Initial selling cost = $5
Initial sales = 4000
with $1 increase in price she loses 300 sales per month
Now,
Let the increase in price which maximizes the profit be '$x'
Therefore,
Final selling price = $5 + x
Final sales = 4000 - 300x
Thus,
Revenue = Final selling price × Final sales
= ( 5 + x)( 4000 - 300x)
= 20,000 - 1500x + 4000x - 300x²
= 20,000 + 2500x - 300x²
Total Cost = Initial cost × Final sales
= 3(4000 - 300x )
= 12,000 - 900x
Now,
Profit = Total revenue - Total cost
or
P = [ 20,000 + 2500x - 300x² ] - [ 12,000 - 900x ]
or
P = 8,000 + 3400x - 300x²
for point of maxima [tex]\frac{dP}{dx}=0[/tex]
Thus,
0 = 0 + 3400 - 300(2x)
or
0 = 3400 - 600x
or
600x = 3400
or
x = [tex]\frac{17}{3}[/tex]
Hence,
The price will be = $5 + x = [tex]5 + \frac{17}{3}[/tex]
= $10.67
A charter is being drafted for a newly formed internal auditing department. Which of the following best describes the appropriate organizational status that should be incorporated into the charter?
A: The director of internal auditing should report to the chief executive officer but have access to the board
of directors.
B: The director of internal auditing should be a member of the audit committee of the board of directors.
C: The director of internal auditing should be a staff officer reporting to the chief financial officer.
D: The director of internal auditing should report to an administrative vice president.
Answer:
A: The director of internal auditing should report to the chief executive officer but have access to the board of directors
Explanation:
We try to determine if we can use educational background, interests, and gender to predict an individual's economic status (poor, average, high), which test should we use?
Answer:
The correct answer is letter "D": Multiple regression.
Explanation:
Multiple regression is a mathematical model used when one value is to be related to two or more variables. The value is independent and is typically the reason for the study and the variables are dependent and represent the factors of the value that must be tested and why the analysis is taking place.
Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $ 6.25 . Michelle was willing to pay up to $ 8.25 for the cappuccino, and Paul's Cafe and Bakery was willing to accept $ 1.75 for the cappuccino. Based on this information, answer the questions..
a)Michelle\'s consumer surplus is equal to?
b) Paul\'s Bakery\'s producer surplus is equal to?
Answer:
a. $2
b. $4.5
Explanation:
The computation of the producer and consumer surplus is presented below:
a. The consumer surplus = Willing to pay - Market price
= $8.25 - $6.25
= $2
b. Producer surplus = Market price - willing to accept
= $6.25 - $1.75
= $4.5
Hence all the given information is to be considered.
a. The consumer surplus of Michelle is $2.
b. The producer surplus of Paul bakery is $4.5.
Consumer surplus is represented by determining the difference between consumers' willingness to pay for a product and the price paid for it actually by them. On the other hand, producer surplus shows the difference in market prices and actual prices received by the producers.
The consumer's willingness to pay is given as $ 8.25 producer's willingness is given $ 1.75. Finally, the price paid or market price is $ 6.25.
Now, the consumer surplus would be:
[tex]8.25 - 6.25\\=2[/tex]
The producer surplus would be:
[tex]6.25 - 1.75\\=4[/tex]
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A large foreign automobile manufacturer was considering where to build a new manufacturing plant in the United States. They were making which type of decision?
Answer:
They made Unstructured choices
Explanation:
Unstructured decisions are the kinds of decisions that involve judgment, observation, and perspective to fix the problem.
Unstructured implies "decision processes not occurring in quite the same manner and for which there is no fixed and clear collection of orderly answers in the organization."Therefore, this decision must be count in an Unstructured decision.
Marion Klatt, CFA, is a representative for Thiel Financial Network. Klatt received a phone call at home from William Kind, a junior executive at Westtown Development Company, asking whether Klatt had heard that Westtown had just reached an agreement to acquire a major shopping mall chain at a very favorable price. (Klatt had not heard this news, and Klatt was able to confirm that the information had not yet been made public.) Kind requested that Klatt acquire 10,000 shares of Westtown for Kind's personal account. Klatt should:
A) not acquire the shares until he has contacted Westtown's management and encouraged them to publicly announce the merger discussion.
B) not acquire the shares.
C) not acquire the shares until the information is made public.
Answer:
(A) Klatt should not acquire the shares until he has contacted Westtown's management and encouraged them to publicly announce the merger discussion. Kind might do fraud because he want Klatt to but 10000 for Kind's personal account.
The correct action for Marion Klatt, CFA, to take is C) not acquire the shares until the information is made public.
According to the CFA Institute's Code of Ethics and Standards of Professional Conduct, members are required to keep information confidential unless it has been made public or is in the public domain. In this scenario, Klatt has received material nonpublic information (MNPI) about Westtown Development Company's plans to acquire a major shopping mall chain at a favorable price. Trading on this information before it is publicly disclosed would constitute insider trading, which is both unethical and illegal.
Option A suggests that Klatt should contact Westtown's management to encourage them to publicly announce the merger discussions. While it is important for the company to disclose material information to the public, it is not Klatt's responsibility to prompt the company to make such an announcement. Klatt's primary responsibility is to maintain confidentiality and not act on the information until it is publicly available.
Option B states that Klatt should not acquire the shares at all. While this action would prevent insider trading, it is not necessary to avoid trading in Westtown shares indefinitely. Once the information is public, Klatt would be free to trade in the shares without violating any ethical standards.
Therefore, the most appropriate course of action is option C, which aligns with the ethical and legal obligations of a CFA charterholder. Klatt must wait until the information regarding Westtown's acquisition is made public before executing any trades for Kind's personal account. This ensures that Klatt adheres to the principles of fairness, transparency, and integrity that are central to the CFA Institute's Code and Standards."
Appraise the results of operations of Prestige Data Service. Is the subsidiary really a problem to Prestige Telephone Company? Consider carefully the differences between reported costs and cost relevant for decisions that Daniel Rowe is considering.
Solution:
Reducing hours would reduce demand for commercial revenue hours by 20%, from 138 hours to 110 hours. At that level, the total contribution would be:
110 hours x ($800 - $71.5) = $80,135 or $20,398 less than at present.
Raising the cost to $1,000 per hr for commercial clients would less demand by 30%. In March, the request had been for 138 hrs and a loss of 30% will also end up leaving 97 hrs of demand (138 hrs x 70 = 96.6 hrs).
Demand x Contribution per hour = Contribution 97 hours x ($1,000 - $71.50) = $90,064.5
Compare to present:
138 hours x ($800 - $71.50) = $100,533
The monthly contribution to fixed costs and income at $800 is greater by $10,469 than the contribution expected at $1,000. Therefore, the income will be higher if we retain the $800/hour price.
An executive conference center has the theoretical physical ability to handle a maximum of 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event resulted in the attendance of 950 participants. Referring to Scenario 2 above, assume that conference management personnel wish to earn additional revenue. Thus, they are willing make effective capacity be the same as design capacity (i.e., they now wish to operate at the design capacity of 1,100 participants). Assume now that the last event still resulted in the attendance of 950 participants. What is the new efficiency of the conference facility?
Answer:
86.36%
Explanation:
The efficiency of the conference facility is given by the number of people who attended the event divided by the effective capacity. If the effective capacity is considered to be the design capacity of 1,100, the efficiency of the conference facility for an attendance of 950 participants is:
[tex]E=\frac{950}{1,100}=0.8636=86.36\%[/tex]
The new efficiency is 86.36%
If the retained earnings account decreases from the beginning of the year to the end of the year, then?
(A) net income is less than dividends
(B) there was a net income and no dividends
(C) additional investments are less than net losses
(D) net income is greater than dividends
Answer:
(A) net income is less than dividends
Explanation:
We know that
The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid
Since the beginning balance of the retained earning is more than the ending balance of the retained earning which represents that the dividend amount is more than the net income
Therefore, the most appropriate option is a.
If the retained earnings account decreases from the beginning of the year to the end of the year, it usually means that the company's net income is less than the dividends it paid out. Therefore, the correct answer to this question is option (A).
Explanation:If a company's retained earnings account decreases from the beginning of the year to the end of the year, it generally indicates that the total amount of dividends paid out to shareholders is greater than the company's net profit for that period. In simpler terms, it means that the company's net income is less than its dividends. So, the correct answer to this multiple-choice question is option (A).
Let's consider an example. If a company starts the year with $500,000 in retained earnings and ends the year with $400,000, and it distributed $150,000 in dividends, this would mean the company had a net income of $50,000 for the year ($150,000 in dividends minus the $100,000 decrease in retained earnings).
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Total variable costs A. always increase with output. B. initially decrease and then increase with output. C. initially increase as output increases and then decrease. D. always decrease with output.
Answer:
A. always increase with output.
Explanation:
There are basically 2 groups of cost namely; Fixed and variable cost.
The fixed cost are usually like sunk cost that will be incurred irrespective of how many units are produced.
Total variable costs refers to all elements of cost that vary proportionately with the level of activities or output. A good example is the direct material cost.
It is the total of the marginal cost over the units produced. The right answer is A. always increase with output.
Total variable costs, such as raw materials and labor costs, always increase with output. This is due to the need for additional resources as production increases. However, the per-unit variable cost remains constant.
Explanation:The correct answer to this question is (A) Total variable costs always increase with output. This is because variable costs are expenses that change in proportion to the activity of a business. Examples of variable costs include raw materials, direct labor costs, and sales commissions. If a business produces more goods or services, the total variable costs will increase accordingly due to the need for additional materials, labor, and so forth.
However, it's important to note that the per-unit variable cost remains constant. That is, the cost of making one additional unit remains the same.
The other options listed do not correctly describe the behaviour of total variable costs in relation to output. Options (B) and (C) might be mistaken for the description of how average total costs behave in the short run due to economies of scale and diseconomies of scale. Option (D) is incorrect because total variable costs do not decrease with an increase in output.
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The manager at Tom's Taxidermy expects to sell 1,000 units at $70 each unit. In order for the manager to breakeven, the manager must sell100 units.
What is the margin of safety in dollars?
A.$63,000
B.$75,900
C.$70,000
D.$ 77,000
Answer:
A.$63,000
Explanation:
The margin of safety is defined as the difference between the actual sales volume and the breakeven volume.
In this case, Tom's Taxidermy expects to sell 1,000 units at $70 each and their breakeven volume is 100 units, the margin of sales, in dollars, is:
[tex]MS = (1,000-100)*\$70\\MS=\$63,000[/tex]
The answer is A.$63,000.
g For the most part, the 1st Amendment does not protect the right to join organizations. Group of answer choices True False
Answer:
True
Explanation:
The 1st Amendment does not protect the right to freedom of association.
Cole purchased a car for business and personal use. In 2019, he used the car 60% for business (13,000 total use miles) and used the standard mileage rate to calculate his vehicle expenses. He also paid $1,500 in interest and $360 in county property tax on the car. What is the total business deduction related to business use of the car rounded to the nearest dollar
Answer:
The total business deduction related to business use of the car rounded to the nearest dollar is $5367.
Explanation:
Amount of business deduction
= (13000 miles*$0.54.5/mile + $1500 + $360)*60%
= $5367
Therefore, The total business deduction related to business use of the car rounded to the nearest dollar is $5367.
Hunter is the founder and CEO of a website development firm. Clients are typically small to midsized companies that are seeking an offbeat, innovative approach to their online design, as well as functionality that offers customers surprising ways to interact with the site.What is the more appropriate style of leadership, given the type of work Hunter wants his website designers to do?a. Either transactional or transformational b. Transformational c. Transactional
Answer:
b. Transformational
Explanation:
b. Transformational because a constant change may be needed in online working .Transformational leadership allows one to determine any changes that may be required overtime to use better and enhanced to make it grow bigger and better.It is a an important part of the complete leadership strategy. Business may require changes very often and use of latest developing tools makes transformational leadership a guided approach.
If the unit sales price is $12, variable costs are $6 per unit, and fixed costs are $36,000, what sales volume (in dollars) is necessary to break-even?
Answer:
72000
Explanation:
Break even formula:
Break even in units=Fixed cost/Contribution margin per unit
= $ 36,000 / $ 6
= 6,000 Units
[Contribution margin=Sales price-Variable cost=12-6]
Break Even in Dollars = Break Even in Units * Selling Price Per Unit
= 6,000 Units * $ 12 Per Unit = $ 72,000
Roscoe signs a written agreement with Philip, giving Philip the right to cast Roscoe's votes for a certain group of people nominated by the Stillbar Corporation board of directors. The agreement between Roscoe and Philip is known as a .
Answer: Proxy
Explanation:
The proxy agreement is one of the type of legal or the authorized act which is done of the behalf of another person. By using this type of agreement we can easily done various types of legal formalities in the business management firm.
The proxy agreement should in the written format and specifically signed by the other member or party in the management. The proxy agreement is valid 10 months starting from the the date of issue.
According to the given question, the agreement between the Philip and the Roscoe is basically know as the proxy agreement in the corporation.
Therefore, Proxy is the correct answer.
The best indicator of how well a company's strategy is working is whether the company is
Answer:
attaining its objectives
Explanation:
The organization objectives are tangible and explain clearly the activities necessary to accomplish a mission. Objectives define the strategies that your company will use to attain commercial success, quality of customer care, promotional incentives and any other tangible goals.
In other phrases, a company objective is a consequence a corporation is trying to accomplish. It also involves the techniques individuals will need to get to this place. A business goal typically includes a time period and profiles the existing resources.
Ikea is a very Sweden âcentric that is they like doing it the Swedish way, from the names of the furniture to the management of the company. Sweden is a neutral country so maybe this is the way to go for a global company but really is it smart to be centric to a specific country when you are a global corporation?
Answer and explanation:
For a business to be successful, nowadays it is important to diversify and adjust not only the goods or services the firm provides but also the organizational structure according to the territory where the operations take place. However, IKEA has shown that even having a Swedish-centralized organization scheme, they can handle operations in 25 countries with 276 stores including 37 more franchised stores.
IKEA's country-centric approach helps it stand out in the global market, but it's also important for corporations to adapt to local cultures to maintain market relevance.
Explanation:IKEA's strategy to stay Sweden-centric while being a global corporation could be seen from two perspectives. On one hand, this strategy helps the company differentiate itself in a crowded market, as it brings unique Swedish values and aesthetics to its products, thereby nurturing its uniqueness in a global marketplace. However, on the other hand, being too country-centric might lead to a lack of local adaptability in different markets, as cultural differences might cause customers to interpret the same products or processes differently. Therefore, it's important for any global corporation to find a balance between maintaining the core brand identity and accommodating local cultures.
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Using a cost chart, estimate the current purchased cost of a cast-steel centrifugal pump that requires 100 kW of power. What is the cost if the pump is made of 316 stainless steel?
Answer:
$94,500
Explanation:
Given the attached chart and table, we have
Purchased cost of cast-steel centrifugal pump that requires 100kw of power = $45,000
Cost if pump is made of 316 stainless steel = 2.1 * 45,000 = $94,500
Note: see the attached images.
Hope this helps!
For which pairs of goods would most people likely have convex indifference curves
Answer:
Movie tickets and concert tickets .
Explanation:
The indifference curve is a chart showing a mixture of two products providing equal value and usefulness for the customer.
That point on a graph of indifference indicates a customer is oblivious here between two and all points offer him the very same value.The indifference curve method was used not only to describe the actions and demand of customers but also to evaluate and clarify numerous other economic issues.Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.Required:1. Solve for the company’s break-even point in unit sales using the equation method.2. Solve for the company’s break-even point in sales dollars using the equation method and the CM ratio.3. Solve for the company’s break-even point in unit sales using the formula
Answer:
Explanation:
(SP-VC)*Q
$(8-6)Q = $5500
Q=5500/2
Break even quantity = 2750 units per month
2. Sales = $8 x 2750 = $ 22,000
On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $67,800. The band estimates it will use this equipment for five years. It estimates that after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised depreciation for both the second and third years. Book value at point of revision Remaining depreciable cost Depreciation per year for years 2 and 3
Answer:
Book value at point of revision = $54,640
Remaining depreciable cost = $54,640
Depreciation per year for years 2 and 3 = $28,320
Explanation:
Depreciation expense using the straight line depreciation method = ( Cost of asset - Salvage value) / useful life
Depreciation expense before the revision = ($67,800 - $2000) / 5 = $13,160
Book value at point of revision = $67,800 - $13,160 = $54,640.
Depreciation expense after the revision = ($54,640 - $2000) / 2 = $28,320
A study that relies primarily on quantitative data and uses qualitative data to follow up is considered an example of a(n) ________ approach to mixed methods design.
Answer:
The correct answer is letter "D": Explanatory.
Explanation:
Explanatory research typically is carried out when preliminary research was not made successfully, is unclear or vague. Explanatory research is based on factual data -mainly numerical- that allows the researcher to support the detailed descriptions that must be reported as conclusions of the study.
A study that relies primarily on quantitative data with qualitative follow-up is an example of a quantitative-dominant mixed methods design.
A study that primarily relies on quantitative data and uses qualitative data for follow-up is considered an example of a quantitative-dominant mixed methods design. This approach effectively combines both statistical analysis and detailed contextual understanding, reflecting the evolving landscape of research methodologies that emphasize the importance of triangulation in research. Such designs demonstrate how quantitative analysis can be enriched and contextualized with qualitative insights, providing a more comprehensive understanding of the research topic.
By employing a quantitative-dominant mixed methods approach, researchers can utilize the strengths of both quantitative and qualitative data to address complex research questions. This blend allows for robust testing of theories or hypotheses with quantitative data, while qualitative data provide a deeper insight into participant experiences, adding texture and meaning to the statistical findings.
Suppose we observe the following rates: 1R1 = 13 percent, 1R2 = 16 percent, and E(2r1) = 10 percent. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2?
a)8.7 percent
b)9.1 percent
c)9.7 percent
d)10.0 percent
Answer:
b)9.1 percent
Explanation:
Data provided in the question:
1R1 = 13 percent,
1R2 = 16 percent3
E(2r1) = 10 percent
Now,
The liquidity premium theory is given as:
1 + 1R2 = [tex][ ( 1 + 1R1)\times(1 + E(2r1) + L2 )]^{\frac{1}{n}}[/tex]
for year 2, n = 2
Thus,
1 + 0.16 = [tex][ ( 1 + 0.13)\times(1 + 0.10 + L2 )]^{\frac{1}{2}}[/tex]
or
1.16² = [ 1.13 × ( 1.10 + L2)]
or
1.191 = 1.10 + L2
or
1.191 - 1.10 = L2
or
L2 = 0.091
or
L = 0.091 × 100% = 9.1%
b)9.1 percent
George works at the Springfield Nuclear Plant as a nuclear technician. The plant is located 15 miles from the town of Springfield. George likes to eat his lunch at the plant's cafeteria because he is required to be available for nuclear emergencies during his shift. Unsurprisingly, there are no other eating establishments located near the plant. George estimates the value of the meals he was provided during the current year as $1,300. He estimates the cost for him to have prepared those lunches for himself as about $560. The cost of the meals to the power company was $470. How much income does George need to recognize from the meals?
Answer:
$0
Explanation:
Given that
Estimated value of the meals = $1,300
Preparing cost of lunch = $560
Cost of the meals to the power company = $470
The income that is recognized from the meals should be zero as he took the lunch from the office premises only which is to be excluded while computing the gross income
Plus, he also likes to eat his lunch at the plant cafeteria due to nuclear emergencies
Final answer:
George's income from employer-provided meals may not be considered taxable if they are for the employer's convenience and on the business premises. However, without clear IRS guidance in the scenario, it's difficult to state a specific figure. Consulting a tax professional is recommended for an accurate determination.
Explanation:
George needs to recognize income from the employer-provided meals based on their fair market value (FMV). The value he places on the meals is $1,300, while his out-of-pocket cost if he prepared the meals himself would be $560. However, the IRS generally requires one to include in their income the amount their employer paid for the meals unless they are furnished for the employer's convenience and on the employer's business premises. In George's case, since he must be available for nuclear emergencies during his shift, it appears the meals are provided for the convenience of the employer, and thus may not be considered taxable income. To determine the exact amount of income George needs to recognize, one would need to refer to current IRS regulations or consult with a tax professional.
Suppose you bought a 15-year $1,000 face-value bond for $945 one year ago. The annual coupon rate is 7% and interest payments are paid annually. If the price today is $995, the yield to maturity must have changed from _____________ to ______________.
a. 8.12%; 6.94%
b. 7.12%; 8.11%
c. 7.63%; 7.06%
d. 9.11%; 9.35%
e. None of the above
Answer:
c. 7.63%; 7.06%
Explanation:
First we need to find the yield to maturity when we first bought the bond, the face value was 1,000 the present value was 945, the coupon payments were (0.07*1000)=70 and number of years to maturity were 15. We input the following into a financial calculator.
FV= 1,000
PV= 945
PMT= 70
N=15
Compute I= 7.63%
Now we need to find the ytm after one year of holding the bond, the future value is 1,000, the pv is 995, the number of years to maturity is 14 years and the payments are still 70,
FV= 1,000
PV=995
PMT=70
N=14
Compute I = 7.06%
The YTM changed from 7.63% to 7.06%
Consider the Hotelling model of the competition between two firms discussed in class. Select ALL that apply.
a. If both firms are localized in position 1/2 (i.e., center of the line), neither firm has incentives to deviate and move to a different position.
b. In the Nash Equilibrium in pure strategies firms will localize together anywhere along the line.
c. If Firm localize at the same point along the line, they will each sell to 50% of the consumers.
d. If Firm 1 is located at position 1/2 (i.e., center of the line) and firm 2 is located somewhere else, then both firms have incentives to deviate and change their position along the line.
Answer: The corrects answers are: "a. If both firms are localized in position 1/2 (i.e., center of the line), neither firm has incentives to deviate and move to a different position.", "c. If Firm localize at the same point along the line, they will each sell to 50% of the consumers." and "d. If Firm 1 is located at position 1/2 (i.e., center of the line) and firm 2 is located somewhere else, then both firms have incentives to deviate and change their position along the line.".
Explanation: According to the Hotelling model of the competition between two firms:
a. If both firms are localized in position 1/2 (i.e., center of the line), neither firm has incentives to deviate and move to a different position. - If this were the case, it would be indifferent for customers to go to either.
c. If Firm localize at the same point along the line, they will each sell to 50% of the consumers. - This happens because each consumer will go to the nearest one.
d. If Firm 1 is located at position 1/2 (i.e., center of the line) and firm 2 is located somewhere else, then both firms have incentives to deviate and change their position along the line. - This happens because the strategy chosen is not suitable for either company.
Consider the market for corn.
Indicate whether each of the following events will cause a shift in the supply curve or a movement along the curve. If it will cause a shift, specify the direction.
a. A drought hits corn-growing regions, cutting the supply of corn.
b. The government announces a new subsidy for biofuels made from corn.
c. A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is a normal good).
d. A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre.
e. An advertising campaign by the beef producers' association highlights the health benefits of corn fed beef.
Answer:
(a) This will shift the supply curve of corn leftwards because a lot of corn would be destroyed from the drought.
(b) This will increase the demand and price for corn and hence, this will cause a movement along a supply curve.
(c) Reduction in the income level of the consumers will lead to reduce the demand and prices of the corn. Therefore, there is a movement along a supply curve.
(d) Increase in the productivity will cause a rise in the production of corn and hence, this will shift the supply curve rightwards.
(e) By advertising campaign, there is an increase in the demand for beef and therefore, this will increase the price of beef. Hence, cause a movement along a supply curve.
Events such as droughts or new farming technologies cause shifts in the supply curve for corn, while changes in consumer demand or government policies may lead to movement along the curve or shifts in the demand curve.
When analyzing the market for corn, various events can either cause a shift in the supply curve or a movement along the curve.
a. Drought in corn-growing regions: This will cause a leftward shift in the supply curve as it cuts the supply, indicating that less corn is available at any given price due to decreased production.
b. New subsidy for biofuels made from corn: This event can potentially increase the demand for corn, causing a rightward shift in the demand curve. However, it can also prompt a rightward shift in the supply curve for biofuels made from corn specifically, as producers are incentivized to increase production. For just the corn market, this is less direct and may not shift the supply of corn itself.
c. Global recession reduces incomes: This leads to a leftward shift in the demand curve for corn as a normal good, assuming that with lower incomes, the demand for corn falls. This represents a decrease in consumer demand, not a change in supply.
d. New hybrid corn seed increases yield: This causes a rightward shift in the supply curve because of increased productivity and thus more corn is available at any given price.
e. Advertising campaign highlights health benefits: This may increase demand for corn-fed beef, possibly leading to a movement along the supply curve for corn as more is demanded, rather than causing the curve itself to shift.
Overall, these examples illustrate the difference between changes in the conditions of supply (which lead to shifts in the supply curve) and changes in demand (which lead to movements along the supply curve or shifts in the demand curve).
When interest rates in a given economy are reduced, it causes firms to employ __________ capital goods. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes _________________ .
Answer:
More; A movement up along a given production function
Explanation:
A reduction in the interest rate of a given economy causes firms to increase their borrowing in order to make investement in projects that are more profitable. This cause firms to employ More capital goods.
Also, once firms increase capital goods, this increase in capital causes the Economoy's Gross Domestic Product (GDP) to rise along the production function.
It is however, important to note that a rise in the GDP along the production function does not lead to a shift in the production function. A shift in production function occurs when their is either improvement in labour skills or technological access or where there is an improvement in both factors.