Answer:
Incentives
Explanation:
The purpose behind any saving and investment is to earn a return or in short make the money grow.
Incentives refer to a form of motivation which is usually expressed in monetary terms.
The incentive for an entrepreneur is profit, for investors it could be in the form of interests and dividends or capital appreciation and for savers it could be in the form of interest income.
Incentives serve as the driving force behind any form of savings or investments.
Richard Moore is the controller for Ajax Company. Recently, he suffered several large losses at the race track, causing him to incur enormous personal debts. Which type of non-sharable financial problem best describes Richard’s situation?
Answer:
Violation of Ascribed Obligation
Explanation:
Non Shareable Financial Problem
These are the type of financial debt that can cause some sort of shame or stigma in the individual's head. An individual may start committing fraud when faced with this pressure. It results because the individual feels unable to seek help from others It is part of the FRAUD TRIANGLE made up of
a. Percieved opportunity
b. Rationalization
c. Non shareable financial need.
The non shareable financial need is sub divided into 6 groups
1. Violation of ascribed obligation
2. Problems resulting from personal failure
3. Business reversals
4. Physical isolation
5. Status gaining
6. Employer-employee relationship.
Violation of ascribed obligation occurs when an individual is unable to pay his debts. This may lead to the individual engaging in illegal activities in order to catch up with the debt. Richard Moore is facing this kind of problem after losing his money on the race track.
Fifteen-year-old Hermione is able to write a much more complex answer than 10-year-old Ginger to the question, "Compare the advantages and disadvantages of using simple spells for self-protection." This is because, as an adolescent, Hermione is able to think:A. egocentrically.
B. deductively.
C. in metacognitive ways. D. in multiple dimensions.
Answer:
D. In Multiple dimensions
Explanation:
As an adolescent, Hermione is able to do more complex thinking. Also known as formal logical operations and includes the ability to reason from known principles, consider many points of view, think about the process of thinking and do alot of abstract thinking. Ginger can think in multiple dimensions because at his age they have the ability to only think in concrete ways.
A firm successfully implementing a differentiation strategy would expect: a. to have high levels of power over suppliers. b. to charge premium prices. c. customers to be sensitive to price increases. d. customers to perceive the product as standard.
A firm successfully implementing a differentiation strategy would expect b. to charge premium prices.
Why would they charge premium ?A differentiation strategy is a business strategy that focuses on creating products or services that are perceived by customers as being unique and valuable. This can be done by offering products or services with features or benefits that are not available from competitors, or by offering products or services that are of higher quality than those of competitors.
When a firm successfully implements a differentiation strategy, it can charge premium prices for its products or services. This is because customers are willing to pay more for products or services that they perceive as being unique and valuable.
Option B is correct.
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Producer surplus is the area A. under the demand curve and above the price. B. between the supply and demand curves. C. below the price and above the supply curve. D. under the supply curve.
Answer:
C. below the price and above the supply curve
Explanation:
The Producer surplus is the difference between the price received for a product and the minimum price the seller is willing to accept for the same product. This area on the graph is below the price line and above the supply curve.
On January 2, Boulder Co. assigned its patent to Castle Co. for royalties of 10% of patent-related sales. The assignment is for the remaining 4 years of the patent’s life. Castle guaranteed Boulder a minimum royalty of $100,000 over the life of the patent and paid Boulder $50,000 against future royalties during the year. Patent-related sales for the year were $300,000. In its income statement for the year, what amount should Boulder report as royalty revenue?
Answer:
$30,000
Explanation:
The computation of the royalty revenue reported is shown below:
= Patent-related sales for the year × given percentage
= $300,000 × 10%
= $30,000
The revenue is recognized when it is earned or realized so only $30,000 is to be reported as the royalty revenue
The remaining amount i.e $20,000 would be treated as an unearned royalty revenue
What is the document that the marketing researcher pledges to deliver as a result of the marketing research process?
Answer: Marketing research proposal
Explanation: A marketing research proposal simply means a detailed outline of market research plan. It entails the processes involves in the research study which includes the aims and objectives of the market research which is included in the problem statement, Developing ways to solve the identified problem, Formulating the design or model for the research, collection of required data (both qualitative and quantitative) , data preparation, cleansing and analysis and Report preparation and presentation.
When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset. A) direct investment; indirect investment B) portfolio investment; direct investment C) portfolio investment; indirect investment D) direct investment; portfolio investment
Answer:
The answer is B.Portfolio Investment and direct Investment.
Explanation:
Portfolio Investments are investments made in a group of assets (equity, debt, mutual funds, derivatives or even bitcoins) instead of a single asset with the objective of earning returns is commensurate with the risk profile of the investor.
Direct Investment commonly referred to as foreign direct investment (FDI), refers to an investment in a foreign business enterprise designed to acquire a controlling interest in this enterprise.
A firm's natural resource exploitation site will require an expenditure of $5 million to reclaim the site for environmental purposes. That expenditure is expected to be made five years from now. The present value today of that amount is $3.5 million. Because of this obligation, by what amount will (1) total depletion on the site increase and (2) how much accretion expense will be recognized, over the five years (in millions)?
Answer:
(1) $3.5 million
(2) $1.5 million
Explanation:
The account of natural resources is compounded by the duty to sell the properties, which is the present value of the $5 million to be paid later, or $3.5 million.
Total depletion over most of the life of the project thus increases by this number. Accretion expense is the growth in the obligation over time.
The $3.5 million amount will increase to $5 million in five years, and at that time that amount's expended.
Mann Corporation has been investing $18,000 for the last four years in an investment scheme that will mature at the end of the current year. It will be receiving $80,000 at the time of the maturity. $80,000 received at maturity is an example of _____.
a. annuity due
b. ordinary annuity
c. lump-sum amount
d. uneven cash flow
Answer:
c. lump-sum amount
Explanation:
Lump-sum amount -
It refers to the one complete amount of money , is referred to as lump - sum amount .
A lump -sum investment ,. refers to the amount of money invested at one time .
Similarly ,
The returns can be lump - sum , where the person receives the complete amount at one go after maturation , is referred to as lump - sum amount .
Hence , from the given scenario of the question ,
The correct option is c. lump - sum amount .
Rice and potatoes are substitutes in consumption. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the equilibrium price to _____ and the equilibrium quantity to _____.
a) equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.
b) equilibrium price to rise and the equilibrium quantity to fall.
c) equilibrium price and quantity both to fall.
d) equilibrium price to rise and the equilibrium quantity to fall, rise, or stay the same.
Answer:
a) equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.
Explanation:
Substitute goods are goods that can be used in place of each other.
If the price of rice rises, consumers shift to the consumption of potatoes. Price and quantity demanded of potatoes increases
The bumper harvest increases supply of potatoes. Price falls and quantity increases.
The effect on equilibrium quantity of potatoes would be indeterminate but equilibrium quantity would rise.
I hope my answer helps you
Final answer:
When the price of rice rises and there's a bumper crop of potatoes, the equilibrium price for potatoes may rise, fall, or stay the same, but the equilibrium quantity is expected to increase due to increased demand and supply.
Explanation:
When considering the situation where rice and potatoes are substitutes in consumption, and the price of rice rises, the demand for potatoes is likely to increase as consumers switch to the cheaper substitute. Simultaneously, a bumper crop of potatoes implies an increase in the supply of potatoes. According to the principles of market equilibrium, an increase in demand would generally lead to a higher equilibrium price and quantity, whereas an increase in supply would lead to a lower equilibrium price and higher quantity demanded.
If both the demand for potatoes increases (due to higher rice prices) and the supply of potatoes increases (due to a bumper crop), the equilibrium price movement might be ambiguous, depending on the relative magnitude of the shifts in demand and supply curves. However, the equilibrium quantity of potatoes can be expected to rise, since both the increase in demand and increase in supply suggest a larger quantity. Therefore, the correct answer is a) equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.
Adventure Holidays sells thousands of tour packages each month through its branches. A branch manager's salary would be a(n) _____ drop item here of generating a particular lead.
Answer:
Indirect cost
Explanation:
Indirect costs are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable.
Answer:
Indirect cost.
Explanation:
The gains Adventure Holidays sells through its branches attracts cost. The salary is the branch manager is an indirect cost for selling tour packages through the branches.
So the branches will need to meet a sales target that will cover the cost incurred at the branch, and turn a profit for adventure holidays.
If the level of economic development in the former West Germany is higher that the level of economic development in the former East Germany, then which of the following is likely to occur?
a the share of total economic activity will rise
b the population in west germany territories will increase
c the east german territories will be a lucrative market for consumer goods
d there will be a decline in total economic activity
Answer:
b the population in west germany territories will increase
Explanation:
People tend to move towards the areas of development to be able to get jobs where they will either make it big or be able to provide food, clothing and shelter for themselves and families if any. Economic development creates jobs and opportunities and it brings in different people from all works of life looking for those jobs.
Chris has a job as a sales representative for a pharmaceutical company. The company offers both quarterly and annual bonuses based on performance. The company also has a profit-sharing plan for its employees. This demonstrates Fayol's principle of __________.a. subordination of individual interests to the common interest.
b. equity.
c. remuneration of personnel.
d. esprit de corps.
e. initiative.
Answer:
c. remuneration of personnel
Explanation:
Henri Fayol developed the fourteen principles of management.
One of the fourteen principles being, Remuneration of personnel.
Fayol was of the opinion that in order to extract the best performance from employees, appropriate remuneration system must exist in an organization.
This meant emphasizing on employee satisfaction by following fair remuneration practices coupled with adequate incentive system which rewards good performance.
In the given case, the pharmaceutical company offers performance based incentives in the form of quarterly as well as annual bonuses in addition to an existing profit-sharing plan for employees. This is an example of Fayol's principle of Remuneration of personnel.
Sophia is an architect and she is trying to decide whether to hire Jacob, a draftsman, to assist with her work. Sophia could hire Jacob at $20 per hour but it would take him three times as long to complete a task as it takes Sophia. Sophia is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?
Answer:
b. Jacob should be hired at the $20 per hour wage rate
Options
a. Sophia should do the drafting work herself because she has the lower opportunity cost
b. Jacob should be hired at the $20 per hour wage rate
c. Sophia should not hire Jacob because it would be faster for her to do the work herself
d. Jacob should be hired, but only if he is paid more than $30 per hour
Explanation:
Sophia cannot fullfil their client request on time without hiring an employee Assuming Jacob is the best possible candidate for Sophie she should consider to hire it as three hours of Jabor will cost 60 dollars while an hour of his work is worth 90 dollars
Thus, making convinient to hire it as there is a profit of 30 dollars.
We should also conider jacob will earn experience over time and this will make it a better employee in the long-run.
In its 1996 income statement, Kilm Co. reported cost of goods sold of $450,000. Changes occurred in several balance sheet accounts as follows:Inventory $160,000 decreaseAccounts payable-suppliers 40,000 decreaseWhat amount should Kilm report as cash paid to suppliers in its 1996 cash flow statement, prepared under the direct method?a. $250,000b. $330,000c. $570,000d. $650,000
Answer:
b. $330,000
Explanation:
Provided that
Reported cost of good sold = $450,000
Decrease in inventory = $160,000
Decrease in account payable = $40,000
So, The computation of the cash paid to supplier is shown below:
= Cost of goods sold + decrease in account payable - decrease in inventory
= $450,000 + $40,000 - $160,000
= $330,000
The decrease in supplies is added while the decrease in inventory is deducted to the cost of goods sold.
Which quality of an asset makes it more appropriate for the fair value principle rather than the historical cost principle?
Answer and Explanation:
Fair value refers to the current market price of the asset while historical cost is the cost at which the asset was acquired. Fair market value will always be higher than historical cost so it reflects the actual worth of the asset.
One of the qualities that makes valuing current assets at fair value rather than historical cost is the availability and reliability of current market price or fair value of current assets.
You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. Which of the following are included in the true cost of going skiing? Check all that apply.
1.The rental of any ski equipment you need
2.The cost of a lift ticket
3.The cost of your ski jacket you purchased last year
4.The wages you forgo by going skiing
Answer:
The rental of any ski equipment you need
The cost of a lift ticket
The wages you forego by going skiing
Explanation:
True cost includes all the cost incurred when you decide to go skiing. It includes opportunity cost and amount spent skiing
The opportunity cost of skiing are the wages you forgo when you go skiing.
The other true costs are the expenses you incur while skiing. They are: The rental of any ski equipment you need
The cost of a lift ticket.
The cost of the ski jacket isn't added because you already own the jacket.
I hope my answer helps you
Lekeisha's income exceeds her expenditures. Lekeisha is a
a. saver who demands money from the financial system.
b. saver who supplies money to the financial system.
c. borrower who demands money from the financial system.
d. borrower who demands money from the financial system.
Answer:
b. saver who supplies money to the financial system.
Explanation:
Lekeisha's income exceeds her expenditures, this means that after using money to satisfy all her immediate needs, she still has some money left. Lekeisha saves this money, for example, by depositing in a savings account. This funds then enter the financial system because the bank uses part of it (or all of it) to make loans.
. Accounts receivable that cannot be collected. (p. 412) 2. Crediting the estimated value of uncollectible accounts to a contra account. (p. 412) 3. The difference between an asset's account balance and its related contra account balance. (p. 412) 4. The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts. (p. 412) 5. The amount of accounts receivable a business expects to collect. (p. 412) 6. A method used to estimate uncollectible accounts receivable that assumes a percent of credit sales will become uncollectible. (p. 413) 7. A method used to estimate uncollectible accounts receivable that uses an analysis of accounts receivable to estimate the amount that will be uncollectible. (p. 413) 8. Analyzing accounts receivable according to when they are due. (p. 414) 9. Canceling the balance of a customer account because the customer does not pay. (p. 418) 10. Recording uncollectible accounts expense only when an amount is actually known to be uncollectible. (p. 419)
Answer:
Uncollectible accountsAllowance methodBook valueBook value of accounts receivableNet realizable valuePercent of sales methodPercent of accounts receivable methodAging of accounts receivablesWriting off an accountDirect write off methodA corporation declares a dividend of $3.00 on Tuesday, December 6th. The record date is set at Friday, December 30th, with the dividend payable on January 6th. Based on this information, the ex date is set at December 28th. For the recipient of the dividend, the "tax event" occurs on:
StatusA A. December 6th
StatusB B. December 26th
StatusC C. December 30th
StatusD D. January 6th
Answer:
30+28+6=64÷3.00
Explanation:
add 30 28 6 then divide $3.00
The tax event for the recipient of the dividend occurs on the payment date, which in this case is January 6th.
Explanation:The “tax event” for a dividend typically occurs on the date that the dividend is actually paid out to shareholders. In the scenario provided, the corporation declares a dividend of $3.00 on December 6th, the record date is December 30th, and the dividend is payable on January 6th. Therefore, the tax event for the recipient of the dividend would be on the payment date, which is January 6th.
Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by________.
Answer:
It depends on the relative elasticties (ie. how elastic demand is/inelastic supply is). The price received by suppliers would decrease by $20 if demand is perfectly elastic: the burden of the tax falls primarily on the supplier since their supply is inelastic.
Therefore:
The tax will raise the equilibrium price from the old level (P*) to the new price paid by consumers (Pc). The price that producers will receive (Pp) is the amount consumers pay minus the amount of the tax, or Pc - t. (depending on the relative elasticities)
Explanation:
Key points :
Tax incidence is the manner in which the tax burden is divided between buyers and sellers. The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax. Tax revenue (to the government) is larger the more inelastic the demand and supply are.Depending on the circumstance (relative elasticities of demand and supply), the burden of tax can fall more on consumers or on producers.
Typically, the incidence, or burden, of a tax falls both on the consumers and producers of the taxed good. But if we want to predict which group will bear most of the burden, all we need to do is examine the elasticity of demand and supply.
The tax burden falls on the more inelastic side of the market. In this case since supply is more inelastic than demand, the tax burden will fall more on them.
When a tax is introduced in a market with an inelastic supply, the sellers have no choice but to accept lower prices.
Further explanation:
By introducing a tax, the government essentially creates a wedge between the price paid by consumers, Pc and the price received by producers, Pp. In other words, of the total price paid by consumers, part is retained by the sellers and part is paid to the government in the form of a tax. he distance between Pc an Pp is the tax rate. The new market price is Pc , but sellers receive only Pp per unit sold since they pay Pc - Pp to the government.
Summary:
The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax. Tax revenue is larger the more inelastic the demand and supply are.
Sellers (suppliers) have to carry a higher tax burden if supply is less elastic than demand. In other words, the side that has a relatively more inelastic curve (i.e., reacts less to price changes) has to carry a larger share of the tax burden, regardless of who the tax is initially levied on.
In a market for digital cameras where demand is elastic and supply is inelastic, the effective price received by sellers will decrease significantly due to a $20 tax, potentially by the full amount of the tax. This occurs because sellers, who cannot easily adjust their quantity supplied, bear a larger share of the tax burden.
The question explores the implications of a $20 tax on digital cameras when demand is elastic and supply is inelastic. In such a market structure, when a tax is levied, the burden tends to fall more heavily on the side of the market that is less responsive to price changes. Given that the supply of digital cameras is inelastic (suppliers cannot easily adjust their quantity supplied in response to price changes), and demand is elastic (consumers are sensitive to price changes and can easily switch to substitutes), the effective price received by sellers of digital cameras will decrease significantly.
Considering the principles of tax incidence in markets with these characteristics, sellers bear a larger share of the tax burden when their ability to adjust is limited. Therefore, the $20 tax will lead to a decrease in the effective price received by sellers by nearly the full amount of the tax, if not the entire $20, depending on the exact elasticity measures of demand and supply.
People are not motivated when they do not have clear goals and do not know what is expected of them. ________ reduces uncertainty and indicates what everyone is expected to accomplish.
Answer:
Planning
Explanation:
Planning is the process of setting goals and defining the actions required to achieve the goals.
The planning process involves deciding before hand, what is to be achieve or what is to be done, ways by which it will be done and when it will be done. It helps to reduce uncertainty by setting directions that is to be followed to accomplish the set objectives.
Jane and Sarah were watching the evening news when viewers were asked to weigh in on the city's proposed tax increase. Later in the broadcast, these results were posted. Both Jane and Sarah were skeptical: 68 percent of the viewers supported the tax increase. They wondered how well the type of people who chose to participate would represent the views of all the city's citizens. Jane and Sarah are demonstrating:
Answer:
Critical thinking
Explanation:
Critical thinking refers to gathering information, analyzing it in depth so as to arrive at a conclusion which guides an individuals actions.
Critical thinking requires precision as a trait coupled with high observation skills. Such an activity requires impartial thoughts, an objective mind, not influenced by personal bias or prejudice.
In the given case, Jane and Sarah are assessing the views of the viewers with regard to proposed tax increase, based upon the results announced by the broadcaster. Skepticism is one of the traits required for critical thinking as it makes an individual probe further.
Jane and Sarah are demonstrating critical thinking.
The definition of supervisor as "any individual having the authority to hire, transfer, suspend, recall, or discipline other employees; or responsibility to direct them, or to adjust their grievances" comes from ?
Answer:
The Taft Hartley Act, 1947
Explanation:
The Taft Hartley Act, which is also referred to Labor Management Relations Act , came into force on June 23, 1947 as a means to control and regulate the powers of labor trade unions in the United States.
The act barred labor unions from carrying out unfair labor activities such as disruptive or political strikes or acts of solidarity. The act made a clear distinction between employees and supervisors.
Supervisors have the power to hire individuals, retain them, direct them, discipline their actions and also to address their grievances and complaints.
Supervisors as defined under the act are not prohibited from organizing unions. But unlike employees, their interests are not safeguarded from the outcome of those union activities.
Potential competitors may enter an industry and begin to take market share from existing companies. What would be one of the largest challenges a new entrant would need to overcome to be successful when entering the industry?
Production costs are high and require high volumes to achieve profitability.
Explanation:One of the largest challenges that will be faced by the potential competitors when they try to enter an industry will be that they will face that cost of production will be higher and they would require higher volumes for achieving profits. When a company is new to an industry there will be competitors who are already established well on that particular industry.
The challenges and the opportunity that are in existence will be well known to the existing competitors. They already have buyers and suppliers chain. Hence, the new entrant will have higher production cost and also they require higher volumes to achieve profits.
A company that manufactures frozen pizza rolls is employing the shaping process (one of the learning theories) to get consumers to try its products. The free samples offered by the company and the discount coupons have been received well by consumers. In general, the overall goal of a learning theory is:
Answer:
It is to evaluate the response to introduction of new services and how learning are delivered.
Explanation:
Learning theory is the process of developing and transferring knowledge and also how the new introductions are received by the target audience . It can be affected by old experiences ,environmental influences and the state of mind as at the time of learning.
It is grouped into cognitive , conditioning and social learning theory.
Its main reason is to evaluate how audience reacts to introduction of new ideas , good and services and how well it was delivered.
Derek has liquid assets of $4,450 and he saves $615 a month. His current liabilities are equal to $1,750 and monthly credit payments of $425. Derek’s gross income is $5,900 each month and a take-home pay of $4,775. What is Derek’s debt-payments ratio?
Final answer:
Derek's debt-payments ratio is calculated by dividing his monthly credit payments ($425) by his take-home pay ($4,775). This results in a ratio of 0.089 or 8.9%, indicating a healthy financial state as it is below the recommended maximum of 20%.
Explanation:
Derek’s debt-payments ratio is a tool used to assess his financial health by comparing the amount of money he owes each month to his take-home pay. To calculate this ratio, we would take Derek's monthly credit payments and divide them by his take-home pay. Thus, the calculation for Derek’s debt-payments ratio is:
Monthly Credit Payments / Take-Home Pay = $425 / $4,775 = 0.089 or 8.9%
This means that 8.9% of Derek's monthly take-home pay goes towards credit payments, which is under the recommended maximum of 20%. Having a debt-payments ratio under this threshold generally indicates good financial health and that Derek is managing his credit responsibly.
You are the Cisco administrator for your company. A new branch office is opening and
you are selecting the necessary hardware to support the network. There will be two
groups of computers, each organized by department. The Sales group computers will
be assigned IP addresses ranging from 192.168.1.2 to 192.168.1.50. The Accounting
group will be assigned IP addresses ranging from 10.0.0.2 to 10.0.0.50. What type of
device should you select to connect the two groups of computers so that data communication
can occur?
A. Hub
B. Switch
C. Router
D. Bridge
You should select Router to connect the two groups of computers so that data communication can occur.
Explanation:Routers are essential for the communication between two or more computers that are connected to a network. The primary function of routers is making connection between various networks and the data packets will be forwarded to the computers of same network of different networks.
It is a layer 3 device. This because the data that is contained in the layer 3 IP packet that contains the IP address of the destination to which the packet should be forwarded plays a very important role in making decisions related to the data packets forwarding. Thus a Router must be selected for connecting two groups of computer for data transfer and communication.
You are scheduled to receive $7,500 in three years. When you receive it, you will invest it for eight more years at 7.5 percent per year. How much will you have in eleven years?
Answer:
$13,376
Explanation:
Given an initial investment (P) of $7,500 invested for 8 years (n) at 7.5% per annum (r),
the amount at the end of the investment will be
[tex]A = P (1+r)^{n}[/tex]
[tex]= 7,500 * (1.075)^{8}[/tex]
[tex]= 7,500 * 1.7835[/tex]
= $13,376.
Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low-quality "lemon."a. Suppose that there are equal numbers of good and bad used cars in the market and that good used cars are worth $13,000 while bad used cars are worth $5,000. What is the average value of a used car?b. By how much does the average value exceed the value of a bad used car? By how much does the value of a good used car exceed the average value?c. Would a potential seller of a good used car be willing to accept the average value as payment for her vehicle?d. If a buyer negotiates with a seller to purchase the seller’s used car for a price equal to the average value, is the car more likely to be good or bad?e. Will the used car market come to feature mostly—if not exclusively—lemons? How much will used cars end up costing if all the good cars are withdrawn?
Answer:
A) the average value of a used car = ($13,000 + $5,000) / 2 = $18,000 / 2 = $9,000
B) the average value is $4,000 higher than the value of a bad used car. A good used car exceeds the average value by $4,000.
C) No, because he/she knows that his good used car is worth much more.
D) If the seller accepts the average value, it is more likely that his car is a bad car.
E) The majority of used cars should be bad or lemon, since good used cars will be sold quickly. If all good used cars were removed, then the price of used cars would drop to $5,000 (the value of a lemon car).