! 16) In the past a common practice forselling a home was to allow the buyer to"assume the mortgage" this meant that thebuyer would be able to take over theexisting mortgage of the seller. Theadvantage of doing this was that theexisting mortgage might have a lowerinterest rate than the current mortgages.Suppose that a seller of a home has aninterest rate of 3% on his existing mortgageand it is locked in for the next 5 years.Suppose also that the best interest ratebuyers can ger for a new mortgage is 6%. Ifthe mortgage is assumed by the buyer,who benefits: the buyer or the seller?Explain

Among the buyer or the seller the benefits will go to the buyer . The details are discussed as…

Answered: 16) In the past a common practice for…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter7: Nonlinear Optimization Models

Section7.3: Pricing Models

Problem 4P

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Pricing Decisions at Madison The Madison Company manufactures and retails a certain product. The company wants to determine the price that maximizes its profit from this product. The unit cost of producing and marketing the product is 50. Madison will certainly charge at least 50 for the product to ensure that it makes some profit. However, there is a very competitive market for this product, so that Madisons demand falls sharply when it increases its price. How should the company proceed?2 In the pricing model in Example 7.1 with the constant elasticity demand function, the assumption is that all units demanded are sold. Suppose the company has the capacity to produce only 200 units. If demand is less than capacity, all of demand is sold. If demand is greater than or equal to capacity, only 200 units are sold. Use Solver to find the optimal price and the corresponding profit. Then use SolverTable to see how sensitive these answers are to the production capacity, letting it vary from 170 to 230 in increments of 10. Discuss your findings relative to the original solution in Example 7.1. In other words, what is the effect of capacity on the optimal price and profit?
1. Select the rule which determines the quantity of a rice which a consumer will demand.a) Continue to buy so long as there is no consumer surplus.b) Stop buying rice at the level of demand where the consumer surplus rises above the market price.c) Stop buying rice at the level of demand where the marginal utility falls to the price of rice.d) Continue to buy so long as demand for rice is price elastic. 2. In which of these situations might moral hazard arise?a) Insurance companies fail to calculate the risks of accident correctly.b) A company receives an exemption from pollution control legislation.c) A sports team accepts bribes which affect their performance in a game.d) A group of households makes a collective purchase of flood insurance
Purchase Discounts It is typically beneficial for companies to take advantage of early-paymentdiscounts allowed on purchases made on credit. To see why this is the case, determine the effectiverate of interest associated with not taking advantage of the early-payment discount for each of thefollowing situations. Assume in each case that payment is made on the 30th day of the billing cycle.Required1. What is the opportunity cost of not taking advantage of the discount associated with purchases madeunder the following terms: 2/10, n/30? (Show calculations.)2. What is the opportunity cost of not taking advantage of the discount associated with purchases madeunder the following terms: 1/10, n/30? (Show calculations.)3. To motivate managers to take early-payment discounts, what is the appropriate accounting treatment forpurchase discounts?
33- In the cash count made on 10.05.202, a cash balance of 35,000 TL was determined. As of the same date, the total debit of the cash account is TL 45,000, and the total receivable is TL 15,000. Which of the following calculations is correct in this situation? a) 197 Lack of Counting and Receipt Hs. 5,000 TL (Borrower) B) 770 General Administrative Expenses Hs. 5,000 (Borrower) NS) 760 Marketing Sales and Distribution Expenses Hs. 5,000 (Borrower) D) 397 Count and Receipt Surplus Hs. 5,000 TL (Creditor) TO) 100 Case Hs. 5,000 TL (Creditor)
CASE JOVINA BUENAARTE PLASTIC PRODUCTS: LET ME TRY AGAIN Miss Jovina Buenaarte was thirty-six years old way back in 2003 when she first started plastic products. She made up her mind to operate this business when her friend, a plastic maker, complained about the unavailability of plastic products in the area which is of standard quality. Those that are locally máde do not conform to the requirements set by various users. With a P50,000 starting capital, Ms. Buenaarte proceeded to produce plastic products like bags and kitchen utensils. She personally supervised the mixing of the necessary materials for production. Because of good quality control, her products surpassed the requirements of buyers. Her sales increased considerably even if her selling prices are a little higher than those of competitors. The firm soon grew into a multi-million peso operation. The number of her employees increased to about a hundred with five assigned to administration and the rest either as drivers or…
Michelle owns a house in which she keeps valuables worth 100,000 which can get stolen with probability 1%. She can purchase coverage C of the amount C ∈ [0; 100,000] at premium π = 0.05 dollars for each dollar covered. Her Bernouilli utility function is u(w) = ln(w). Assume she has no other assets. 1. Set up her maximization problem. 2. How much insurance will she choose to buy? 3. How much profits does the insurance company earn on insuring Michelle? 4. Does the fact that the insurance company earn profits mean that Michelle is worse off com-pared to the situation in which she is not insured? Explain what is happening. 5. How much insurance will she buy if insurance companies charge an actuarially fair insurance rate?
#17FAVORABLE UNFAVORABLEMARKET MARKETEQUIPMENT ( $) ($)Sub 100 300,000 –200,000Oiler J 250,000 –100,000Texan 75,000 –18,000For example, if Ken purchases a Sub 100 and ifthere is a favorable market, he will realize a profitof $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. ButKen has always been a very optimistic decisionmaker.(a) What type of decision is Ken facing?(b) What decision criterion should he use?(c) What alternative is best? #18Although Ken Brown (discussed in Problem 3-17) is the principal owner of Brown Oil, his brother Bob iscredited with making the company a financial success. Bob is vice president of finance. Bob attributeshis success to his pessimistic attitude about business and the oil industry. Given the information fromProblem 3-17, it is likely that Bob will arrive at a different decision. What decision criterion should Bobuse, and what alternative…
If Jensen obtains the job based on a bid of $14,300, what is the probability that he will lose money on the job?Note: Use Appendix B (link to appendix b https://cxp-cdn.cengage.info/protected/prod/assets/b6/2/b62d7c39-0b28-4359-ade6-4e056146f23e.pdf?__gda__=st=1671734492~exp=1672339292~acl=%2fprotected%2fprod%2fassets%2fb6%2f2%2fb62d7c39-0b28-4359-ade6-4e056146f23e.pdf*~hmac=6aa777d3df8bd33ffb3bbf0e849b197e2f0e6fb7a521cce4eb085aa7faf52b03) to identify the areas for the standard normal distribution. If required, round your answer to four decimal places.
Choose the right answer. 7. (Sale of Goods) Amira bought a big oven yesterday. Today her little sister, Bashira takes the oven to her house to bake a cake, after she receive permission to do so. Tomorrow her friend Cinthia wants to rent the oven and and she already paid RM50 for it. Who has the legal right to the machine? a. Asma b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira 8. (Sale of Goods) Who has the equitable right to the machine? a. Asma b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira
Assume Clinique expects to sell 3 million ounces of BB cream within the first year after introduction butexpects that half of those sales will come from buyers who would otherwise purchase Clinique’s moisturizer (that is, cannibalized sales). Assuming that Cliniquenormally sells 10 million ounces of moisturizer per year and that the company will incur an increase in fixed costs of $2 million during the first year of production for the BB cream, will the new product be profitable for the company? Refer to the discussion of cannibalization in Appendix 3: Marketing by the Numbers for an explanation of how to conduct this analysis. (AACSB: Written and Oral Communication; Analytical Thinking)
Choose the right answer. 5. (Sale of Goods) Amira bought a big oven yesterday. Today her little sister, Bashira takes the oven to her house to bake a cake, after she receive permission to do so. Tomorrow her friend Cinthia wants to rent the oven and and she already paid RM50 for it. Who has the title to the machine? a. Asmira b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira 6. (Sale of Goods) Who has possession of the machine? a. Asma b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira 7. (Sale of Goods) Who has the legal right to the machine? a. Asma b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira 8. (Sale of Goods) Who has the equitable right to the machine? a. Asma b. Bashira c. Cinthia d. Amira and Cinthia e. Amira and Bashira

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