Moses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average cost is $0.15 per kilowatt-hour. A government regulator is considering a proposal to regulate the firm’s price at $0.05 per kilowatt-hour. Would such a policy improve social welfare? Explain
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Moses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average cost is $0.15 per kilowatt-hour. A government regulator is considering a proposal to regulate the firm’s price at $0.05 per kilowatt-hour. Would such a policy improve social welfare? Explain
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- The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as QD=18,000+0.4N350PM+90Ps where N=numberofnewhomescompletedintheprimarymarketarea PM=priceoftheMapcotrimmerPS=priceofitscompetitorsSurefiretrimmer In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55. What sales are forecasted for 2010 under these conditions? If its competitor cuts the price of the Surefire trimmer to $50, what effect will this have on Mapcos sales? What effect would a 30 percent reduction in the number of new homes completed have on Mapcos sales (ignore the impact of the price cut of the Surefire trimmer)?Quantum Footwear is an MNE that manufactures inexpensive shoes. Quantum outsources portions of its production to independent companies located in Bangladesh and India where child labor is common. Other clothing and footwear firms have recently faced criticism regarding the use of child labor, and Quantum executives want to avoid similar problems. Which of the following would be the best approach for Quantum? improving conditions at the subcontract facilities developing an external ethics code for foreign partners and letting them worry about compliance requiring local governments to alter their labor policies leaving the market and focusing on domestic productionShaughnessy Consulting, LLC currently enjoys a patent on software that estimates economic damages for clients involved in personal injury lawsuits. Demand for my software is QD = 287.5 – 12.5P. Creating the software cost me about $985 in development and coding. I can produce a copy of the software for $11 per unit (constant cost). How many copies of the software should I attempt to sell? At what price should I sell it? How much profit would I make? My patent expires in a year, and I know other economic consultants will produce competing software. What quantity and price will result once competing software emerges? How much consumer surplus will my clients (lawyers) gain once the competitors enter? (For measuring consumer surplus, recall that area of a triangle = ½ * base * height.) How much deadweight loss is created by my patent and monopoly in this software?
- Big Bird Air is legally obligated to purchase 50 jet engines from ERUS at the end of two years at a price of $200,000 per engine. Confident that it is protected from opportunism with this contract, Big Bird begins making aircraft bodies designed to fit ERUS’s engines. Due to unforeseen events in the aerospace industry, in the second year of the contract ERUS is on the brink of bankruptcy. It tells Big Bird that unless it increases the engine price to $300,000, it will go bankrupt. 1. What should the manager of Big Bird Air do? 2. How could this problem have been avoided? 3. Did the manager of Big Bird Air use the wrong method of acquiring inputs?XYZ, inc. makes and sells bicycle parts. Last year XYZ sold 5,400 handlebars, generating sales of $110,000. This year they are considering a new pricing strategy with a target profit goal of $15,000. They determined that for every $2 increase to the selling price, a 300 decrease in unit sales was expected. Their total costs were $110,000 with fixed costs accounting for $60,000. This year, XYZ, inc. is considering changing the selling price to $27. Assuming that the demand function is linear, what is the slope of demand? CALCULATED VARIABLES:cm = $11.11vc = $9.26asp = $20.37A local restaurateur who had been running a profitable business for many years, recently purchased a three-way liquor license. This on-premise license gives the owner the legal right to sell beer, wine, and spirits in her restaurant. The cost of obtaining the three-way license was about $90,000, since only 300 such licenses are issued by the state. While the license is transferable, only $75,000 is refundable if the owner chooses not to use the license. After selling alcoholic beverages for about one year, the restaurateur came to the realization that she was losing dining customers and that her profitable restaurant was turning into a noisy, unprofitable bar. Subsequently, she spent about $8,000 placing advertisements in various newspapers and restaurant magazines across the state offering to sell the license for $80,000. After a long wait, she finally received one offer to purchase her license for $77,000. a) Would you recommend that she accept the $77,000 offer? b) The restaurateur…
- You have been promoted to be the new manager of Nefertiti Hotel, and you must decide where to build a new hotel. The finance department believes that Morocco is the better option due to the tax benefits of $5 million, while the marketing department estimates the present value of gross operating profits to be only $10 million in Morocco compared to $14 million in Tunisia. If it costs $15 million to build the hotel in either location, would it be more profitable to build in Morocco or Tunisia? If the hotel is located in Morocco, what would the firm's economic profits be?compute, show solution, explainAcme Manufacturing Co. and Compressors Institute of America, Inc. orally agreed that CIA would custom-manufacture a compressor for Acme at a price of $120,000. After CIA completed the work at a cost of $90,000, Acme notified CIA that the compressor was no longer needed. CIA is holding the compressor and has requested payment from Acme. CIA has been unable to resell the compressor for any price after reasonable attempts. CIA incurred storage fees of $2,000. If Acme refuses to pay CIA and CIA sues Acme, the most CIA will be entitled to recover is: Group of answer choices Nothing, because the contract was verbal only. As much as they want because the CIA has special powers. $120,000. $90,000. $122,000.The Odessa Independent Phone Company (OIPC) is currently engaged in a rate case that will set rates for its Midland-Odessa area customer base. OIPC has total assets of $20 million. The Texas Public Utility Commission has determined that an 11 percent return on assets is fair. OIPC has estimated its annual demand function as follows: P=$3,514-$0.08Q Its total cost function ( Not Including the cost of capital) is TC=$2,300,00+$130Q OIPC has proposed a rate of $250 per year for each customer. If this rate is approved, OIPC will earn a percent return on assets? If the commission wants to limit the return on assets to 11 percent, OIPC can either charge per year for each customer and serve fewer customers than under its proposed rate of $250, or it can charge per year for each customer and serve more customers than under its proposed rate of $250.
- Tesla share price is $439.18; Netflix share price is $480.68; and Amazon share price is 3148.24. Tesla has a P/E ratio of 870.15; Netflix has a P/E ratio of 77.66; and Amazon has a P/E ratio of 92.20. ______ is the most expensive stock and _____ is the least expensive stock to receive part of their earnings.Cloth plc is the parent of the enterprise and has a manufacturing subsidiary, Tweed Inc, which is based in the US. Tweed Inc purchases 60% of its manufacturing inputs from the parent company, and the remaining 40% from an unrelated New Zealand company Darwin Wools Limited. Tweed Inc sells 40% of its output to retailers in the Eurozone, 40% to retailers in the UK, and exports the remaining 20% to retailers in Canada. Tweed Inc is negotiating with their New Zealand supplier, Darwin Wools Limited, to purchase a consignment of wool. The order is for 1 million kilos of wool. Darwin Wools Limited has insisted that they receive New Zealand Dollars (NZ$). Tweed Inc agree to pay NZ$ 500,000 for the wool in 6 months’ time, though are concerned that the US$/NZ$ exchange rate might change adversely. The following market information is available: Current spot exchange rate US$1/ NZ$1.49 Forward rate (6 months) US$1/ NZ$1.42 NZ borrowing rate 2.00% p.a.…A provincial park issues three different types of passes to its customers (bronze, silver, and gold tickets). Each pass type allows visitors to spend different times in the park and have access to different park amenities. The profit margins of the three pass types are $1.00, $3.50, and $12.00 per pass, respectively. The administrative working units required for the three pass types are estimated to be 1, 1, and 4 units, respectively. The monthly administrative working units available are 25000 units. In a typical summer month, the number of visitors was estimated to be 10,000 visitors. Accordingly, the park management decided to issue a total of 10,000 tickets for that month. Based on preliminary market research, the park management also decided to make at least 1500 bronze and 1500 silver passes available for customers. Based on this information, what is the optimal number of each pass type that the park should issue to maximize its profit? Use the simplex method to develop your…