2. A monopolist has a cost function given by TC 250+q+.004q2. The inverse market demand for boxes is given by p-8-.0010. The monopolist is currently able to exclude rivals from the market because of a special governmental zoning rule. (a) What is its output and what price does it charge for boxes? (b) Calculate the firm’s profit at this output level. (c) Calculate the firm’s producer’s surplus at this output level (d) Calculate the consumer’s surplus in this situation

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(2) Glenn Foreman, president of Oceanview Development Corporation, is considering submitting a bid to purchase property that will be sold by sealed bid at a county tax foreclosure. Glenn’s initial judgment is to submit a bid of $5.5 million. Based on his experience, Glenn estimates that a bid of $5.5 million will have a 0.2 probability of being the highest bid and securing the property for Oceanview.

The sealed-bid procedure requires the bid to be submitted with a certified check for

8% of the amount bid. If the bid is rejected, the deposit is refunded. If the bid is accepted, the deposit is the down payment for the property. However, if the bid is accepted and the bidder does not follow through with the purchase and meet the remainder of the financial obligation within six months, the deposit will be forfeited. In this case, the county will offer the property to the next highest bidder.

If Oceanview’s bid is accepted and they obtain the property, the firm has to decide between building and selling a complex of luxury condominiums or building and selling a complex of single family residences. However, a complicating factor is that the property is currently zoned for single-family residences only. Glenn believes that a referendum could be placed on the voting ballot in time for the November election. Passage of the referendum would change the zoning of the property and permit construction of the condominiums. To determine whether Oceanview should submit the $5 million bid, Glenn conducted some preliminary analysis. This preliminary work provided an assessment of a 40% the probability that the referendum for a zoning change will be approved.

Cost and Revenue Estimates- Condominiums

Revenue from condominium sales: $16,000,000 with a probability of 75% or 7,000,000 with a probability of 25%

Cost: Construction expenses of $7,500,000

Cost and Revenue Estimates- Single Family Homes

Revenue from home sales: $12,000,000 with a probability of 70% or 6,000,000 with a probability of 30%

Cost: Construction expenses of $6,000,000

a. Draw the decision tree for this problem.

b. Calculate the expected values and determine the best decision for Oceanview

 

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2. Final Project: Business PlanResources: Appendix ADue Date: Sunday Day 7 [Individual] forumWrite a 700- to 1,050-word paper, using APA guidelines, based on the scenario below.You want to start your own business. You found an investment group that is willing to give you the capital needed for the first year of your business, but only if you can convince them you have a solid plan for the success of this business. Your investor is very concerned with how the accounting functions of this business will be handled. You must persuade your investor to put up the capital by addressing the following questions in your business plan:· What is the name of your business?· What type of business structure is it (sole proprietorship, partnership, or corporation)?· Why did you choose that structure?· What type of services or products does your business provide?· What role will accounting play in the start up of your business?· What type of work characteristics will you look for when hiring your accounting staff?· What education should a person have in budgeting, internal controls, and cash management before going into business?· What kinds of internal controls will you put in place for the business?· How will your managers use financial information to predict outcomes for your business?I really do not know where to start and was wondering if anyone can give me a way to go?

 

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2. Expected Utility Theory An individual goes to the store to buy a new iClicker for $40. The clerk at the store tells the individual that the same iClicker is on sale for $20 across campus. The individual goes to the other store. The same individual goes to the store to buy a new computer for $600. The clerk at the store tells the individual the same computer is on sale at the same store across campus for $580. The student does not go. Is this consistent with expected utility theory? Why or why not

 

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2. Suppose that US market demand and supply for cloth are given, respectively, by the following algebraic equations: P = 8 – ½Q and P = 2 + ¼Q (P is given in dollars and Q in tons).

a) Plot the demand and supply schedule for clothe and determine the equilibrium price and quantity for cloth in the US in the absence of [international] trade.

b) If the US now allows free trade and P=$2.00 on the world market and we assume no transportation costs, how much cloth will the US consume, produce and import with free trade?

c) Now assume the US imposes a tariff of 50% on the world price, how much cloth will the US consume, produce and import with tariff?

d) How much tax revenues will the US government collect with trade restrictions?

e) How much is the consumer loss as a result of the tariff?

f) How much are the producer’s gains and the society loss (deadweight loss) as a result of the tariff?

g) The benefits of trade liberalization are assumed to be great. Yet, Nations restrict International Trade. Why do they do that? Discuss.

 

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