You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing revenues. Your economics consultants have informed you that at present price and output levels, price elasticity of demand for your product is less than one. You should:

Answers

Answer 1

Answer:

Increase price.

Explanation:

Price elasticity is the degree of responsiveness of quantity demanded to changes in price. Ideally as price increases quantity demanded reduces. When prices reduce quantity demanded increases.

As a new manager of Rock Record company, if the economics consultants inform you the price elasticity is less than one it means quantity does not change with increase in price.

So price can be increased without a corresponding decrease in price. The goal of higher revenue can be achieved by increasing the product price.

Answer 2

Answer:

Answer:

The correct answer is: increase prices.

Explanation:

Price elasticity refers to the changes in quantity demand after the change in price for a good or service. Elasticity is calculated by dividing the percentage in quantity demanded by the percentage change in price. If the result is equal or greater than one (1) the demand is elastic. If the result is lower than 1 the demand is inelastic.

Thus, in the case given, Rock Record Company has an inelastic price demand since it is lower than 1. It implies changes in price are unlikely to change the quantity demanded. As the company needs to increase the revenue, the easiest method to achieve that is to raise the product prices.

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Elmer’s utility function is U(x, y) = min{x, y2}. If the price of x is $25 and the price of y is $15 and if Elmer chooses to consume 7 units of y, what must his income be? a.

Answers

Answer:

the income is $1,330

Explanation:

The computation of the income is shown below;

Given that

U(x, y) = min{x, y2}

Price of x is $25

ANd, the prcie of Y is $15

So,

25X + 15Y = M

if Y = 7,

So,

At eqm, X = Y^2 = 49

Then ,

M = 25 × 49 + 15 × 7

= 1225 + 105

= 1330

Hence, the income is $1,330

The same should be relevant and considered too

For utility maximization, Elmer's income should be $1330, considering his consumption of 7 units of y at $15 each and a maximum of 49 units of x at $25 each.

To find Elmer's income for utility maximization, we need to consider his utility function, the prices of the goods (x and y), and the quantity of y he chooses to consume.

Elmer's utility function is U(x, y) = min{x, y^2}, which means his utility depends on the minimum of x and y^2. In this case, he chooses to consume 7 units of y at a price of $15 each, so his expenditure on y is 7 * $15 = $105.

Now, we need to find out how much he is willing to spend on x to maximize his utility. Since the utility function takes the minimum of x and y^2, we want to make x as small as possible to keep utility high. Let's assume he consumes x units of x.

For utility maximization, x must be the minimum between x and y^2. In this case, x <= y^2, so x <= 7^2 = 49.

Now, we need to find the price of x, which is $25 per unit.

To maximize utility, he should spend his remaining income on x, so his income (I) should satisfy:

I = expenditure on x + expenditure on y

I = (x * $25) + ($105)

We know that x <= 49, so let's assume he consumes the maximum possible x, which is 49. Therefore,

I = (49 * $25) + ($105)

I = $1225 + $105

I = $1330

So, Elmer's income for utility maximization should be $1330.

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Complete question below :

If Elmer's utility function is U(x, y) = min{x, y^2}, and he chooses to consume 7 units of y at a price of $15 each, what must his income be for utility maximization?

A construction company entered into a fixed-price contract to build an office building for $20 million. Construction costs incurred during the first year were $6 million and estimated costs to complete at the end of the year were $9 million. The company recognizes revenue over time according to percentage of completion. How much revenue and gross profit or loss will appear in the company’s income statement in the first year of the contract? (Enter your answer in whole dollars.)

Answers

Answer:

$2 million or $2,000,000

Explanation:

The computation of the revenue and gross profit or loss will appear in the company’s income statement in the first year is shown below:

= revenue recognized - cost incurred

The Total cost is

= $6 + $9

= $15

And, the revenue recognized is

= $6 ÷ $15 × $20

= $8

So, the gross profit is

= $8 - $6

= $2

hence, the gross profit is $2 million

Markowis Corp. has collected the following data concerning its maintenance costs for the past 6 months. Units Produced Total Cost July 19,962 $39,924 August 35,488 53,232 September 39,924 60,995 October 24,398 42,142 November 44,360 82,620 December 42,142 68,758 Compute the variable cost per unit using the high-low method. (Round variable cost per mile to 2 decimal places e.g. 1.25.) Variable cost per unit $ Compute the fixed cost elements using the high-low method. Fixed costs $

Answers

Answer:

C = 1.75Q + 4,990

variable 1.75

fixed component 4,990

Explanation:

High-Low method:

we subtract the highest level of activity with the lowest one:

$\left[\begin{array}{ccc}High&44,360&82,620\nLow&19,962&39,924\nDifference&24,398&42,696\n\end{array}\right]$

24,398 units generates 42,696 cost

with this information we can solve for variable cost.

42,696 / 24,398 = 1.75

Now we calcualte the fixed cost:

TC = variable x Q + fixed cost

82,620 = 1.75 (44,360) + fixed cost

82,620 - 77630 = 4990

the formula will be:

C = 1.75Q + 4,990

Answer: variable 1.75

fixed component 4,990

Explanation: subtract the highest level of activity from the lowest one

44,360-19,962=24,398

82,620-39,924=42,696

then do 42,696 / 24,398 = 1.75

Now for fixed cost:

82,620 = 1.75 (44,360)

82,620 - 77630 = 4990

Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 5%. The Federal Reserve buys a government bond worth $200,000 from Lorenzo, a client of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank.Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets LiabilitiesReserves $200,000 Deposits $200,000 Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%.Hint: If the change is negative, be sure to enter the value as negative number.Amount Deposited Change in Excess Reserves Change in Required Reserves(Dollars) (Dollars) (Dollars)200,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Juanita, who immediately uses the funds to write a check to Gilberto. Gilberto deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Lorenzo, who writes a check to Neha, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Teresa as well.Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.Increase in Deposits Increase in Required Reserves Increase in Loans(Dollars) (Dollars) (Dollars)First Main Street Bank Second Republic Bank Third Fidelity Bank Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.

Answers

Answer:

a) Assets: Reserves $200,000; Liabilities: Deposits $200,000

b) Amount Deposited: $2000,000; Change in Excess Reserves: $190,000; and Change in Required Reserves: $10,000

c) See the calculation below and the attached excel file for the table.

d) the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.

Explanation:

These can be answered as follows:

a) Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).

Note: See the attached excel file for the table.

The $200,000 deposited by Lorenzo to First Main Street Bank led to the creation of both an asset and a liability for First Main Street Bank.

As a result, the reserve of the bank is increased by $200,000 on the asset side of the T-account. It is therefore now possible for the ban to grant loan to other customers from these additional reserves.

In addition, the demand deposit of the bank is increased by $200,000 on the liability side of the T-account. This is recorded as a demand deposit because it is possible for Lorenzo to come at any time to the band to withdraw his deposit either by using a debit card or by writing a check.

b) Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%. Hint: If the change is negative, be sure to enter the value as negative number.

Note: See the attached excel file for the table. Just scroll the excel file down to part b.

The required reserve ratio of 5% indicates that First Main Street Bank has to hold 5% of the $200,000 the deposit or fresh fresh reserves, and this will result in having a 95% excess reserve which the bank can employ to grant loans.

From the amount deposited, the change in excess reserve and the change in the required reserve can be computed as follows:

Amount deposited = $200,000

Change in excess reserve = $200,000 * (1 - 5%) = $190,000

Change in required reserve = $200,000 * 5% = $10,000

c) Now, suppose First Main Street Bank loans out all of its new excess reserves to Juanita, who immediately uses the funds to write a check to Gilberto. Gilberto deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Lorenzo, who writes a check to Neha, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Teresa as well.Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.

Note: See the attached excel file for the table. Just scroll the excel file down to part c.

As already computed in part b above, we have the following to show the effect of this ongoing chain of events at each bank, we have:

For First Main Street Bank:

Increase deposit = Deposit from Lorenzo = $200,000

increase in required reserve = $200,000 * 5% = $10,000

Increase in loans = Loan to Juanita = $200,000 * (1 - 5%) = $190,000

For Second Republic Bank:

Increase deposit = Deposit from Gilberto = $190,000

Increase in required reserve = $190,000 * 5% = $9,500

Increase in Loans = Loans to Lorenzo = $190,000 * (1 - 5%) = $180,500

For Third Fidelity Bank:

Increase deposit = Deposit from Neha = $180,500

Increase in required reserve = $180,500 * 5% = $9,025

Increase in Loans = Loans to Teresa = $180,500 * (1 - 5%) = $171,475

d) Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.

In order to calculate this, the formula for the money multiplier is used to multiply the initial deposit or injection of $200,000 by Lorenzo as follows:

Money multiplier = 1/r

Where r denotes required reserve ratio of 5%, or 0.05.

Therefore, we have:

Overall increase in demand deposits = Injection * (1 / r) = $200,000 * (1 / 0.05) = $200,000 * 20 = $4,000,000

Therefore, the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.

Final answer:

When the Federal Reserve buys a government bond from a client of First Main Street Bank, the bank's assets increase by the bond value and its liabilities increase by the same amount in deposits.

Explanation:

In this scenario, when the Federal Reserve buys a $200,000 government bond from Lorenzo, a client of First Main Street Bank, and he deposits the money into his checking account at the bank, there are changes in the bank's T-account. The bank's assets increase by $200,000 in reserves, while its liabilities increase by $200,000 in deposits.

Next, if First Main Street Bank loans out all of its new excess reserves to Juanita, who writes a check to Gilberto, Gilberto deposits the funds into his checking account at Second Republic Bank. This process continues with each successive loan deposited into a checking account at each bank. The increase in deposits, required reserves, and loans at each bank can be filled in the table provided.

Assuming this process continues with no banks keeping any excess reserves, the $200,000 injection into the money supply results in an overall increase of $200,000 in demand deposits.

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Mary, a merchant, was in the business of selling flowers to local florists. Melissa was the owner of Little Flower, Inc. and she regularly purchased her flowers from Mary. One day, Melissa called Mary and ordered 20 dozen roses, 15 dozen carnations, 10 dozen daisies, baby breaths, 6 dozen tulips, and some plants. Everything totaled $1,200, and was to be delivered in 14 days. After the two ended their call, Mary sent Melissa an e-mail detailing the order and her acceptance. Melissa never responded to the e-mail. Eleven days later, Mary delivered the merchandise to Melissa, but she refused shipment. Mary sued Melissa for breach of contract. What is the likely result? Mary wins because the contract involved specially manufactured goods. Mary loses because Melissa did not sign anything. Mary loses because the contract was not in writing. Mary wins because Melissa failed to object to the merchant's confirmation memorandum.

Answers

Answer:Mary wins because Melissa failed to object to the merchant's confirmation memorandum.

Explanation:

A contract is first establish based on offer and acceptance between two parties. The telephone conversation of Mellisa to Mary constitute a valid offer and the email communication of Mary constitute a valid acceptance.

Furthermore the time interval between the email communication and delivery of the goods are enough period for Mellisa to counter the acceptance memorandum of Mary which she failed to carry out. This is the reason Mary wins.

Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is $0.40 per card, and the cost of printing is $0.10 per card. The company receives $3.75 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Their customers are from the four areas: Los Angeles, Santa Monica, Hollywood, and Pasadena. Based on past data, the number of customers from each of the four regions is normally distributed with mean 2,300 and standard deviation 200. (Assume these four are independent.)What is the optimal production quantity for the card?