Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then __________________ has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then ___________________________.
A) No market failure; market failure has occurred.
B) Market failure; no market failure has occurred.
C) No market failure; there will still be no market failure.
D) Market failure; there will still be market failure.
Answer:
The correct answer is A)
Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then No Market Failure has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then Occurred
Explanation:
Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market.
Reasons for market failure include: positive and negative externalities, environmental concerns, lack of public goods, under provision of merit goods, over provision of demerit goods, and abuse of monopoly power.
In the question above, we see that at first there is a substandard good but people stick to it because it cost much more to switch than to enjoy the utility derivable from the good. This is logical. So there the forces of the market (price, demand and supply) are functional by themselves.
On the other hand, the cost of switching falls below the value of the benefit derivable. Logically, because it is an inferior good, people ought to switch because there is a better alternative. However because the market stays same, it means that the forces have failed to adjust accordingly.
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Answer:
total cost to be accounted = $294,000
Explanation:
Work in Process
Beginning value of WIP = $24,000
Ending value of WIP = $13,000
Cost added to production = $283,000
Cost to be accounted for = Beginning value of WIP + Cost added to production - Ending value of WIP
Cost to be accounted for = $24,000 + $283,000 - $13,000 = $294,000
The total cost to be accounted for in Tsuzuki Corporation's cost reconciliation report for August would be $307,000. This is calculated by adding the beginning work in process inventory ($24,000) to the costs added to production during the month ($283,000). The ending work in process inventory is not included in this calculation.
In the scenario provided, Tsuzuki Corporation's cost reconciliation report for August would be a combination of the beginning work in process inventory, the ending work in process inventory, and the costs added to production for that month. To calculate the total cost to be accounted for, we add the beginning inventory to the costs added during the month. That would be $24,000 (beginning work in process) + $283,000 (costs added to production) = $307,000.
It is important to note that the ending work-in-process inventory of $13,000 is not included in this particular calculation because the question asks for the total cost to be accounted for, not the cost assigned to finished goods or carried forward to the next accounting period. In other words, the total cost to be accounted for represents the money spent within the period, regardless of whether the goods were finished or not.
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Answer:
1. Share of Ann's Loss: $31,048
2. Share of Becky's Loss: $60,000
3. Maximum Loss Allowed: $41,300
Explanation:
The total loss for the year is $120,000 and both Ann and Becky own 50% each.
1. Share of Ann's Loss:
Ann had ownership of Whitman Inc. for 189 days which means the 50% of the total loss would be further lessened by 189/365 factor.
Mathematically:
Ann's Loss = $1,20,000 * 50% * (189/365) = $31,048 Loss
2. Share of Becky's Loss:
This means that the share of loss for Becky would be = $120,000 * 50%
= $60,000
3. Maximum Loss Allowed:
As the stock basis is $41,300, hence the maximum loss for Becky would be $41,300.
Answer:
c. will be able to make new loans up to a maximum of $9.50
Explanation:
If the reserve requirement is 5% it means that the bank is required to reserve(not loan out) 5% of it's reserves so in this case the bank is required to 5% of 10 (0.05*10) $0.50 as reserves and can loan out $9.50 (10-0.50). As the bank has no desire to hold on to excess reserves we can be sure that it will only hold 0.50 as reserve as it is required and loan out $9.50. So statement c is correct.
Statement A is incorrect because the bank does not need to increase required reserve by $10 but by just $0.50.
Statement B is incorrect a deposit of $10 cannot increase the total reserve by $10.50 as it is impossible mathematically.
Statement d is incorrect because 2 of the 3 statements are incorrect therefore all of the above statements cant be correct.
Answer:
a. machine hours
Explanation:
Machine hours -
It is the measurement adapted to apply factory overhead to the manufactured goods , is referred to as machine hours .
In the field of machine environment ,
the time consumed for processing the machine is the maximum .
In case there is lesser machines in the company , the labor hours would be more .
Hence , from the given information of the question,
The correct option is a. machine hours .
Answer: b. stocking quantity of product B is higher.
Explanation:
We are using the Newsvendor model and are told that the products have identical cost, retail price, and demand parameters and the same short selling season.
Using this model, it is important to understand 2 terminologies for this question, Overage cost and Underage costs.
Overage Costs is the cost of unused inventor and is calculated by subtracting Salvage Value from the cost price.
Underage costs are costs arising from unmet Demand. In this scenario they are the same because both products share the same demand.
The Overage costs for the products are,
Overage cost for Product X =100-75
=25%
Overage cost for Product Y = 20%
When deciding which product to stick more of we look at the one with the higher CRITICAL RATIO.
The formula of which is,
= Cu/(Cu+Co)
Where,
Cu is the Underage cost,
Co is the Overage cost
As earlier mentioned, both have the same Underage cost meaning that B will give a higher CRITICAL ratio as it's Co is smaller.
Product B should therefore be stocked more than Product A.
Answer:
Stocking quantity of product B is higher
Explanation:
Overage cost for Product A(Co)=100-75=25%
Overage cost for Product B (Co)=20%
The underage cost (Cu) for both the products is same hence critical ratio i.e, Cu/(Cu+Co) is lower for product A than Product B which means product B should will be stocked more compare to product A
So the correct answer will be stocking quantity of product B is higher