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Ted Baxter runs a small, very stable newspaper company in southern Oregon. The paper has been in business for 25 years. The total value of the firms capital stock is $1 million, which Ted owns outright. This year, the firm earned a total of $250,000 after out of pocket expenses. Without taking the opportunity cost of of capital into account, this means that Ted is earning a 25% return on his capital. Suppose that risk free bonds are currently paying a rate of 10% to those who buy them. a. What is meant by the "opportunity cost of capital"? b. Explain why opportunity costs are real costs even though they do not necessarily involve out of pocket expenses. c. What is the opportunity cost of Ted's capital? d. How much excess profit is Ted earning?
Gail works in a flower shop, where she produces 10 floral arrangements per hour. She is paid $10 per hour for the first eight hours she works and $15 an hour for each additional hour she works. What is the firm’s cost function? What are its AC, AVC, ..
Jennifer has $10 to spend on tomatoes and cheese. The price of a pound of tomatoes is S2 and the price of a pound of cheese is $4. She has found her utility-maximizing bundle at 2 pounds of tomatoes and 1.5 pounds of cheese. Jennifer is considering a..
What is a subgame-perfect Nash equilibrium proposal of player 1, and what is the resulting outcome of the game
If he continued to work exactly as many hours as he did before the wage increase, how much more money would he have each day to spend on consumption?
Computer time saved is worth $325 per hour and the interest rate is 12% compounded monthly. Should the old unit be replaced now? If the system is used 16 hours per day, calculate the IRR represented by using the improved storage system.
q.consider a market consists of a dominant rm producing the majority of the market supply and large number of small
A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor at $7 each or to produce them in-house. Determine the range of annual volume for which each of the alter..
Suppose that the automobile industry in Japan can be characterized by the model of monopolistic competition. Assume the following values for the parameters of the demand and cost fuction: assuming that annual sales of automobiles are equal to 900,000..
q1. suppose china produces both agricultural and capital goods. draw and show the change in the ppf when an outbreak of
You learned that Texas has a tax system that is generally “regressive” because it relies heavily on sales taxes rather than income taxes. What are the definitions of regressive, flat, and progressive when it comes to taxes? Why a sales tax is conside..
If by bad management components of a corporation become competitive, the system is destroyed. A common example lies in the practice of ranking people,
The financial manager at Genesis Co is looking into the purchase of an apartment complex for $150,000. Net after-tax cash flows are expected to be $60,000 for each of the next 2 years, then drop to $50,000 for two year. Genesis Co. expects to sell th..
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