please only do: if you can teach explain steps In Italy, firms pay tax on reported profits at a constant proportionate rate t € (0, 1). If thefirm's profit is, the owner of the firm can choose to report any amount of profit r where0≤r≤, and thus pay tr in tax. However, if the firm is audited, it must pay additional taxon unreported profit -r at a rate of t+f, where 0 0, that is,if and only if p 2 =P*.(b) If the auditing probability is equal to p* from part (a), will a risk averse owner reportthe full profit, less than the full profit, or is it impossible to determine?Solution: When p = p, the expected value of after-tax profit does not depend on thereported profit r. Since r = involves no uncertainty and r < involves uncertainty, arisk averse owner prefers the certain lottery giving the same expected value. Therefore,she will report the full profit.

AUDITING PROBABILITY- Baselining and polarization are often detected by independently evaluating…

In Italy, firms pay tax on reported profits at a constant proportionate rate t€ (0,1). If th firm's profit is, the owner of the firm can choose to report any amount of profit r wher 0 ≤r ≤7, and thus pay tr in tax. However, if the firm is audited, it must pay additional ta on unreported profit -r at a rate of t+f, where 0

In Italy, firms pay tax on reported profits at a constant proportionate rate t€ (0,1). If th firm's profit is, the owner of the firm can choose to report any amount of profit r wher 0 ≤r ≤7, and thus pay tr in tax. However, if the firm is audited, it must pay additional ta on unreported profit -r at a rate of t+f, where 0

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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Consider the following MA(1) - GARCH (1,1) model for equity returns. rt = 0.5 +0.3ut-1 + Ut of = 0.8 +0.2u-1 + 0.707-1 Let t-1 denote the information (data) known at time t-1. The definition or meaning of the term of is: Select one: O a. the variance of rt b. the variance of u conditional on 2 t-1 c. the variance of ut d. the variance of rt conditional on 2 +-1 e. the variance of rt conditional on 2t-1 and the variance of ut conditional on 2t-1 as both are equal to each other
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please only do: if you can teach explain steps of how to solve each part a) how to derive b) r= p?
Corporate tax is included while calculating profit True/False
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The University of Professional Studies, Accra (UPSA) was founded in 1965 as a privateprofessional business education tuition provider. In 1999, by means of the Institute ofProfessional Studies Act, (Act 566), it became a tertiary institution with the mandate toprovide tertiary and profess ional education in Accountancy, Management and relateddisciplines. The University has a student population of approximately 12,000. TheUniversity now has a state -of-the-art Stude nts ’Center where food, snacks and drinks are served to students and staff. Nevertheless, a sizeablenumber of UPSA students patronize Auntie Ama’s (ATM) rice and beans food located at MadinaEstate close to the Home Made restaurant. Assume all other restaurants and food joints on campusand at Madina Estate with the exception of ATM food were able to reduce the price of their food.Further, suppose the local municipal authority decides to impose tax on ATM food. With the aidof a diagram, what will be the effect of these events…
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Help Save Suppose a corporation has two subsidiaries, one of which is unregulated and sells all of its output to the other, regulated subsidiary. Permitted profits at the regulated subsidiary are equal to 10 percent of total costs. The initial profit picture for the subsidiaries is provided in the table below: Unregulated Subsidiary Regulated Subsidiary Total $ 650,000 N/A revenue $ 350,000 $300,000 $1,000,000 $ 100,000 Total costs Total profit If the unregulated subsidiary doubles its selling price to the regulated subsidiary, what are the new profits at Instructions: Enter your responses as a whole number. (a) The unregulated subsidiary? profit = $ (b) The regulated subsidiary? profit = $ & 23 24 8. *00 w/ %S4