ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 3P
To determine
The investment at varying expected
Concept Introduction:
Expected Return- The expected value of the potential outcomes or the expected profit or loss with associated known expected rates of return is the Expected Return from an investment
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
2. Exercise 8.2
Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $8 million. Bowen owes his local bank $5
million. Last year Bowen sold $7 million worth of cotton. His variable operating costs were $5 million; accounting depreciation was $40,000, although
the actual decline in value of Bowen's machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not considered part of his
variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income
would be about $50,000. Bowen can invest any funds that would be derived if the farm were sold to earn 10% annually. (Ignore taxes.)
What is Bowen's accounting profit?
$1,560,000
$1,190,000.00
$1,200,000.00
$1,550,000
What is Bowen's economic profit?
$1,190,000.00
$1,200,000.00
$1,550,000
$1,560,000
11. (Marginal Analysis) The owner of a small pizzeria is decid-
ing whether to increase the radius of its delivery area by
one mile. What considerations must be taken into account
if such a decision is to contribute to profitability?
7. (10 points) Joe has moved to a small town with only one golf course. His demand curve is P =
120-2Q where Q is the number of rounds of golf he plays per year. The manager of the golf
course offers Joe a special deal, where Joe pays an annual membership fee and can play as many
rounds of golf as he wants to at $20 per round. The golf course's Marginal Cost is $20.
P
$120
$20
demand curve is P = 120-2Q
MC-AC
Q*
(a) How many rounds of golf will Joe play per year (calculate the value of Q*)? Please explain.
(b) If the golf course wishes to implement a two-part pricing model, what membership fee will
maximize revenue for the golf course? Please show your calculations.
(c) Would someone who just occasionally plays golf (perhaps 1 or 2 rounds once every 2
months) prefer two-part pricing as given above, or would they prefer to pay a price of $100 per
round without any membership fee? Please explain.
8. (10 points) Assume that you live on the second floor of an apartment building and one day…
Chapter 13 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
Knowledge Booster
Similar questions
- (MANAGERIAL ECONOMICS) Show algebraic solution pleasearrow_forward(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?Scenario: Accounting and Economic ProfitRather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was $150,000.arrow_forward14. Lorenzo lives in New York City and runs a business that sells guitars. In an average year, he receives $851,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totaling $281,000. He owns his showroom; if he chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Lorenzo does not operate this guitar business, he can work as an accountant and receive an annual salary of $34,000 with no additional monetary costs. No other costs are incurred in running this guitar business. a. Which costs are considered explicit? Which costs are considered implicit? b. What is Lorenzo's total cost? C. What is Lorenzo's total revenue? d. What is Lorenzo's accounting profit? e. What is Lorenzo's economic profit? f. Is Lorenzo earning a normal profit? If his goal is to maximize economic profit, should Lorenzo quit the…arrow_forward
- [Economics] A maximization problem with partial derivative :)arrow_forward14) Stan bought a car three years ago for $20,000. Recently he got a promotion and is deciding whether to keep his old car or to buy a new one. His dealer told him that the current market price of his old car is $15,000, The car maintenance costs are $1,000 now, and they are going to increase each year by at least $500. Stan compares his old car with a new one that, he calculates, would have an equivalent annual cost of $4,100. What is Stan's optimal decision if his current interest rate is 7%?arrow_forward5. Complete the following table. Price () 8. 4 Output (units) TR () MR () 1 2 3 4 %3Darrow_forward
- 6. All else being equal, how will the following events affect price and quantity in the Canadian real estate market? Use a diagram to explain each of your answers. (30%) (a) The government raises immigration targets, causing migrants to flood into the country. (b) Crime increases in Canada. (c) The government gets rid of many construction regulations, making building easier. (d) A recession hits the nation. (e) The Bank of Canada raises interest rates. (f) The Baby Boomers all die at around the same time.arrow_forward4. Use the Table below: Nike and Reebok Sales. Reebok and Nike must decide whether to have a sale or not, based on the potential economic profits shown in the table. Table: Nike and Reebok Sales Reebok Sale No Sale Reebok: $5M Sale Nike Nike: $5M Reebok: $IM Nike: $30M No Sale Reebok: $30M Reebok: $20M Nike: SIM Nike: $20M a.{9} Is there a Nash equilibrium in this game? If there is what is it, and if not, why not? b. (8.5) If Nike and Reebok were to collude to maximize joint profits, what decision should each firm pursue?arrow_forward(Figure: Market Demand for Oranges) Consider the figure Market Demand for Oranges. The amount by which the total If the price of oranges is benefits of oranges to consumers exceed consumers' total expenditures on oranges is called B, this quantity is depicted by the area Price (per bushel) 0 producer surplus; BCD consumer surplus; OCDE consumer surplus; BCD net benefit; OBDE Market Demand Quantity (per period)arrow_forward
- 10. (Continuing with the situation described in the preceding question.) Consider the economic model of an individual's labor-leisure choice with the following components: good C represents units of the consumption good L represents hours of leisure H represents hours of paid work p represents the unit price of the consumption w represents the hourly wage rate Y represents nonlabor income T represents total time available U(C, L) represents the individual's utility function MUC denotes the marginal utility of consumption MUL denotes the marginal utility of leisure Unless otherwise instructed, assume that consumption and leisure are normal goods. Whenever graphing the model, put C on the vertical axis and L on the horizontal axis. According to this model, how will labor supply change in response to an increase in the wage rate w? Which of the following statements is true? People who initially were working will increase their optimal hours of work H*. People who initially were working…arrow_forwardThe table below shows the annual percentage change in sales for five locations of J&J Burger. Pct. Change, 2019- Pct. Change, 2020- Location 2021 2020 6 -3 -12 -6 11 3 7 10 -2 2 Camarillo Oxnard Ventura Thousand Oaks Simi Valley If the total sales at the Oxnard location are $125,864 in 2021, what were the sales at that same location at the end of 2019? Round to the nearest whole dollar. Type your answer...arrow_forward2. Profit maximization A profit-maximizing firm will use more of a factor of production when: The marginal physical product of the additional factor unit is greater than the marginal revenue product (MRP) of the additional factor unit. The extra cost of using an additional factor unit is less than the marginal physical product of the additional factor unit. The extra cost of using an additional factor unit is less than the marginal revenue product of the additional factor unit. The marginal physical product of the additional factor unit is less than the marginal revenue product of the additional factor unit. Apply your answer as an argument to the labor market-when the wage rate is above the MRP, the firm should hire Therefore, what is the relationship between a perfectly competitive firm's MRP curve for an input and that firm's demand curve for that input? The firm's demand curve for an input is the downward-sloping portion of the MRP curve. workers. They are identical except for the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning