During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

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Answer 1

Question

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

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Answer 3

Question

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

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Answer 4

Question

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

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Answer 5

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

Answer 6

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

Answer 7

Chapter 4, Problem 1QFT

To determine

Concept Introduction:

During price rise of a good, lenders are ready to provide loans to the borrowers who pledge their good as the collateral. If the borrowers fail to repay their debt, the recovery is made by selling those goods. As the price continues to increase there is a capital gain for the lenders. As a result, they see very little downside risk of giving a loan. When the price suddenly falls, they suffer a huge loss.

Answer 8

Expert Solution & Answer

Answer to Problem 1QFT

Lenders were benefitted a lot from the restriction on the number of New York City taxi. Due to restriction on numbers of the taxi, they provided a huge loan to finance the purchase of taxi Medallions and hence, earned lots of profit.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Many financial companies provided loans to the people for buying taxis. If the borrowers failed to repay the loan the companies took the possession of the taxis. As the price of a taxi was rising continuously, it provided lenders capital gain in case of default.

If there wasa restriction on the number of taxis, the demand for taxi Medallionswas increased. As a result, loans offered by financial companies increased. The interest on manyloans provided them huge profits.

Answer 12

Ch. 4 - Prob. 1QFT Ch. 4 - Prob. 2QFT Ch. 4 - Prob. 1P Ch. 4 - Prob. 2P Ch. 4 - Prob. 3P Ch. 4 - Prob. 4P Ch. 4 - Prob. 5P Ch. 4 - Prob. 6P Ch. 4 - Prob. 7P Ch. 4 - Prob. 8P

Answer to Problem 1QFT

Explanation of Solution

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Chapter 4 Solutions