In a city, there are two car factories, Factory A and Factory B. Factory A can produce 100 red cars or 200 yellow cars per batch, while Factory B can produce 50 red cars or 150 yellow cars per batch. Which factory has the higher opportunity cost of producing one yellow car?
A robot factory is located next to a student dormitory, and the production noise prevents the students from sleeping. The graph below shows the Marginal Private Cost (MPC) and Marginal Social Cost (MSC) of robot production. The robot market is competitive, and the market price is pounds 340. If a co
Consider an economy experiencing both high inflation and high unemployment, a situation known as stagnation. Which of the following policy mixes would be most appropriate to address both issues simultaneously?
The price of apples decreases from USD 2.00 per kilogram to USD 1.82 per kilogram, causing the quantity demanded to increase from 100 kilograms to 118 kilograms. Calculate the price elasticity of demand for apples and determine if the demand is elastic, inelastic, or unit elastic.
Alexandra and Bob can each choose how hard to work on a task. Each person's output is pounds 80 if they are lazy, and pounds 160 if they work hard. The cost of effort is pounds 0 if they are lazy, and pounds 70 if they work hard. The total output is shared equally between them. For example, if Alexa
Alvin, Simon, and Theodore are neighbors taking their families for a weekend trip to a mountain chalet an hour's drive from the city. They meet at the neighborhood gas station before starting their trip. Before seeing the gas prices, they discuss their plans. Alvin says he will definitely fill his t
There are 4 consumers in the market for sweaters. Consumer 1 is willing to spend pounds 40 on a sweater, Consumer 2 is willing to spend pounds 35, Consumer 3 is willing to spend pounds 25, and Consumer 4 is willing to spend pounds 20. Each consumer only wants to buy one sweater. If the market price
The diagram below shows the effect of a per-unit tax of 5 dollars on suppliers, where A represents the pre-tax equilibrium and B represents the after-tax equilibrium. P refers to price and Q refers to quantity. If the government imposed a proportional tax of 50%, then compared to the outcomes under
In a market of price-taking firms, the market (inverse) supply curve is P = (1/2)Q and the (inverse) demand curve is P = 100 – (1/3)Q, where P refers to price and Q refers to quantity. 'Tax burden' refers to how the tax on each unit sold is shared between producers and consumers. If the government i
Consider a game with an entrant and an incumbent. The entrant moves first, and the incumbent observes this decision. The entrant can either enter the market or stay out. If the entrant stays out, the game ends with the entrant receiving a payoff of 0 and the incumbent receiving a payoff of 3. If the
Fill in the gap: In the graph shown below, countries with a larger difference between the height of the blue bar (Market income Gini) and the red bar (Disposable income Gini) are likely to have _ income taxation systems.
Residents of Catalonia (autonomous community of Spain) during the winter of 2023-24 faced water usage restrictions due to drought. Fountains were turned off, watering lawns, filling pools, washing streets and house facades were prohibited; restrictions also affected public showers and car washes. Wh
Lake L is situated near a village. In this task, we will consider different property rights regimes for the lake and explore their implications on the villagers' well-being and the environment. Assume that the production function of the lake is f(x) = 100 x, where f is the total amount of fish (in k
Securitization is the process of converting various types of assets into tradable securities. The most common method involves pooling large assets together and issuing a larger number of small securities linked to this pool. Financial innovation, and particularly securitization, are often cited as k
During the first UK national lockdown in 2020, the government announced a furlough scheme for all full-time workers. Under this scheme, firms could apply for government support to pay up to 80% of the wages of workers who were unable to work (for example, because the rm was required to close during
In country B, the market for beer is organized as follows: There is a major brewery, Brewery A, and numerous (potentially very many) microbreweries and craft beer producers. Brewery A is the market leader and sets the price for a bottle that others follow as price-takers. After Brewery A sets the pr
The CFO of Lang Co wants to earn a higher return on the company's cash holdings. Which of the following comparable maturity investments will earn Lang the highest expected return?
Parma Co requires all divisions to prepare their own budgets and these are then approved by head office. The current managing director of Parma Co believes that it would be better if all budgets for the divisions are prepared centrally at head office, and divisional managers told that they must aim
Universal Exports Co limits its operations to exporting overseas. Which of the following statements about Universal's exposure to exchange rate risk is correct?
Fly Co gathered the following data about cash flows (in $): The annual interest rate is 10%. Which project(s) will be acceptable for investment based on the NPV criterion?
Assume that initially the exchange rate is 1 USD = 1 EUR. A company in Europe sells a product to a customer in the United States for $1,000. By the time the customer pays, the value of the European currency has strengthened by 20% compared to the US dollar. What will the final amount the company rec
Hathaway Co has just paid a dividend of 0.21 per share and its share price is3.50 per share. One year ago its share price was $3.60 per share. What is the total shareholder return over the period?
Mr. Mouse has no money for his vacation today, but after a year he will have 1000 for his vacation. He can borrow some money at an annual interest rate of 10% to go on vacation now, pay back the loan after one year and use the rest of the money for the vacation after one year as well. His total util
Handria is a country that has the peso for its currency and Wengry is a country that has the dollar () for its currency. The current spot exchange rate is 1.5134 pesos =1. The one-year forward exchange rate is 1.5346 pesos = $1. The currency market between the peso and the dollar is assumed perfect
A company has in issue 6% 100 loan notes which have a current market value of105. Which of the following best describes the 6% quoted on the loan notes above?
A large, listed company is to issue 90-day commercial paper with a nominal value of 10m. Each paper will have a nominal value of100,000. The annual required rate of return is 4% assuming a 365-day year. What will be the issue price of each paper?
Which of the following factors is likely to impact the strategic objectives of a public sector body or organization more than that of a private sector organization?
George has found an apartment for $200,000. After making a 20% down payment, he takes out a 30-year mortgage to pay the rest of the price in monthly installments. The monthly interest rate is 1%. Which of the following options would double the monthly installments?
A person has been promising investors in their company a very high annual return on their investment. To fund these promised returns, the person has been taking money from new investors and using it to pay the high returns demanded by earlier investors. What type of fraudulent activity is the person
An annual event created $100,000 positive cash ow this year. The cash ow is expected to grow by 2% per year, if it continues. The probability of this event to continue for every next year is 95%. Discount rate is 7%. Assume that the cash flows are generated at the end of each year and that if the ev
A project has average estimated cash flows of 3,000 per year with an initial investment of9,000. Depreciation is straight-line with no residual value and the project has a five-year life span. The company has set a Required Rate of Return (RRR) equal to 15% and a target payback period of 2.5 years.
Lydia wants to put her savings into an account to earn some interest. She analyzes the savings account market and nds that the best available interest rate is 5% per annum and takes this offer. Her sister, Elisa, has saved the same amount of money as Lydia, but she does not want to put her money int
Salem Co is considering a six-year project that produces annual net cash inows of 420,000 for the rst ve years and a net cash inow of100,000 at the end of the sixth year. The project will require an initial investment of $1,800,000. Salem's cost of capital is 10%. What is the net present value for t
