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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?
Bart is a new engineering graduate that decides to purchase a new automobile costing $25,000. He can only afford a down payment of $5,000 and must finance remaining $20.000. The dealership offers financing at 15% per year, compounded monthly over a 5..
What is the fertility transition and when did it take place in the United States? What explanations have been proposed to account for the fertility transition? Critically evaluate each of these explanations in accounting for the fertility transition ..
Compare and contrast the major negative fluctuation in the 1980s with that of the Great Recession (post-2007) with a focus on (i) the extent of the fluctuation and (ii) the speed of the recovery.
Consider the market for corn in the United States. Suppose that the mandated percentage of ethanol in gasoline is increased and at the same time a corn blight destroys a significant portion of the corn crop. Using a supply and demand diagram, show wh..
One of the fans at this game believes in the Law of Small Numbers. She has the wrong model of how likely Curry is to make a basket. Here’s how her model works. The fan imagines that there is a deck of 4 cards. When Paul is Hot, 3 of these cards say “..
Beginning from a steady state in the Solow growth model, explain how an increase in the saving rate will affect the levels and growth rates of capital and output per worker. (Note: discuss both the short-run and long-run impacts).
Which of the following types of technological change in healthcare are likely to be cost increasing:
We defined marketing as, “the art and science of getting people to spend their money on your product rather than the other guy’s, and be happy that they did so.” Do you think that’s true? Does some Wizard of Oz person-behind-the-curtain get you to bu..
When a government or corporation sells bonds to raise money, it can do so in one of two ways. It can target a certain amount to raise or it can target a certain amount to pay back at the end of the bond (this is simplified for the purpose of the prob..
Can a for-profit business engaged in maximizing profits also be an ethical business? If so, why or why not? Include discussion of at least 1 ethical theory, refer to a least 2 materials assigned in Theme 2, and give at least 1 specific example to cla..
What appears to be the major constraint that the central banks used to determine the limits of the monetary injections into the economy?
In the early 1880’s cigarette-rolling machinery became available. Prior to this all rolling was done by hand. The machines dramatically cut the cost of rolling cigarettes. But they were not fully automatic—they needed the permanent presence of an ope..
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