Economics Answers

A client informed you that they took an overseas trip for business purposes, On the basis of it being a legitimate expense they ask for the costs to be included as a deduction.

When the client came to review and sign the tax return they showed you photographs of the family sightseeing in Europe. What would you do at this point? 120–150 words.

Tax agents have a responsibility to ensure that their clients’ returns are prepared within the established timelines. What role do timelines have in satisfying client expectations and how would you develop a timeline to fulfil your obligations? 120–150 words.

d. With the nominal wage fixed at $38, the price of widgets doubles from $5 each to $10 each. What happens to Acme's labor demand and production?

c. Graph the relationship between Acme's labor demand and the nominal wage. How does this graph differ from a labor demand curve? Graph Acme's labor demand curve.

e. With the nominal wage fixed at $38 and the price of widgets fixed at $5, the introduction of a new automatic widget maker doubles the number of widgets that the same number of workers can produce. What happens to labor demand and production?

Equilibrium for a monopoly firm looks exactly like long-run equilibrium for a monopolistically competitive firm.
true or false

Syldavia is a country that has 200 workers and neighbouring Borduria has 250 workers. In Syldavia, each worker can make 20 pairs of socks or 30 candles in one year. In Borduria, each worker can make 16 pairs of socks or 20 candles in one year. Who has comparative advantage in producing which good and how will they trade with each other?

In a small town there are two sushi restaurants. If neither restaurant advertises, revenue will not change. If only one firm advertises, that firm will double its revenue and the firm that doesn’t advertise will see a decrease in revenue. But if both firms advertise, their revenue will not change. What outcome is predicted by game theory (Nash Equilibrium)? (2)
a) Both restaurants will advertise
b) One restaurant will advertise
c) Neither restaurant will advertise
d) Game theory is a load of bunk
e) Sometimes only one firm will advertise and the rest of the time both firms will advertise

Consider Peter’s Pizza Place. Peter needs to know if he is optimizing cost in handling his inputs of capital and labour. This is what he sees: (5)

Marginal Product of Capital 3,200 pizzas/oven
Marginal Product of Labour 1,400 pizzas/worker
Wage Rate $280/week
Rental Price of Ovens $800/week

Using this information, find out if Peter is optimizing his costs and if he is not, then how should he reallocate his factors of production?

1) An investor was originally expecting a 16% return on her portfolio with beta of 1.25 before
the market risk premium decreased from 8% to 6%. Given this change, what return will
now be expected on the portfolio?

2) John PLC is financed by debt and equity. The market value of its debt is £8 million and
its equity £12 million. If John’s cost of debt is 6% and the required rate of return on
equity is 12%, its Weighted Average Cost of Capital (WACC) is (assume there is no tax):

3. (60 points) In the commodity market Qd- 200-2P, Qs-2P-50. Government impose a subsidy S 10 per unit of goods. Determine: I. Find the elasticity demand and supply in the point of equilibrium. 2.How to changes consumer and produce surpluses. 3. Pw 40, what happens with consumer and producer surpluses, if the country decide to import goods 4. Government wants to restrict import and impose a tariff 10. How to change consumer and producer surpluses, government revenue, DWL

Stock A is currently earning a return of 10% and has a beta of 0. 75, whilst Stock B is
earning 15% and has a beta of 1.5. The rate of return on the market is 12% and a risk
free asset yields 5%. According to the CAPM:
a. Stocks A and B are earning equilibrium returns
b. Stock A is overpriced and stock B is underpriced
c. Stock A is underpriced and stock B is overpriced
d. Socks A and B are overpriced

.Firm A has a value of £200 million and Firm B has a value of £140 million. Merging the
two companies would allow cost savings with a present value of £30 million. If Firm A
purchases Firm B for £150 million, how much do the shareholders of firm A gain from this
merger:
a. £20 million
b. £30 million
c. £40 million
d. £50 million