🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Economics
1
answer
0
watching
67
views

So suppose we plan to build a new facility or buy new equipment both of which will produce future income over the next 25 years. Should we lock up today's cash in an asset, or should we borrow the money and let the future cash flows pay off the use of the building and equipment? Along the same lines, if the government uses debt to invest in programs or infrastructure that will increase productivity, why would they pay out of today's cash when they can let the program or infrastructure's cash flows from the future gains in productivity pay for the investment?

Watch
1
answer
0
watching
67
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Romarie Khazandra Marijuan
Romarie Khazandra MarijuanLv10
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

100 word answer needed from the question and artile below.

Question:

Explain whether, and if so how, you would expect laws that prohibit the buying and selling of organs to affect the overall wellbeing of society.

Article: "Should there be a market in organs?"

Some years ago, a Boston newspaper reported the story of Susan Stephens, a woman whose son needed a kidney transplant. When the doctor learned that the mother's kidney was not compatible, he proposed a novel solution: If Stephens donated one of her kidneys to a stranger, her son would move to the top of the kidney waiting list. The mother accepted the deal and soon two patients had the transplant they were waiting for.

The ingenuity of the doctor's proposal and the nobility of the mother's act cannot be doubted. But the story raises many intriguing questions. If the mother could trade a kidney, would the hospital allow her to trade a kidney for an expensive, experimental cancer treatment that she could not afford otherwise? Should she be allowed to exchange her kidney for free tuition for her son at the hospital's mediacal school? Should she be able to sell her kidney so she can use the cash to trade in her old Toyota for a new Lexus?

In many countries, including Australia, it is illegal for a person to sell their organs. In essence, in the market for organs the government has imposed a price ceiling of zero. The result, as with any binding price ceiling, is the shortage of the good. The deal in the Stephens case did not fall under this prohibition because no cash exchanged hands.

Some countries, however, have illicit markets in organs. The World Health Organizations estimates that 10% of all organ transplants, including arount 15 000 kidneys each year, involve a patient from a rich country buying an illegal organ from a citizen of a poorer nation. The temptation to the world's poorest people to sell their 'spare' organs in high. A kidney can sell for around $1500 or more in the illegal trade. This may not sounds like much to you or me. But it can be many years income to a person living in dire poverty.

Some economists believe that there would be large benefits to allowing a free market in organs. People are born with two kidneys but they usually need only one. Meanwhile, a few people suffer from illnesses that leave them wiithout any working kidneys. Despite the obvious gains from trade, the current situation is dire. In Ausralia, the average wait for a kidney transplant is 3.8 years and there are up to 50 deaths a year from people on the waiting list because a kidney cannot be found. In Europe, on average, 12 people die each day waiting for an organ transplant. If those needing a kidney were allowed to buy one from those who have two, the price would rise to balance supply and demand. Sellers would be better off with the extra cash in their pockets. Buyers would be better off with the rgan they need to save their lives. The shortage of kidneys would disappear.

Such a market would lear to an efficient allocation of resources, but critics of this plan worry about fairness. A market for organs, they argue, would benefit the rich at the expense of the oor, because organs would then be allocated to those most willing and able to pay. But you can also question the fairness of the current system.Now, most of us walk around with an etra organ that we don't really need, while some of our fellow citizens are dying to get one. Is that fair?

1. The Houston Chronicle reported that in Houston, the average price of new homes has decreased, while at the same time, the number of new homes sold has increased. This situation could be explained by which one of the following: (draw curves before answering)

  1. An Increase in demand
  2. An Increase in supply
  3. A Decrease in demand
  4. A Decrease in supply

2. In another market, the average price of new homes fell, while at the same time, the number of new homes sold decreased. The situation would best be explained by (Draw the curves before answering)

  1. An Increase in Demand
  2. An Increase in Supply
  3. A Decrease in demand
  4. A Decrease in supply

3. A consumer is said to have achieved maximum total utility when:

  1. Purchases of Good A give the same satisfaction as purchases of Good B.
  2. Purchases of the last dollar spent on Good A give the same satisfaction as purchases of the last dollar spent on Good B.
  3. The average purchases per dollar of Good A give the same satisfaction as the average purchases per dollar of Good B.
  4. The total utility derived from Good A is the same as the marginal utility derived from Good B.

4. You are given the following information about a firm's present output position: MPP (Marginal Physical Product) of Land = 12; MPP of Labor = 16; Price of Land = $2; Price of Labor = $4. With no additional money to spend, this firm should:

5. A firm achieves the least cost in production by substituting factors until

  1. their factor prices are equal
  2. their marginal products are equal to the factor prices
  3. their marginal products are each equal to zero
  4. the ratios of their marginal product equal the ratio of their prices
  5. none of the above

6.The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything--more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

  1. correct if he is assuming a rightward-shifting PPF.
  2. incorrect if he is assuming a rightward-shifting PPF.
  3. correct if he is assuming a PPF that does not change.
  4. none of the above

7. Assume your swimsuit business is at its maximum profit position, and one new change occurs: consumer incomes decrease. If swimsuits are normal goods, the equilibrium price of swimsuits will __________, and the CONSUMER surplus will ________.

  1. increase, increase
  2. decrease, decrease
  3. increase, decrease
  4. decrease, increase

8. Firms that shuts-down in the short-run still must pay:

  1. Marginal cost
  2. Variable cost
  3. Fixed cost
  4. Total cost

9. The term externalities refer to:

  1. Black-market economic activity.
  2. The impact on markets of imported goods.
  3. The costs and benefits of a market activity borne by a third party.
  4. The inequitable distribution of income.

10. If full external costs are not internalized, firms will tend to allocate more of society's scarce resources to produce than is societally warranted, and if full external benefits are not internalized, firms will allocate less of society's resources to produce than is societally justified. True/False.

11. Joe was very careful about smoking in his home until he bought a fire insurance policy. After buying the policy, he became careless. His attitude is: "I'm insured. What do I care if this place burns down; I'll just collect the money". Joe's attitude is an example of ______________.

12. Megatrust Bank had historically scrutinized loans very carefully and extended them, only to persons whom they considered very creditworthy. They made relatively few loans. However, after the government provided guarantees to sub-prime loans, Megatrust relaxed its standards and increased its loan volume. (And its default rate as well.) This is an example of _______________.

13. In the short-run, if a perfectly competitive firm finds itself operating at a loss, it will

  1. Reduce the size of its plant to lower fixed costs.
  2. Raise the price of its product.
  3. Shut down.
  4. Continue to operate as long as it covers its variable cost.

14. If income today is more equally distributed than it was in 1960, a Lorenz Curve depicting today's distribution would be

  1. More bowed and to the left of the 1960's curve.
  2. More bowed and to the right of the 1960's curve.
  3. Less bowed and to the left of the 1960' curve.
  4. Less bowed and to the right of the 1960's curve.

15. Which of the following statements is true?

  1. As output increases, the average fixed cost becomes smaller and smaller.
  2. Average fixed cost does not change as output increases.
  3. The marginal cost curve intersects the average fixed cost curve at its minimum point.
  4. When marginal cost is greater than average fixed cost, average fixed cost increases.
  5.  

16. A firm in any of the market structures we have studied will maximize its profit (or minimizes its loss) when its

  1. Average costs are at a minimum
  2. Marginal revenue and marginal cost are the same.
  3. Marginal revenue is less than marginal cost.
  4. Marginal revenue is zero.

17. If the demand for a good increase, when the price of other good increases, these goods are

  1. Capital goods
  2. Substitute goods
  3. Complementary goods
  4. Luxury goods

18. Which of the following pairs of products are complementary goods?

  1. mobile phones and laptops
  2. pens and pencils
  3. sugar and artificial sweeteners
  4. radios and television
  5. toothbrushes and toothpaste

19. The amount of a good that is given up to produce another good is:

  1. Scarcity
  2. Specialization
  3. Opportunity cost
  4. Trade
  5. Efficiency

20. The most important characteristic of the equilibrium price is that it:

  1. Guarantees that producers earn a profit.
  2. Increases the quantity demanded.
  3. Clears the market.
  4. Decreases the quantity supplied.

21. Rank the following market structures based on the number of participating firms: From the fewest number of firms to the most number of firms:

  1. Oligopoly
  2. Perfect Competition
  3. Monopoly
  4. Monopolistic Competition

22. If firms in a monopolistically competitive market are earning economic profits which of the following scenarios would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium?

  1. an increase in demand
  2. a decrease in demand
  3. a downward shift in their marginal cost curve
  4. an upward shift in their marginal cost curve


23. If labor in Mexico is less productive than labor in the United States in all areas of production, 

  1. neither nation can benefit from trade
  2. Mexico can benefit from trade but the United States cannot
  3. Mexico will not have a comparative advantage in any good
  4. both nations can benefit from trade

24. Which of the following statements is false?

  1. The typical monopolistically competitive firm could reduce its average total cost if it produced more output.
  2. Monopolistically competitive firms advertise to increase the elasticity of the demand curve they face.
  3. Expensive advertising might help consumers if it is a signal that the product is good.
  4. Brand names acquired at great cost might help consumers by assuring quality.

25. Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigs in surrounding states. Which of the following principles does this best illustrate:

  1. people respond to incentives
  2. rational people think at the margin
  3. a trademark can make everyone better off
  4. markets are usually a good way to organize economic activity

Entrepreneurship

1. Discuss what steps Craig took to develop and grow his business. (7 marks)

2. Illustrate the role Craig played in contributing towards the economy (8 marks)

clearrisk | craig rowe

Business is risky, but that is Craig Rowe’s business - risk management to be precise. Craig,

the President of ClearRisk Inc., becomes animated and energized as he explains his line of

work. “Risk,” he says, “is not negative. It is when there is opportunity for a downside or an

upside.” Risk management is about formalizing the decision making process. People are

constantly assessing risks, whether it is instinctively in crossing the street or deliberately in

weighing the pros and cons of buying a car. “Business people,” he says, “engage in the same

process whether in deciding where to build a head office or whether to buy another company.”

the entrepreneur

Craig spent almost 20 years in the insurance industry, where he started right out of high

school. Over the years, he attained various insurance designations and completed many

business courses and ample on-the-job training. Craig is naturally entrepreneurial and also

operated his own consulting company and became involved in several insurance industry

associations. This allowed him to develop a large network of connections.

Craig found himself thinking and talking more and more about risk management. He realized

that if businesses did some basic things to manage risk they would save money. In 2001 he

wrote a book on the topic and later adapted the ideas in to a workshop which he presented

throughout Canada and the United States. Insurance industry professionals and other business

people noticed Craig and saw the logic in his message. Soon he was being invited to speak to

various associations and was asked to assist in writing material on risk management. When

dealing with clients of his consulting business, he noticed the same set of steps and questions

could be applied to different realities in different types of companies. He was sure that there

was something that could be packaged and sold to assist these companies.

He went in search of risk management software. He found some, but none applicable to small

and mid-sized companies and organizations. So he decided to build it. He teamed with David

d’Entremont who had the background provide technical expertise. Together they founded

ClearRisk. They developed a business plan which became their roadmap, even though it was

constantly being adapted to take into account new realities, circumstances and goals. Craig estimates they are on version 30 by now!

Craig decided to leave his job and pursue ClearRisk full-time. It was not an easy decision to

make as Craig had a young family at the time. He had to engage in his own risk management

process and weigh his options. He had almost 20 years of solid insurance industry experience.

He had an extensive network of contacts. He had entrepreneurial experience through his

consulting business. He knew the market. He knew what his customers needed and he knew

that he could develop a product to meet that need. He found a solid business partner to

complement his skills. So the timing was right and after 10 years of thinking, dreaming and

percolating ideas, Craig made the leap in 2006.

Craig says that the biggest challenge facing ClearRisk and any business, whether it is in

starting, sustaining or growing the business, is cash. ClearRisk needed capital to develop its

product. For any business to have credibility with lenders and investors, that initial money has

to come from the business owner. Craig and David secured an operating line of credit from the

bank based on personal guarantees.

Step 2 was to seek more financing to start implementing the business. Craig says that it is

important to look for money before you need it because you are building relationships and

confidence and convincing people that you are creditworthy. A business plan is a necessity but

“everyone invests in people.” This applies to accessing financing from Business Development

Bank of Canada (BDC), Atlantic Canada Opportunities Agency (ACOA), or any government

organization, as well as private lenders and investors. It is necessary to raise private money to

leverage government money.

Another important factor in developing ClearRisk was being accepted by Memorial University’s

Genesis Centre, a facility which provides business and technical support to new and emerging

technology businesses. This added to their credibility and attracted the attention of angel

investors. Angel investors are business people with financial resources available to invest in

new promising businesses.

Technological businesses are expensive to grow and ClearRisk’s growth has been made

possible by private investors and organizations such as Growth Works (a venture capital

company). Ownership of the company is now shared with these investors and ClearRisk is a

corporation with multiple shareholders. One of the tradeoffs in taking money from investors is

that ownership becomes shared. Craig says, “You can have a big piece of something small or

a small piece of something big.” He chose the latter.

Craig’s idea has grown immensely. He keeps the numbers to himself, but says sales have

grown exponentially. His primary market is North America and the ClearRisk software has been

launched in French and Spanish. Customers do not pay an upfront fee; instead, they pay an

annual fee for the software and support. ClearRisk is constantly improving its products. The

team is always enhancing features and improving functionality. Currently, they offer three

programs to consumers: ClearRisk™ Manager, which enables an organization to build and

implement a risk management plan; ClearRisk™ Tracker, which facilitates tracking insurance

claims; and ClearRisk™ Trainer, an online instructional program which increases awareness of

risk and its management. The latter two products are offered in partnership with other

organizations.

ClearRisk’s web-based business is global; however, Craig is cautious about expanding beyond

North America. The insurance industries in the USA and Canada are relatively interconnected

and homogeneous. It would be very difficult to provide support to countries with different

regulations and different languages. ClearRisk offers a web-based software service so they

use web-based marketing, rarely using traditional media. They access all forms of social media

such as Facebook, Twitter, MySpace, and blogs and find the approach cost effective and high

impact. Social media facilitates the use of in-bound marketing.

In addition to web-based marketing, ClearRisk is now getting calls from referrals. Clients are

spreading the word to other businesses seeking a similar product. The demand for ClearRisk’s

product is expanding but Craig resists growing the team too quickly. Craig prefers a small team

and likes the dynamics of small groups. However, more sales people are needed and they will co-op

and computer science students to his company. He likes to hire young people. It is

rewarding to see them take shape and become leaders.

Craig speaks favorably about starting a new business in Newfoundland and Labrador. He

says that the provincial climate is positive. In addition to the practical and financial support

available, the provincial government has done a lot to assist business in recent years, including

reducing taxes and red tape and increasing funding.

When Craig reflects on the path his career has taken, he gives special acknowledgement to

Paul Johnson of Johnson Insurance as a business icon and an inspiration. Mr. Johnson

inherited his father’s small insurance office and built it into an innovative, billion-dollar

Company. Not only was Mr. Johnson a great businessman, he was a community-minded

Philanthropist. This is evident today throughout the capital city in the parks, trail ways, and the

Johnson Geo on Signal Hill. Mr. Johnson has influenced Craig’s professional and

Community life. In addition to Craig’s entrepreneurial success he is firmly rooted in his

Community; he currently serves as Chair of the YM/YWCA.

Craig has advice for young people who dream of starting their own businesses. He says to be

Informed, to go in with open eyes and to seek honest opinions from knowledgeable people. He

advises that an entrepreneur should realize that “the odds are against you, but you need the

tenacity and perseverance to stick with it. It is important to understand your industry, to

understand the need for your product or service and ultimately to understand the risks before

you make the leap.” In business, managing risk is everyone’s business!

1. Discuss what steps Craig took to develop and grow his business.

2. Illustrate the role Craig played in contributing towards the economy

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in