ENVS 1000 Midterm: test 1 f13.pdf
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Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the
a. | forgone working or partying, depending on which was your next best choice. | |
b. | forgone work. | |
c. | forgone working and partying. | |
d. | test because you are taking it. |
1 points
QUESTION 2
A trend is
a. | a measure of closeness on a scatter diagram. | |
b. | a general tendency for a variable to rise or fall. | |
c. | the maximum value of a variable. | |
d. | the difference between the maximum value of a variable and the minimum value of the variable. |
1 points
QUESTION 3
A time-series graph measures
a. | time on the y-axis and the variable or variables in which we are interested on the x-axis. | |
b. | time on the x-axis and the variable or variables in which we are interested on the y-axis. | |
c. | the value of one variable against the value of another variable. | |
d. | the value of an economic variable for different groups in a population at a point in time. |
1 points
QUESTION 4
Canada has nationalized health care, so that everyone, regardless of their ability to pay, has some access to health care. Based on this observation, Canada has decided that "everyone, regardless of their ability to pay" is the answer to what microeconomic question?
a. | Why will we offer health care? | |
b. | How will health care be produced? | |
c. | For whom will health care be produced? | |
d. | What type of health care will be produced and in what quantity? |
1 points
QUESTION 5
As a shoe factory adds more workers, shoe production grows, reaches a maximum, and then shrinks. In a diagram that has the number of workers on the horizontal axis and the number of shoes on the vertical axis, the relationship between the number of workers and the number of shoes starts as ________ and then, after the maximum point, is ________.
a. | positive; negative | |
b. | negative; positive | |
c. | linear; negative | |
d. | positive; linear |
1 points
QUESTION 6
Microeconomics includes the study of the
a. | choices made by individuals and businesses. | |
b. | recessions and inflation in the global economy. | |
c. | aggregate effects on the national economy. | |
d. | reasons why the government changes interest rates. |
1 points
QUESTION 7
When Fresh Express Salads decides to mechanically pick all of its lettuce, it directly answers the ________ question.
a. | when | |
b. | for whom | |
c. | how | |
d. | what |
1 points
QUESTION 8
Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that
a. | the opportunity cost of working is negative. | |
b. | the marginal cost of each additional work hour is not important to most workers. | |
c. | workers are irrational. | |
d. | workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work. |
1 points
QUESTION 9
A choice made by comparing all relevant alternatives systematically and incrementally is
a. | an opportunity cost. | |
b. | a benefit. | |
c. | a sunk cost. | |
d. | a choice on the margin. |
1 points
QUESTION 10
A normative statement
i. can be tested as to whether it is true or false.
ii. is considered negative.
iii. depends on a person's values.
a. | i, ii, and iii | |
b. | iii only | |
c. | i and iii | |
d. | ii and iii |
1 points
QUESTION 11
Normative statements
i. describe how the world is.
ii. describe how the world ought to be.
iii. depend on people's values and cannot be tested.
a. | iii only. | |
b. | i only. | |
c. | ii and iii. | |
d. | ii only. |
1 points
QUESTION 12
In order to determine whether to major in economics, a rational individual compares the ________ of the decision.
a. | positive benefits and normative costs | |
b. | normative benefits and positive costs | |
c. | marginal benefit and marginal cost | |
d. | opportunity cost and the sunk cost |
1 points
QUESTION 13
If x increases whenever y decreases, then x and y are
a. | positively related. | |
b. | negatively related. | |
c. | not related. | |
d. | related but whether positively or negatively related depends on whether the x variable or the y variable is plotted on the vertical axis. |
1 points
QUESTION 14
Rational choice
a. | is what you must give up get what you want. | |
b. | is made by comparing different incentives. | |
c. | making the choice. | |
d. | provides the answer to only the "how" question. |
1 points
QUESTION 15
Scarcity results from the fact that
a. | choices made in self-interest rare not always in the social interest. | |
b. | not all goals are desirable. | |
c. | people's wants exceed the resources available to satisfy them | |
d. | we cannot answer the major economic questions. |
1 points
QUESTION 16
When Delta decides to quit flying to Lithuania, it directly answers the ________ question.
a. | what | |
b. | why | |
c. | for whom | |
d. | how |
1 points
QUESTION 17
A normative statement
a. | says what is currently believed about the way the world operates. | |
b. | depends on someone's values. | |
c. | cannot use the word "should." | |
d. | must be tested to determine if it is correct. |
1 points
QUESTION 18
Which of the following statements best describes the study of economics? Economics studies how
a. | to organize production so that scarcity does not occur. | |
b. | to create incentives so that scarcity does not exist. | |
c. | firms make profits. | |
d. | we make choices in the face of scarcity. |
1 points
QUESTION 19
Which of the following best defines economics?
a. | Economics teaches how to limit our wants. | |
b. | Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level. | |
c. | Economics helps you earn as much money as possible. | |
d. | Economics studies how to choose the best alternative when coping with scarcity. |
1 points
QUESTION 20
In economics, cost is ________, and benefit is ________.
a. | the amount of money that you pay for something; the amount of money that someone else is willing to pay you | |
b. | what you are willing to pay on the margin; what the government pays you when you are unemployed or retired | |
c. | what you must give up to get something; what you are willing to give up to get it | |
d. | the amount of money that you pay on the margin; the amount of money that you receive on the margin |
1 points
QUESTION 21
If Jessie studies economics for two hours instead of going to the movies with her friends, then
a. | the opportunity cost of studying is the missed movie. | |
b. | Jessie is ignoring a sunk cost | |
c. | Jessie is not responding to any incentives. | |
d. | Jesse definitely is making a rational choice. |
1 points
QUESTION 22
Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.
a. | The $80 price of skiing is a sunk cost and so did not affect Adam's decision. | |
b. | He loses a total of $120 per day, so his decision is irrational. | |
c. | His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost. | |
d. | Adam's lost $40 per day in wages is a sunk cost and so did not affect his decision. |
1 points
QUESTION 23
If a curve falls and then rises, it
a. | has a maximum. | |
b. | has a linear relationship. | |
c. | has a minimum. | |
d. | has a constant slope relationship. |
1 points
QUESTION 24
In 2003, Michael Jordan decided to retire from professional basketball. Which of the following was an opportunity cost of his decision?
a. | the avoidance of pain and injury from playing one more year | |
b. | the time he could spend with his family while retired | |
c. | the lost salary from playing one more year | |
d. | the value of new employment opportunities that would await him |
1 points
QUESTION 25
Which of the following statements is a normative statement?
a. | Military spending as a percent of government spending decreased by 5 percent in the 1990s. | |
b. | Every American household should have health care insurance coverage. | |
c. | Welfare reform has decreased the amount the government spends on welfare. | |
d. | The price of computers fell last year. |
Puget Concrete is a major west coast supplier of concrete to residential and commercial builders with multiple sites in the Puget Sound area. Concrete is sold (priced) by the cubic yard including costs based on number of cubic tards, delivery costs based on miles driven, and number of truck-hours while at the job site. The company's pricing policy is to price orders for concrete at 25% over full cost per cubic yard for the order. Full cost includes variable costs for concrete, delivery and yard operations plus an allocation for the estimated annual fixed costs of delivery, site operations and administrative costs (see 2017 cost estimates below). | |||||
Delivery costs include a rate per mile, recognizing that more miles means more gas and maintenance costs, plus a rate per truck-hour (hours on the job) since if kept waiting on a job site the truck must be kept running so the concrete will not harden and the driver must be paid for that time. Site operations is the name for the company's place where the concrete is prepared and loaded in the truck for delivery. | |||||
The price per cubic foot quoted the customer is based on full cost for the job plus 25% divided by number of cubic yards for the order as follows: | |||||
Jobs (orders) are priced as follows (using cost plus method): | |||||
Number of yards x Concrete cost/yard* | * need to compute cost per yard based on cost data below | ||||
Number of Miles driven x $10 per mile | using the planned miles for that order | ||||
Number of Truck hours x $50 per hour | using the planned hours for that order | ||||
Total Job Cost | |||||
plus Markup (job cost x 25%) | |||||
Total Price for the order | |||||
Total price divided by number of cu yds ordered is the quoted price per cu yd (includes delivery) | |||||
At the start of 2017, the company estimated their costs as follows: | |||||
Costs included in concrete cost/yard: | |||||
Direct Material cost = $75 per cubic yard | |||||
Variable site operations costs = $17 per cubic yard | |||||
Fixed site operations costs = $300,000 per year | |||||
Fixed Delivery costs = $500,000 per year | |||||
Fixed Admin. costs = $2,125,000 per year | |||||
Costs included in delivery cost: | |||||
Variable Delivery costs = $10 per mile + $50 per truck hour | |||||
And estimated 2017 sales volume is as follows: | |||||
Annual totals (planned): | 2017 amount | ||||
Total Cubic Yds to be delivered (sold) | 500,000 | ||||
Total Delivery Miles | 700,000 | ||||
Total Truck-hours | 25,000 | ||||
Total number of jobs (orders) | 100 | ||||
Answer each question below (Q1 - Q5) on the tab for that number. Format answer as needed. | |||||
Use "Wrap Text" and "Merge cells" to format cells to hold the text answers on the same page (as shown with this sentence). Increase the row height to make the whole line visible. | |||||
Fill in your name on Tab 1 | |||||
Comprehensive Analysis Project questions (answer on Q# tab) | |||||
Q5 | Puget's CFO will be meeting with the bank to apply for a loan, he had the following report parepared to meet the bank's request. Review the trends based on the this data and answer the questions below to prepare for the bank meeting: | ||||
Report of key ratios for last three years: | 2016 | 2015 | 2014 | ||
Current ratio | 2.6:1 | 2.4:1 | 2.2:1 | ||
Current assets / Current liabilities | |||||
Acid test (quick ratio) | 0.9:1 | 1.0:1 | 1.1:1 | ||
(Cash + Short-term receivables) / Current liabilities | |||||
Accounts receivable turnover | 9.2 times | 10.3 times | 11.5 times | ||
Net credit sales / Accounts receivable | |||||
Inventory turnover | 8.1 times | 7.8 times | 6.2 times | ||
Cost of goods sold / Inventory | |||||
Return on total assets | 14.5% | 13.1% | 11.3% | ||
(Net income + [Interest expense x (1-Tax rate)]) / Total assets | |||||
Return on common stockholderâs equity | 17.2% | 15.1% | 12.9% | ||
Net income / Stockholdersâ equity | |||||
Priceâearnings ratio | 14.5 | 17.2 | 17.8 | ||
Market price per share / Earnings per share | |||||
Earnings per share | $1.52 | $1.51 | $1.54 | ||
Net income / Number of common shares outstanding | |||||
Note: There has been no change in number of shares outstanding. | |||||
Required: Answer each question (a - d) comparing 2016 to prior years and explain which ratio(s) were used and how they are interpreted (results of analysis). | |||||
a) Is it becoming easier for the company to pay its bills as they come due? | |||||
b) Are customers paying their credit accounts as well as they were in 2014? | |||||
c) Is the level of inventory increasing, decreasing, or remaining constant? | |||||
d) Is the market price of the companyâs stock going up or down compared to 2014? |
Required: Answer each question comparing 2016 to prior years and explain which ratio(s) were used and how they are interpreted (results of analysis). | ||||
a) Is it becoming easier for the company to pay its bills as they come due? | ||||
b) Are customers paying their credit accounts as well as they were earlier? | ||||
c) Is the level of inventory increasing, decreasing, or remaining constant? | ||||
d) Is the market price of the companyâs stock going up or down compared to prior level? | ||||
Governmental Budgeting and Accounting
This mini-case covers a number of the major concepts that wehave covered in class this semester. Specifically, the examrequires you to perform a break-even analysis with a weightedaverage contribution margin, prepare a quarterly operating budget,and consider a capital investment using the net present valuetechnique. The answers are cumulative. You cannot skip anysection and do the next.
You may make whatever assumptions you think are necessary toanswer any question. If needed, be sure to state every assumptionexplicitly. Turn in your answers in this Word document along withthe supporting calculations in Excel spreadsheets.
All of the information that you need to answer a given questionis provided in the text that immediately precedes the question andthe answers to the questions that precede it. Read the entireproblem set before you begin. Make sure you understand thequestions before answering them!
Santa Fe Museum of Southwestern Art
The Santa Fe Museum of Southwestern Art (SFMSA) presentsrotating exhibits of the works of artists and artisans from theSouthwestern United States. Historically, the museum has derivedits support from three sources: grants, annual memberships, andvisitor revenues. For the 2017 fiscal year, SFMSA knows that itwill receive $495,000 in grants from various sources. It alsoexpects 1,375 people to be supporting members of the museum. Onaverage, supporting members give SFMSA $105.75 per year. You canthink of the support from grants and memberships as Fixed Revenues.The museum expects the following mix of visitors during 2017, eachpaying the amount shown in the right column of the schedule.
Type of Visitor | Percent of Total | Price |
Regular | 60% | $6.00 |
Group | 18% | $3.00 |
Senior Citizen | 12% | $2.00 |
Student | 10% | $1.00 |
SFMSA has $965,000 of fixed expenses each year. In addition, themuseum spends an average of $0.62 per visitor for handouts thatdescribe the exhibits on display. SFMSA estimates that it hasvariable electric costs of $0.10 per visitor. Plus, the museumoffers each visitor the option of receiving an audio recordingwhich describes the featured exhibit of the month. Visitors areallowed to keep the recording as a memento of their visit.Historically, these recordings have cost the museum $1.30 per copyto produce and replicate. On average, 25% of the people visitingthe museum have taken advantage of the free audio recordingoffer.
Problem 1. The Directorof the museum has asked you to tell her the minimum number of totalvisitors that must come to the museum each year in order for SFMSAto break even. Using the information given above, what is SFMSAâsbreak-even visitor volume? (40 points)
Because of Santa Feâs location in themountains of New Mexico, the museum tends to have a seasonalpattern to its visitor flow with proportionally more peoplevisiting SFMSA in the summer than in the winter. In addition,revenue from grants and memberships tend to flow into the museumunevenly throughout the year. The seasonal flow of visitor, grantsand membership revenues is distributed throughout the year asfollows:
P11.1021 Summer Session - Replacement Assignment Number5
Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |
Visitors | 20% | 25% | 40% | 15% |
Membership Revenue | 40% | 20% | 20% | 20% |
Grant revenue | 25% | 50% | 10% | 15% |
Weighted Average Price per ticket = (Weight of Regularvisitor in total tickets sold x Price of ticket) + (Weight of Groupvisitors in total tickets sold x Price of ticket) + (Weight ofSenior Citizen visitor in total tickets sold x Price of ticket) +(Weight of Student visitor in total tickets sold x Price ofticket)
=> (0.6 x $6) + (0.18 x $3) + (0.12 x $2) + (0.10 x$1) = $4.48 per ticket
Variable cost per visitor = Cost of handouts + variableelectric costs + (Cost of audio recording x 25%)
=> $0.62 + $0.10 + ($1.30 x 25%) =$1.045
Contribution per ticket = Selling Price â Variable cost=> $4.48 - $1.045 = $3.435
Total Fixed Cost = $965,000
Fixed Revenues = Grant + Membership Revenue => $495,000 +($105.75 x 1,375) = $640,406.25
Remaining Fixed cost = $965,000 - $640,406.25 =$324,593.75
Break-even point = Fixed cost / Contribution perticket
=> $324,593.75 / $3.435 = 94,495.99 or94,496
So, total 94,496 tickets with stated percentage ofvisitor type are required to break-even.
Fixed expenses are distributed evenly throughout the year i.e.25% per quarter. The museumâs marketing director forecasts that82,000 people will visit the museum during fiscal year 2017.
SFMSAâs Director of Marketing has convinced the ExecutiveDirector that a museum shop can be operated profitably in a smallspace just off the main entrance. She agrees and the shop isscheduled to open on April 1, 2017, the first day of the secondquarter. The Marketing Director estimates that 5% of the people whovisit the museum will make purchases from the shop. Based on hisexperience, he expects the average purchase to be $50. SFMSAâsBusiness Manager estimates that the cost-of-goods-sold will be 75%of the museum-shopâs sales revenue. The shop will be staffed byvolunteers at no cost to SFMSA.
Problem 2. Using theinformation above, prepare a properly formatted operating budgetfor SFMSA for each of the four quarters in fiscal year 2017 andsummarize the budget for the full year. (45 points)
SFMSA has just been approached by the Curator of SpecialExhibits at the Smithsonian Museum. The Smithsonian has offered tolend SFMSA a rare collection of nineteenth century Navajo crafts.The collection would remain at the museum for a five-year periodafter which it would be returned to the Navajo nation. To house theexhibit, SFMSA will have to upgrade its environmental and securitysystems at a one-time cost of $300,000. This is the only cashoutflow associated with the decision.
Since this may be the last time that this collection will beexhibited in its entirety, the Executive Director is enthusiasticabout the impact that it will have on visitor volume and thereputation of the museum. The Marketing Director forecasts that 900incremental visitors are likely to be drawn to the museum eachmonth that the exhibit is at SFMSA.
The director wants you to tell her if the exhibit is financiallyself-sufficient or if she will need to get a grant to support it.You know that SFMSAâs cost of capital is 8%. You also know themarginal contribution generated by each incremental visitor to themuseum from your work on the break-even analysis. Do not count onany gift shop purchases from the incremental visitors.
Problem 3. What do youtell her? Can SFMSA afford to show the exhibit based solely on themarginal contribution from incremental visitors? If the exhibit isnot financially self-sufficient, how large a grant will SFMSA needto get to meet the projected shortfall? Support your recommendationand present your findings in a way that the director willunderstand. (40 points)
I have answered problem 1, the answer is in bold. I need helpanswering problem 2 and 3.