Answer:
Cool Sky
The product cost per unit under absorption costing is:
= $7.20
Explanation:
a) Data and Calculations:
First year production units = 40,000
First year sales units = 32,000
Ending inventory = 8,000 (40,000 - 32,000)
Selling price per unit = $110
Sales revenue = $3,520,000 (32,000 * $110)
Manufacturing costs
Direct materials per unit $ 42
Direct labor per unit $ 16
Variable overhead per unit $ 5
Fixed overhead for the year $ 360,000
Selling and administrative costs:
Variable selling and administrative cost per unit $ 10
Fixed selling and administrative cost per year $ 115,000
Production Cost per Unit under Absorption Costing:
Manufacturing costs: Unit Total
Direct materials per unit $ 42
Direct labor per unit $ 16
Variable overhead per unit $ 5
Total variable cost per unit $63 $2,520,000
Fixed overhead for the year $ 360,000
Total production cost for 40,000 $2,880,000
Unit product cost = $7.20 ($2,880,000/40,000)
Prepare a journal entry for the purchase of a truck on April 4 for $72,240, paying $5,900 cash and the remainder on account. Refer to the Chart of Accounts for exact wording of account titles.
JOURNAL
DATE DESCRIPTION POST. REF. DEBIT CREDIT
1
2
3
Answer:
Dr Truck $72,240
Cr Cash $5,900
Cr Accounts Payable $66,340
Explanation:
Preparation of the journal entry for the purchase of a truck on April 4
April 4
Dr Truck $72,240
Cr Cash $5,900
Cr Accounts Payable $66,340
($72,240 - $5,900)
(To record purchase of truck)
From the list choose the letter that contains the word, phrase, name, etc that best matches the word, phrase, name, etc listed on the bottom.
1. Government-mandated, government-sanctioned, and voluntary private programs that tend to focus on access to education and employment, granting special rights to historically excluded groups
2. Equal Pay Act of 1963
3. Collective bargaining
4. Improvement in productivity due to higher union wages
5. National Labor-Management
6. Prior to the passage of the Civil Rights Act of 1964
7. The DREAM Act (Development, Relief, and Education for Alien A law requiring all minors to become the citizens of the United States
8. Decline in manufacturing, increased competition from foreign manufacturers, the passage of laws aimed at protecting workers
9. When higher union wages lead to higher quantity
10. Minimum wage laws
A. Legislative proposal providing path to legal residency to qualifying immigrants who entered the United States as minors (before the age of 16)
Relations Act of 1935
B. Requires that men and women be given equal pay for equal work in the same establishment
C. May increase demand for unionized labor
D. A law requiring companies to pay equal wage to all their workers regardless of race, age or sex
E. A law granting states the power to allow workers to opt out of the union in their workplace if they so desired
F. Leads to a shortage of labor
G. Companies in many states could legally refuse to hire a black worker regardless of the credentials or experience of that worker supplied of labor and lower quantity demanded of labor
H. Women were not allowed to work in certain sectors of the economy
I. Lead to a decline of labor unions in the United States
J. Affirmative action
K. Lead to a decline of labor unions in the United States
L. A law granting workers the right to unionize
M. A process of negotiation between firms and labor unions regarding wages, compensation, working conditions, and other factors affecting workers
N. Help reduce the downward pressure on wages of low-skill workers that may arise due to increased competition from immigration
Answer:
Matching with the Best Word, Phrase, Name, etc:
1. J. Affirmative action
2. B. Requires that men and women be given equal pay for equal work in the same establishment
3. M. A process of negotiation between firms and labor unions regarding wages, compensation, working conditions, and other factors affecting workers
4. C. May increase demand for unionized labor
5. L. Relations Act of 1935. A law granting workers the right to unionize
6. G. Companies in many states could legally refuse to hire a black worker regardless of the credentials or experience of that worker supplied of labor and lower quantity demanded of labor
7. A. Legislative proposal providing path to legal residency to qualifying immigrants who entered the United States as minors (before the age of 16)
8. I. Lead to a decline of labor unions in the United States
9. K. Lead to a decline of labor unions in the United States
10. D. A law requiring companies to pay equal wage to all their workers regardless of race, age or sex
Explanation:
The DREAM Act, Relations Act of 1935, Equal Pay Act of 1963, Civil Rights Act of 1964, and Affirmative action are some of the government-sponsored programs to ensure that some level of equity applies to individual cases.
1. Deirdre has one hour this afternoon in which she can either practice the piano for the upcoming school concert, work at
the library for $7 per hour, or babysit her neighbor's son for $10 per hour. Deirdre chooses to practice the piano, but
if she hadn't chosen to practice the piano, she would have chosen to babysit over working at the library. What is the
opportunity cost of Deirdre's decisions
A. The value gained from practicing the piano for an hour.
B. The value of babysitting her neighbor's son for an hour.
C. The value of working at the library for an hour.
D. The value of babysitting her neighbor's son and working at the library for an hour.
Answer:
The correct answer is B) The value of taking care of her neighbours son for 60 minutes.
Explanation:
Opportunity Cost belongs more in the parlance of microeconomics and is used to describe the idea that one cannot have everything all the time. There are alternative ends competing for limited means. In order words, when we decide to take a course of action, in the hope of achieving a thing or getting a reward, there is always another benefit forgone.
So knowing that there is an opportunity that was foregone helps the microeconomist to think carefully about what they want to achieve using the limited resources at their disposal.
Further simplified, if I have $5 dollars to spend, and that amount can purchase either a cupcake or a cup of ice cream, the one I chose to buy becomes the opportunity taken, whilst the alternative forgone is the opportunity cost.
Therefore, the cost of an item is not just the amount of money for which it was purchased, but all other alternatives with which the same amount could have been purchased.
In the question above, Deidre would have chosen to babysit her neighbor's son. That to her is the next best use of her time, and therefore the opportunity cost. According to the question, she wouldn't have worked in the library even if she had nothing else to do. Hence, that does not pass as opportunity cost.
Opportunity cost must be an alternative choice and is very subjective.
Cheers!
ce Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 240 100 % Variable expenses 36 15 % Contribution margin $ 204 85 % Fixed expenses are $160,000 per month. The company is currently selling 1,100 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $75. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 600 units. What should be the overall effect on the company's monthly net operating income of this change if fixed
Answer:
Ace Corporation
The overall effect on the company's monthly net operating income of this change if fixed is a reduction:
= $5,100
Explanation:
a) Data and Calculations:
Per Unit Percent of Sales
Selling price $ 240 100 %
Variable expenses 36 15 %
Contribution margin $ 204 85 %
Fixed expenses are $160,000 per month
Current sales units per month = 1,100 units
Expected increase in unit variable cost = $75
New variable cost per unit = $111 ($36 + $75)
Expected increase in sales units per month = 600 units
New sales units per month = 1,700
Old Component New Component Overall Effect
Sales revenue $264,000 $408,000
Variable costs 39,600 188,700
Contribution margin $224,400 $219,300
Fixed expenses 160,000 160,000
Net operating income $64,400 $59,300 -$5,100
What is a public sector wage bill ?
Answer:
Equal pay for equal work
Answer:
Wage bill (2016/2017)Beckenworth had cost of goods sold of $10,521 million, ending inventory of $3,189 million, and average inventory of $2,075 million. Its days' sales in inventory equals: __________
Answer:
am i supposed to know
Explanation:
Kanye, Jonny, Jaco, and Neil are trying to form a band. They each have some basic skills on most instruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Kanye cannot keep a steady beat when on bass or drums, Jaco sounds terrible on everything except the bass, nobody except Jonny can remember all the chords on guitar, and even Neil's own mother thinks his singing sounds like a dying cow. At their current rate, they expect it will be several years before they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them?
Answer:
2- Have each member specialize in the role that they are best in, to take advantage of benefits from specialization.
Explanation:
Here are the options
1- Continue with the current plan, as economies of scale should eventually kick in.
2- Have each member specialize in the role that they are best in, to take advantage of benefits from specialization.
3- Abandon the band, as continued practice is doomed to suffer diminishing marginal returns.
4- Invest their remaining savings in new instruments, as they are at a point where the marginal product of capital exceeds the marginal product of labor.
5- Change the rotation to be random rather than equal, to take advantage of heteroskedasticity.
Specialisation is when a person focuses on an activity in which they are efficient in or have a comparative advantage in
A person has a comparative advantage in production if he produces at a lower opportunity cost when compared to other people
Jaco seems to be efficient at playing bass, thus he should specialise in this activity
Jonny seems to be efficient at playing the guitar, thus he should specialise in this activity
An advantage of specialisation : Increased efficiency as a result of carrying out the same activity multiple time.
Supplies are assets until they are used. When they are used up, their costs are reported as expenses. The costs of unused supplies are recorded in a Supplies asset account. Supplies are often grouped by purpose—for example, office supplies and store supplies. Office supplies include paper, toner, and pens. Store supplies include packaging and cleaning materials.
Question Completion:
Describe the accounting treatment of Supplies Expenses.
Answer:
Supplies Expenses are debited while the Supplies account is credited with the supplies expenses.
Explanation:
This accounting treatment of Supplies Expenses reduces the balance of the Supplies account by the amount of supplies used during the period. Thus, what is left in the Supplies account is the cost of the unused supplies at the end of the accounting period. The treatment also accords with the accrual concept, which requires that expenses are matched to the revenues that they generate in the period.
Assume that an investor purchased a put option on BP with an exercise price of $1.900 for $0.0215 per unit. There are 31,250 units in a GBP options contract. At the time of the option expiration date, the spot price for GBP was $1.885. What was the net profit/loss on this option to the investor?
a. $203.125
b. $671.8750
c. $468.75
d. $1,140.625
Answer:
a. $203.125
Explanation:
Calculation to determine the net profit/loss on this option to the investor
Net profit/loss=((1.900 - 1.885) - 0.0215)(31,250)
Net profit/loss=(0.015-0.0215)*31,250
Net profit/loss=0.0065*31,250
Net profit/loss=$203.125
Therefore the net profit/loss on this option to the investor will be $203.125
After the stock market crashed in 1929, many people lost money they had kept in bank accounts, leaving many penniless and
desperate. The U.S. government later created regulations and safeguards to prevent this type of financial devastation and instill trust
in U.S. banks again. While most people have bank accounts today, some people still choose to go 'bankless' and keep their cash with
them or in their home. Which statement describes a benefit of Veeninn man in han
Answer: it is D
Explanation:
Hope i helped
Which process plays an important role in advanced manufacturing processes?
Answer:
Innovative technology is used in advanced manufacturing to enhance products or processes, describing these technologies as "advanced," "innovative," or "cutting edges.
'Advanced manufacturing' increasingly incorporates in products and processes new, innovative technologies.
Explanation:
Selection of an appropriate production process often involves taking into account the complex combination of design, material, and process characteristics.
Although a common set of properties can clearly describe most materials, allowing for a certain design to be selected only based on these properties, the same is true only in part in the selection of processes.
Processes are often the most discriminating features of the class of process.
Think of a product that you purchased within the past 6 months
Discuss these questions relative to the purchased product. Your answers should align with how these stages are done based on the consumer decision model in text.
How did you recognize that you needed the product?
Where or how you search for information on alternative products that would satisfy this need (product)?
What alternatives did the search process generate and what variables did you use to make the final decision to buy?
Where did you buy the product and why?
Were you satisfied after using or consuming the product? Explain.
There are 5 categories of influences as outlined by your text:economic, psychological. social, culture and ethnicity, purchase situation. Which one(s) do you think had the greatest effect on your purchasing decision? Please explain.
Answer:
Product purchased: a purse
How did you recognize that you needed the product?
Through a need for more space to carry personal items to work.
Where or how do you look for information about alternative products that meet this need (product)?
Buying online is one of the facilities made possible by new technologies, which allows us to choose the product that meets our desires and needs without having to go to a physical store, in addition to the possibility of comparing prices and getting special discounts.
What alternatives did the research process generate and what variables did you use to make the final purchase decision?
The alternatives found were fast fashion sites that offered a bag of the ideal size, with the expected quality and defined average price.
Where did you buy the product and why?
I bought the product at Zara, which is a top quality fashion department store that would meet all requirements and needs with the purchase.
Were you satisfied after using or consuming the product? Explain.
Yes, because the benefits added to the product met my needs and desires.
There are 5 categories of influences as described in your text: economic, psychological. social, culture and ethnicity, purchasing situation. Which one(s) do you think had the greatest effect on your purchase decision? Please explain.
The item that had the most effect on the purchase decision was the psychological and economic item, as the choice of the product was made due to a need for work, but whose purchase decision process took into account factors such as brand, quality and the price of the product.
At the beginning of 2004, the Alaska Corporation had 2 million shares of common stock outstanding and no preferred stock. At the end of August, 2004, Alaska issued 600,000 new shares of common stock. If Alaska reported net income equal to $8.8 million, what was the firm's earnings per share for 2004
Answer:
$4
Explanation:
Earning per share (EPS) refers to earnings available to common shareholders which is divided by the weighted average number of common shares outstanding.
The weighted average number of shares outstanding equals the original 2 million shares plus 4/12 of the additional 600,000 shares.
The 4/12 weight is used because the new shares were only outstanding 4 months of the year.
Hence,
EPS = $8.8 million / [2 million + (4/12)(600,000)
EPS = $8.8 / $2.2
EPS = $4
The estimated factory overhead cost for a Co. is $1750000 for the year. Direct labor hours are estimated to be 500000. Determine: SHOW ALL WORK a. Predetermined factory overhead rate. $ b. Determine the factory overhead applied assume the actual direct labor hours for Job 50 was. 20000 and for J0b 51 was 24000 . c. Determine the balance in the factory overhead account assuming that the actual cost incurred was $153000. d. Over or under-applied
Answer:
Results are below.
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 1,750,000 / 500,000
Predetermined manufacturing overhead rate= $3.5 per direct labor hour
Now, we can allocate overhead to Job 50 and 51:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Job 50:
Allocated MOH= 3.5*20,000
Allocated MOH= $70,000
Job 51:
Allocated MOH= 3.5*24,000
Allocated MOH= $84,000
Finally, the under/over applied overhead:
(We weren't provided with enough information)
Under/over applied overhead= real overhead - allocated overhead
what kind of business
The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances. Accounts Payable $484 Fees Earned $2,517 Accounts Receivable 877 Insurance Expense 697 Prepaid Insurance 1,703 Land 2,905 Cash 2,011 Wages Expense 782 Dividends 521 Common Stock 6,495 Prepare a trial balance. The total of the debits is:_______.
a. $1,479
b. $6,495
c. $7,496
d. $9,496
Answer:
d. $9,496
Explanation:
Particulars Debit Credit
Accounts Payable $484
Fees Earned $2,517
Accounts Receivable 877
Insurance Expense 697
Prepaid Insurance 1,703
Land 2,905
Cash 2,011
Wages Expense 782
Dividends 521
Common Stock 6,495
Total $9,496
g e-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions. Which of the following terms best describes Futura-Core's abilities in comparison to Core-Dynamix? A. absolute advantage B. collective bargaining C. comparative advantage D. competitive advantage
Complete Question:
Futura-Core Technologies, an electronics manufacturing firm, has advantages in financial capability and sustainability, but a disadvantage in speed of innovation. It is also at a disadvantage relative to Core-Dynamix Technologies, another electronics manufacturing firm, in important factors such as manufacturing capability and adaptability to market conditions.
Answer:
C. comparative advantage
Explanation:
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
Generally, comparative advantage gives a country or business firm a stronger sales margin than their competitors because they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
Hence, the term which best describes Futura-Core's abilities in comparison to Core-Dynamix is comparative advantage.
Common stock holders: Group of answer choices have one vote in the election of how the company operates. are last in line to receive income. are guaranteed to get paid when the company fails. receive income before preferred stockholders.
Answer:
are last in line to receive income.
Explanation:
Common stock holders are referred to as the owners of the company. They own shares that gives them the right to vote in a company's general meeting, receive dividends, and they have the right to get newly issued shares in the company before others.
However they are also called unsecured creditors of the company because when the business makes income they are the last in line to receive dividends if any remains.
Also in the case of bankruptcy preference share holders and other creditors are paid first. Common share holders are paid last.
Using a value at risk (VaR) model based on historical data to forecast future expected losses works well:_______
a. all the time.
b. during times of normal market conditions.
c. during times of increased market volatility.
Answer:
b. during times of normal market conditions.
Explanation:
Using a value at risk (VaR) model based on historical data to forecast future expected losses works well: "during times of normal market conditions."
The above statement is true because VaR regardless of the models does not measure the drastic or uncertain situation. Also given that it is used based on historical data, then it is believed to work better on the assumption of normal circumstances.
Calculate the IRR of a machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and produces the following cash flows: o Year 1: $700. o Year 2: $800. o Year 3: $900. o Year 4:$1,000.
Answer:
5.3%
Explanation:
Year Cash-flow
0 -$5,000
1 $700
2 $800
3 $900
4 $3,500
Using the IRR Function on MS Excel
IRR of the machine = IRR(Cashflow 0,1,2,3,4)
IRR of the machine = 0.053
IRR of the machine = 5.3%
Carter Containers sold marketable securities, land, and common stock for $37.0 million, $13.0 million, and $35.0 million, respectively. Carter also purchased treasury stock, equipment, and a patent for $23.0 million, $23.0 million, and $10.2 million, respectively.
What amount should Carter report as net cash from investing activities? (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Answer:
$16.8 million
Explanation:
Calculation to determine What amount should Carter report as net cash from investing activities
($ in millions)
Cash Flows from Investing Activities:
Proceeds from sale of marketable securities $37
Proceeds from sale of land $13
Less Purchase of equipment for cash ($23)
Less Purchase of patent for cash($10.2)
Net cash inflows (outflows) from investing activities $16.8
Therefore the amount that Carter should report as net cash from investing activities is $16.8 million
The cost of debt is equal to one minus the marginal tax rate multiplied by the average coupon rate on all outstanding debt. True False
Answer:
False
Explanation:
False, The given information is false because coupon rate is not required while calculating the cost of the debt. Only interest rate which is also called Yield to maturity and the marginal tax rate is needed to calculate the cost of debt.
Below is the formula:
Cost of debt after the tax = Interest rate (1 - Marginal tax rate)
Anyina Corporation has an actual profit of $80,000. The break-even point is $500,000 and the variable expenses are 60% of sales. Given this information, the margin of safety, based on actual sales, is:
Answer:
Margin of safety = $200,000
Explanation:
Given:
Actual profit = $80,000
Break-even point = $500,000
Variable expenses = 60% of sales
Find:
Margin of safety
Computation:
Assume sales = a
So,
Variable expenses = 0.6a
Pv ratio = [(Sales - Variable expenses) / Sales]100
Pv ratio = [(a - 0.6a)/a]100
Pv ratio = 40%
Margin of safety = Profit / Pv ratio
Margin of safety = 80,000 / 40%
Margin of safety = $200,000
Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $20 per share. She borrows $2,500 from her broker to help pay for the purchase. The interest rate on the loan is 7%. a. What is the margin in Dée’s account when she first purchases the stock?
Answer: $5500
Explanation:
The margin in Dée’s account when she first purchases the stock will be calculated thus:
First, we calculate the value of the 400 shares which will be:
= 400 × $20
= $8000
Since the borrowed amount is $2500, therefore the margin will be:
= Purchase price - Borrowed amount
= $8000 - $2500
= $5500
Therefore, the margin is $5500
Kansas Company acquired a building valued at $150,000 for property tax purposes in exchange for 10,000 shares of its $5 par common stock. The stock is widely traded and sold for $16 per share. At what amount should the building be recorded by Kansas Company
Answer:
$160000
Explanation:
Below is the calculation for the amount that should be recorded.
The actual value of building = $150000
Number of shares = 10000 shares
The stock is traded at the price = $16 per shares
The Kansas company should record the amount of building = total share x Sell price
The Kansas company should record the amount of building = 10000 x 16
The Kansas company should record the amount of building = $160000 (fair market value or price of shares)
Calculate the net present value in US$ of an investment in the health spa only, assuming that the 1,500-square-foot unit is purchased and then resold at the end of 12 years. (Hint: Before making your present value calculations, multiply all amounts expressed in CI$ by $1.25 to convert into US$.)
Answer: Hello I was able to find the Major part of the question online as attached below
answer :
Net present value ( NPV ) = $153353.91
Explanation:
NPV = ( Present value of Cash Inflow) - ( Present value of Cash outflow) -- ( 1 )
present value of cash inflow
i) cosmetic products = ( 5500 * 1.25 * 12) * ( 6.8137) (cost of capital )) = 562130.25
ii) land sale = ( 1500 * 300 * 1.25 ) * ( 0.8186 ) ( cost of capital )) = 179212.5
∑ present value of cash inflow = 741342.75
Present value of cash outflow ( other expenses )
∑ present value of cash outflow = 587,988.84
NPV = 741,342.75 - 587,988.84 = $153,353.91
Green Thumb Nursery has 53,000 shares outstanding at a market price of $63.57 per share. The earnings per share are $3.57. The firm has total assets of $362,000 and total liabilities of $207,000. Today, the firm announced a share repurchase for $117,000 of its stock. What is the earnings per share after the repurchase
Answer: $3.70
Explanation:
Earnings per share = Net income / Number of shares
Net income = Earnings per share * Number of shares
= 3.57 * 53,000
= $189,210
The number of shares that Green Thumb bought back is:
= Stock repurchase amount / Market price of shares
= 117,000 / 63.57
= 1,840 shares
After the repurchase the number of shares is:
= 53,000 original shares - 1,840
= 51,160 shares
New EPS = 189,210 / 51,160
= $3.70
g Suppose that an employer requires 4 years of education as a precondition for the high-productivity wage. The existence of a separating equilibrium will depend on the cost of education for high-productivity types. In this case, a separating equilibrium will exist if the cost of education for high-productivity types is less than X dollars per year. What is X
Read the following paragraph and respond to the questions below.
(1) Frequently, department managers and supervisors recruit applicants without working through our corporate human-resources office. (2) Our human-resources departments at all of our locations across the country have experienced this problem. (3) Recently, the manager of our tool-design department met with a recent industrial design graduate to discuss an opening for a tool designer. (4) The graduate was sent to the human-resources department, where she was told that no such position existed. (5) When the tool-design manager asked the director of human resources about the matter, the manager learned that the company president had ordered a hiring freeze for two months. (6) I’m sure that our general employment situation will get better. (7) As a result of the manager’s failure to work through proper channels, the applicant was not only disappointed but bitter.
a. Which number sentence is the topic sentence?
b. Which number sentence does not contribute to paragraph unity?
c. What is the writer providing in sentences 3 through 7 to help the reader understand his/her point?
d. Why is that helpful, or why is the message better by adding sentences 3 through 7?
Answer:
a. The number sentence that is the topic sentence is sentence (1).
b. Sentence (6) does not contribute to the paragraph's unity. It can be eliminated, without changing the meaning that can be obtained from the paragraph. It does not support the topic.
c. The writer, in sentences 3 through 7, provides an example and further details to help the reader to understand her point.
d. The example in a sentence makes the idea clearer to the reader. Without the example, which provides further details, the reader may not clearly appreciate the topic under discussion.
Explanation:
The purpose of the topic sentence is to introduce the theme of the paragraph or the point of view of the writer. It captures the essence of the story. As it bears the central idea, it focuses the paragraph to achieve unity.
Consider the oil-producing countries of A, B, and C. Each has a marginal cost of zero. World demand is given by Q = 995 – P. Suppose the three countries form a cartel, and that none of them has an incentive to deviate from the cartel. By how many units lower is the total output of oil under the cartel relative to the Cournot solution?
Answer:
248.75 units
Explanation:
world demand ( Q ) = 995 - P
marginal cost of each country = 0
Determine how much less oil is produced under the cartel arrangement in relation to the Cournot solution
under the Cournot model solution
Total output = 3 [ (995 – 0) / ((3+1)*1) ]
= 3 * ( 995 / 4 ) = 746.25 units
Considering the cartel arrangement
MR = MC = 0
995 - 2Q = 0
∴ Q = 995 / 2 = 497.5 units
Therefore the difference between oil produced under the cartel arrangement and the Cournot solution
= 746.25 - 497.5
= 248.75 units