Levi Straus free essay sample

Does this situation best represent producer—producer rivalry, consumer-consumer rivalry, or producer-consumer rivalry? Explain. A1: At first glance, the example easily demonstrates consumer-consumer rivalry. Our textbook even declares, â€Å"A good example of consumer-consumer rivalry is an auction† (Baye, 2008, p13). Various consumers vying for the same product of which there is only one can easily drive the price higher and higher. References: Baye, M (2008). Managerial economic and business strategy. New York, NY: McGraw-Hill/Irwin. Q2: What is the maximum amount you would pay for an asset that generates an income of $150,000 at the end of each of five years if the opportunity cost of using funds is 9 percent? A2: We must determine the PV of the $150,000 over the 5 years. PV= (150000/1. 09^1)+(150000/1. 09^2)+(150000/1. 09^3) +(150000/1. 09^4)+(150000/1. 09^5) = $583,447. 69 Therefore, if costs exceeded $583,447. 69, then the asset would not be worth the price. Q8: Jaynet spends $20,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm—one offer was for $100,000 per year, and the other was for ,000. We will write a custom essay sample on Levi Straus or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page However, she turned both jobs down to continue a painting career. If Jaynet sells 20 paintings per year at a price of $10,000 each: A8:a: What are her accounting profits? Accounting profit = total amount taken in from sales dollar cost of producing goods Accounting profit = $200,000 $20,000 = $180,000 b. What are her economic profits? Economic profits = Total revenue – total opportunity cost Economic profits = $200,000 – $20,000(supplies storage) $100,000(best job offer) Economic profits = $80,000 Q12: Tara is considering leaving her current job, which pays $56,000 per year, to start a new company that manufactures a line of special pens for personal digital assistants. Based on market research, she can sell about 160,000 units during the first year at a price of $20 per unit. With annual overhead costs and operating expenses amounting to $3,160,000, Tara expects a profit margin of 25 percent. This margin is 6 percent larger than that of her largest competitor, Pens, Inc. . If Tara decides to embark on her new venture, what will her accounting costs be during the first year of operation? Her implicit costs? Her opportunity costs? b. Suppose that Tara’s estimated selling price is lower than originally projected during the first year of operation. How much revenue would she need in order to earn positive accounting profits? Positive economic profits? A12a: Accounting costs = $3,160,000 (overhead and operating expenses) Implicit costs = $56,000 (current salary) Opportunity costs = Accounting cost + implicit cost = $3,160,000 + $56,000 = $3,216,000 A12b: To ensure positive accounting profits, Tara would have revenue exceeding her expenses, $3,160,000. To have positive economic profits, Tara would have to exceed her expenses, plus the salary she is giving up; $3,160,000 + $56,000 = $3,216,000 Q16: Starting in 2002, the maximum allowable contribution to IRAs will increase to $3,000 per year, gradually increasing to $5,000 by 2008. Thereafter, maximum contributions will be indexed by inflation and will increase in increments of $500. Suppose one of your clients is four years away from retirement and has only $1,500 in pretax income to devote to either a Roth or traditional IRA. The traditional IRA permits investors to contribute the full $1,500 since contributions to these accounts are tax-deductible, but they must pay taxes on all future distributions. In contrast, contributions to a Roth IRA are not tax-deductible, meaning that at a tax rate of 25 percent, an investor is able to contribute only $1,125 after taxes; however, the earnings of a Roth IRA grow tax-free. Your company has decided to waive the one-time set-up fee of $25 to open a Roth IRA; however, investors opening a tradition IRA must pay the $25 set-up fee.