Clearly answer all questions. 

Create any correcting entries to adjust inventory to its proper amount at December 31, 2014. Assume the books have not been closed.

1. Craig uses the periodic method of recording inventory. A physical count reveals $299,250 of inventory on hand at December 31, 2014.

2. Not included in the physical count of inventory is $17,097 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31.

3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $16,307 on December 31. The merchandise cost $9,364, and Champy received it on January 3.

4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $19,913. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded.

5. Not included in inventory is $10,880 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30.

6. Included in inventory was $13,298 of inventory held by Craig on consignment from Jackel Industries.

7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $24,079 on December 31. The cost of this merchandise was $13,402, and Kemp received the merchandise on January 5.

8. Excluded from inventory was a carton labeled "Please accept for credit." This carton contains merchandise costing $1,911 which had been sold to a customer for $3,312. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged

Suppose you are a monopolist able to produce your chosen output at a constant average (and thus marginal) cost of ATC = MC = $5. You face a market demand curve given by Q = 53 - P or inverse demand given by P = 53 - Q, where Q is the output provided to the market by supplying firms, in this case you!

a.Please calculate the profit maximizing quantity you should supply to the market along with the price you'll be able to charge. Calculate your firm's profit.

Suppose now that a second firm enters the market. Let Q1 be the output of the first firm, yours, and Q2 the output level of the second firm. Market demand is now given by Q1 + Q2 = 53 - P or inverse demand can be expressed as P = 53 - Q1 - Q2. Also assume the second firm has adopted the same technology as you and thus has the same costs (both in total and per unit) as you. As in the Cournot model, with simultaneous choices of Qi, each firm chooses its profit maximizing level of output on the assumption that its competitor's output is fixed at its' profit maximizing level.

b. Find each firm's "reaction function" or "reaction curve," the statement that expresses a firm's desired output in terms of its competitor's output [i.e., Q1 = f(Q2) and Q2 = f(Q1)].

c. Calculate the Cournot equilibrium, the levels of each firm's output at which each firm is doing as well as it can.

d. What are the resulting market price and profits for each firm?

e. What tactics might your firm, the original monopolist, employ to deter the other firm from entering? How much (maximum) might you be willing to pay, this period, to employ these tactics?

Now suppose there are N identical firms in the market, all with the same marginal and average costs. Using the Cournot mechanism, wherein each firm chooses its output simultaneously:

f. How much will each firm produce [Qi = f(N)] ?

g. What will be the single market price each firm will charge [P = f(N)] ?

h.Demonstrate that as N becomes large(r), the market price and profit per firm approach those that would prevail under perfect competition.

2. (25 points) The firm for which you work estimates its short run revenue with R = 10e - e2 where e is your work effort and R is the firm's revenue. You choose your work effort on the short term basis to maximize your wage, w, net of your effort, e. Or, you wish to make w - e as large as is possible. Given the three compensation options listed below in parts a, b, and c, tell me which you prefer as the firm's employee (knowing you want to maximize w - e). Also, tell me which the firm prefers, knowing they wish to maximize profit, you know, R - w. And lastly, explain why these different compensation packages generate different outcomes for you and your employer and why your work effort, e, is different in each.

a.w = 2 for all e > 1; otherwise w = 0

b.w = R/2

c. w = R - 12.5

3. (25 points) Suppose you manage a plant that produces engines by teams of workers using assembly machines. The technology is summarized by the production function

Q = 4KL

where Q is the number of engines produced per week, K is the number of assembling machines, and L the number of labor teams. Each assembly machine rents for r = $12,000 per week and each labor team costs w = $3,000 per week. Total engine costs are given by the cost of labor teams and assembling machines plus $2,000 per engine for raw (component) materials. Your plant currently has a fixed installation of 10 assembly machines as a part of its design.

a. What is the total cost function [TC = f(Q)] for your plant- namely, how much will it cost to produce Q engines given the production function and input costs above? What are the average [ATC = f(Q)] and marginal costs [MC = f(Q)] of producing Q engines? How does the average costs vary with output?

b. How many labor teams are required for producing a batch of 80 engines given the plant's current makeup? What is the average total cost per engine?

c. You are now asked to make recommendations for the design of a new production facility. What would you suggest? In particular, what capital/labor ratio should the new plant accommodate? If lower average cost per engine was your prime consideration, what would be the optimal capital/labor levels to produce 80 engines? What then would be the average cost per engine? And lastly, should you suggest that the new plant have more or less production capacity than the plant you currently manage? Explain why you chose as you did and the circumstances by which you answered as you did.

4. (25 points) Current domestic passenger air carriers are a much changed collection of firms relative to, say, a generation ago. Gone are Pan American, TWA, Eastern and Braniff. Merged carriers include America West and US Air to make US Airways, and under consideration today, the joining of Delta and Northwest Airlines. Upstarts like Jet Blue, Southwest, Virgin, Midwest Express, and Trump have proven able entrants into specialized, regional, and /or niche markets. But, in summary, a few, maybe 10 or so, large air carriers dominate the nationwide domestic market with small markets like Sioux City IA, Fort Dodge IA, Lincoln NE, West Lafayette IN, and Moline IL wondering "where are these 10 carriers and this deregulated competitiveness we've been hearing about for the last 25 years? We're lucky to have one airline service us, and the fares aren't cheap!"

So as an appointed undersecretary of transportation/air travel in our new President's administration, what recommendations will you take to the new President on 22 January 2009, two days after the inauguration festivities have concluded? Namely, what general market corrections, regulations, policy changes and/or proposals will you forward for consideration?

Please raise and discuss at least three issues for the President, posing your (governmental) responses to each of the issues. Some acceptable (governmental) responses are to interfere, lessen the interference, or do nothing. Please enumerate your policy response(s) and justify your actions by focusing on the intended results of your recommendations.

[HINTS: Use the language and metrics we have used in this class regarding market concentration, pricing power, normal vs. monopoly profits, collusive behavior, consumer surplus, threats of entry, HHI, and the structure-conduct-performance of the industry in recommending free and uninhibited mergers, the encouragement of upstarts, relaxed safety and regulatory burdens and/or the like. Also, remember that a generation ago, only the top 30% of earners were considered "flyers," willing and able to afford air travel, where now it is generally thought that only the bottom 30% of earners are ground-bound (meaning 70% are "flyers"). The profitability of air carriers and bankruptcy protection some are being given might also be germane to your discussion.

Express each of the following symbols: in terms of the random variables T, and Ty, and as an integral. (i) Axy (iii) A2 Two lives, each aged x, are subject to the same mortality table. According to this mortality table, and at a certain rate of interest, Ax = 0.4 and Axx =0.6. Calculate the value of Ax based on this mortality table and interest rate. Given that: 1 for Ox