Explain the following questions.
Other receipts for the couple were as follows: Dividends (all qualified dividends) $2.500 Interest income: Union Bank $ 220 State of Idaho-interest on tax refund 22 City of Boise school bonds 1.250 Interest from U.S. savings bonds 410 (not used for educational purposes) 2017 federal income tax refund received in 2018 2,007 2017 state income tax refund received in 2018 218 Idaho lottery winnings 1.100 Casino slot machine winnings 2,250 Gambling losses at casino 6.500 Other information that the Reyeses provided for the 2018 tax year. Mortgage interest on personal residence $11.081 Loan interest on fully equipped motor home 3.010 Doctor's fee for a face-lift for Mrs. Reyes 8.800 Dentist's fee for a new dental bridge for Mr. Reyes 3,500 Vitamins for the entire family 1 10 Real estate property taxes paid $ 5,025 DMV fees on motor home (tax portion) 1.044 DMV fees on family autos (tax portion) 436 Doctors' bills for grandmother 2,960 Nursing home for grandmother 10,200 Wheelchair for grandmother 1.030 Property taxes on boat 134 Interest on personal credit card 550 Interest on loan to buy public school district bonds 270 Cash contributions to church (all the contributions 6.100 were in cash and none more than $250 at any one time) Cash contribution to man at bottom of freeway off-ramp 25 Contribution of furniture to Goodwill-cost basis 4,000 Contribution of same furniture to listed above Goodwill-fair market value 410 Tax return preparation fee for 2017 taxes 625 Required Prepare a Form 1040 and appropriate schedules, Schedule A, and Schedule B for the comple- tion of the Reyes's tax return. They do not want to contribute to the presidential election cam- paign and do not want anyone to be a third-party designee. For any missing information, make reasonable assumptions. They had qualifying health coverage at all times during the year.Ill T-Mobile Wi-Fi 7:40 PM A Problems-Options 1. What is the difference between time value and intrinsic value? 2. What is the intrinsic value and time value of the following 3-month stock options? Assume the stock price is $45. 40 strike call option with a price of 7 45 strike call option with a price of 4 47 strike call option with a price of 2 40 strike put option with a price of 1 45 strike put option with a price of 3 47 strike put option with a price of 4 3. You own a stock currently at $50. You buy a 6-month put option with a 45 strike for a price of 4. You sell a 6-month call option with a 60 strike for a price of 3. Fill in the net profit table for the following stock prices at the end of 6 months. Stock price in 6 months Net value 65 60 55 50 45 40 4. You can buy or sell calls and puts. Which option has unlimited upside? Which option has unlimited downside? Which option has a limited upside? Which option has a limited downside? 5. You need to buy oil in 3 months. How can you create an option position using puts and calls to limit your exposure to a change in oil prices? 6 You need to call your Gosale clock in f manthe How can A X CProblem 2 (30 pts) Explain your answers! The market demand function for computer games is qD (p) = BOOSp and the market supply function is qs(p) = 4}). (a) Find the equations of (express price in terms of quantity) and plot the demand and supply curves corresponding to the given market demand and supply functions. Find the market equilibrium price and quantity p* and if". (b) Find the producer's surplus and consumer's surplus at the equilibrium. (c) What is the price elasticity of demand at the equilibrium point? ((1) Derive the equation of the marginal revenue curve and compute the marginal revenue at the equilibrium point in (a). (e) Given the demand function, at what price would total revenue be maximized? (f) Suppose a quantity tax of $5 per game is imposed on the computer game suppliers. What is the new equilibrium price paid by the consumers? What is the new equilibrium price received by producers? How much is the tax revenue? How much is the deadweight loss of the tax? Use a graph to explain your answers. Problem 3 (15 pts) Explain your answers! Suppose the production function of a rm is given by f (K ,L) = SK 1/4111\Perfect Competition 1. ATG! a. How do you determine the level of output that maximizes profit (or minimizes losses)? b. How much will output be in the short run if the price is $16? $13? $11 $10 c. If the price is below $11, what will the firm do in the short run? in the long run? d. If the price is between $11 and $13, what will the firm do in the short run? in the long run? c. If the price is above $13, what will the firm do in the short run? in the long f. Where is the break even point for the firm? Explain.4. (30 points) Consider the following game. There are ten dollars to divide. Two players are each required to simultaneously name an integer between 0 and 10. The player who names the higher number gets to keep the money. If they name the same number, the money is equally shared between them. (a) Describe the set of players N, the set of strategies { Silien, and the payoff function QuitiEN. (b) Are there strategies that are strictly dominated? Demonstrate your reasoning. What are the resulting strategies after iterated elimination of strictly dominated strategies? (c) Find the best responses (correspondence) for each player. That is, find the strategies that maximize a player's payoff given what the other player does. (d) Find the Nash equilibria of the game. (e) Suppose now the game is changed. Whenever there is a tie, each player receives nothing. Answer the same questions in parts (b) and (c). Find the pure-strategy Nash equilibria of the game
