Question: Discuss the resource limitations that affect a.

> Country A has a cold climate with a short growing season, but a highly skilled labor force (think of Finland). What sorts of products do you think it is likely to produce? What are the characteristics of the countries with which you would expect it to tr

> Given the current state of the economy, what sort of fiscal-monetary policy mix seems most appropriate to you now?

> Newspaper reports frequently suggest that the administration (regardless of who is president) wants the Fed to lower interest rates. In view of your answer to Test Yourself Question 3, why do you think that might be the case?

> In December 2008, the Fed reduced the federal funds rate to approximately zero. What should it have done then? Why? What did it actually do?

> Given the behavior of velocity shown in Figure 1, would it make more sense for the Federal Reserve to formulate targets for M1 or M2?

> What factors do you think bankers normally use to distinguish “prime” borrowers from “subprime” borrowers?

> Since 2017, the federal government’s budget deficit has been rising because of tax cuts and increased spending. If the Federal Reserve wanted to maintain the same level of aggregate demand in the face of large increases in the budget deficit, what should

> What are some reasons behind the worldwide trend toward greater central bank independence? Are there arguments on the other side?

> Average hourly earnings in the U.S. economy during several past years were as follows: Use the CPI numbers provided on the inside back cover of this book to calculate the real wage (in 1982–1984 dollars) for each of these years. Which d

> Each year during the Christmas shopping season, consumers and stores increase their holdings of cash. Explain how this development could lead to a multiple contraction of the money supply. (As a matter of fact, the authorities prevent this contraction fr

> Which of the proposed supply-side tax cuts appeals to you most? Draw up a list of arguments for and against enacting such a cut right now.

> If the government decides that aggregate demand is excessive and is causing inflation, what options are open to it? What if the government decides that aggregate demand is too weak instead?

> Explain in words why rising prices reduce the multiplier effect of an autonomous increase in aggregate demand.

> Explain why a decrease in the price of foreign oil shifts the aggregate supply curve outward to the right. What are the consequences of such a shift?

> Try to remember where you last spent a dollar. Explain how this dollar will lead to a multiplier chain of increased income and spending. (Who received the dollar? What will he or she do with it?)

> Does the economy this year seem to have an inflationary gap or a recessionary gap?

> Look back at the income-expenditure diagram in Figure 3 and explain why some level of real GDP other than $6,000 (say, $5,000 or $7,000) is not an equilibrium on the demand side of the economy. Do not give a mechanical answer to this question. Explain th

> What is a consumption function, and why is it a useful device for government economists planning a tax cut?

> What would the circular flow diagram (Figure 1) look like in an economy with no government? Draw one for yourself.

> Use the following data to compute the College Price Index for 2017 using the base 1987 = 100.

> Explain the logic behind the finding that variable imports reduce the numerical value of the multiplier?

> Explain the basic logic behind the multiplier in words. Why does it require b, the marginal propensity to consume, to be between 0 and 1?

> What would happen to the multiplier analysis if b = 0? If b = 1?

> Explain the difference between government spending and government purchases of goods and services (G). Which is larger?

> Explain the difference between final goods and intermediate goods. Why is it sometimes difficult to apply this distinction in practice? In this regard, why is the concept of value added useful?

> Discuss the pros and cons of having a higher or lower multiplier.

> What is meant by a “factor of production”? Have you ever sold any on a market?

> Explain why a government policy maker cannot afford to ignore economic theory.

> Relate the process of abstraction to the way you take notes in a lecture. Why do you not try to transcribe every word uttered by the lecturer? Why don’t you write down just the title of the lecture and stop there? How do you decide, roughly speaking, on

> Think about a way you would construct a model of how your college is governed. Which officers and administrators would you include and exclude from your model if the objective were one of the following: a. To explain how decisions on financial aid are ma

> Fill in the blanks in the following table of GDP statistics:

> Why is it so difficult to define full employment? What unemployment rate should the government be shooting for today?

> “Unemployment is no longer a social problem because unemployed workers receive unemployment benefits and other benefits that make up for most of their lost wages.” Comment.

> Why is it not as terrible to become unemployed nowadays as it was during the Great Depression?

> Give some reasons why gross domestic product is not a suitable measure of the well-being of the nation. (Have you noticed newspaper accounts in which journalists seem to use GDP for this purpose?)

> Try asking a friend who has not studied economics in which year he or she thinks prices were higher: 1870 or 1900? 1920 or 1940? (In both cases, prices were higher in the earlier year.) Most people think that prices have always risen. Why do you think th

> You probably use “aggregates” frequently in everyday discussions. Try to think of some examples. (Here is one: Have you ever said, “The students at this college generally think . . .”? What, precisely, did you mean?)

> From 2000 to 2010 in the United States, the number of working men fell by 0.6 percent, while the number of working women grew by almost 4 percent. During this time, average wages for men grew by roughly 3 percent, whereas average wages for women grew by

> In 1981, when regulations were holding the price of natural gas below its free-market level, then-Congressman Jack Kemp of New York said the following in an interview with The New York Times: “We need to decontrol natural gas, and get production of natur

> Show in diagrams that if a speculator were to buy when price is high and sell when price is low, he would increase price fluctuations. Why would it be in his best interest not to do so? (Hint: Draw two supply-demand diagrams, one for the high-price perio

> The same rightward shift of the demand curve may produce a very small or a very large increase in quantity, depending on the slope of the supply curve. Explain this conclusion with diagrams.

> Consider an economy described by the following set of equations: Find the equilibrium level of GDP. Next, find the multipliers for government purchases and for fixed taxes. If full employment comes at Y = 1,800, what are some policies that would move GDP

> It is claimed in this chapter that either price floors or price ceilings reduce the actual quantity exchanged in a market. Use a diagram or diagrams to test this conclusion, and explain the common sense behind it.

> U.S. government price supports for milk led to an unceasing surplus of milk. In an effort to reduce the surplus about a decade ago, Congress offered to pay dairy farmers to slaughter cows. Use two diagrams, one for the milk market and one for the meat ma

> Discuss the likely effects of the following: a. Rent ceilings on the market for apartments b. A price floor in the market for wheat Use supply-demand diagrams to show what may happen in each case.

> How often do you rent videos? Would you do so more often if a rental cost half as much? Distinguish between your demand curve for home videos and your “quantity demanded” at the current price.

> Raising chickens requires several types of feed, such as corn and soy meal. Consider a farm in the former Soviet Union. Try to describe how decisions on the number of chickens to be raised, and the amount of each feed to use in raising them, were made un

> If you were to leave college, what things would change in your life? What, then, is the opportunity cost of your education?

> If you were president of your college, what would you change if your budget were cut by 10 percent? By 25 percent? By 50 percent?

> Why do you think per capita income in Maryland is nearly double that in Mississippi?

> What is the role of government in a mixed economy?

> You are given the following information about an economy: a. Find equilibrium GDP and the budget deficit. b. Suppose the government, unhappy with the budget deficit, decides to cut government spending by precisely the amount of the deficit you just found

> The following table presents the demand and supply curves for laptop computers in Japan and the United States. NOTE: Quantity is in thousands. a. Draw the demand and supply curves for the United States on one diagram and those for Japan on another one. b

> Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend $375,000 on prototype inspection, $75,000 on vendor certification, and $50,000 on process acceptance. Assume sales

> Kanumba Company implemented a quality improvement program and tracked the following for the five years: By cost category as a percentage of sales for the same period of time: Required: 1. Prepare a bar graph that reveals the trend in quality cost as a pe

> Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation

> Evans Company had total sales of $3,000,000 for fiscal 20x5. The costs of quality-related activities are given below. Returns/allowances $150,000 Design changes 180,000 Prototype inspection 39,000 Downtime 120,000 Quality circles 6,000 Packaging inspecti

> Harmon Community Hospital developed the following series of if-then statements for its Balanced Scorecard strategy: • If employee turnover rate decreases and employee satisfaction increases, then the quality of health care service will improve. • If the

> Fontane, Inc., has provided the following information for one of its products for each hour of production: Actual velocity: 400 units (per hour) Move time: 25 minutes Inspection time: 5 minutes Rework time: 10 minutes Required: 1. Calculate MCE. Comme

> Bemidii Company has the following data for one of its production departments: Theoretical velocity: 400 units per hour Productive minutes available per year: 5,000,000 Annual conversion costs: $120,000,000 Actual velocity: 240 units per hour Required:

> Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activit

> Wade Paving Company has a sealcoating activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: • Five truck-mounted sealing units, with a lease cost of $15,000 per year per unit • Ten sea

> Gordon Company produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value added standard (SQ) for this activity is zero. On July 1, at the beginning

> Callie’s Gym is a complete fitness center. Owner Callie Ducain employs various fitness trainers who are expected to staff the front desk and to teach fitness classes. While on the front desk, trainers answer the phone, handle walk-ins and show them aroun

> Assume that at the beginning of 20x2, Cicleta trained the assembly workers in a new approach that had the objective of increasing the efficiency of the assembly process. Cicleta also began moving toward a JIT purchasing and manufacturing system. When JIT

> Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activi

> Hepworth Company has implemented a JIT system and is considering the use of backf lush costing. Hepworth had the following transactions for the current fiscal year: 1. Purchased raw materials on account for $600,000. 2. Placed all materials received into

> Kagle design engineers are in the process of developing a new “green” product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two desig

> Deeds Company sells custom-made machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent

> Tulsa Company is a car brake repair and replacement company operating in the after-sales market. Tulsa’s purchasing manager uses two suppliers (Stridulo and Fallimento) for the source of its passenger car brakes. Data relating to brake

> Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity

> Alejandro’s Moab Grill features authentic Mexican dishes delivered in a relaxing Western motif. Given the short summer tourist season, Alejandro (the owner) decided to identify his top risk. Alejandro is most concerned that his restaura

> Refer to Brief Exercise 10-4. Required: 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that

> Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division i

> Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The

> Ignacio, Inc., had after-tax operating income last year of $1,196,500. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 million in

> Refer to Brief Exercise 10-1. Forchen, Inc., requires an 8 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum r

> Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. ROI 2. For the Cleaning Products Division, calculate

> Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas. Mangia put a batch of 2,000 pounds of direct materia

> Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,000 Standard direct labor hours per unit 0.20 Standard fixed overhead rate (per direct labor hour) $2.50 Budgeted fixed o

> Refer to Brief Exercise 9-6. Required: 1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to th

> Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,000 Standard direct labor hours per unit 0.20 Standard variable overhead rate (per direct labor hour) $3.40 Actual variab

> Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end: Unadjusted Cost of Goods Sold equals $1,500,000, unadjusted Work in Process equals $236,000, and unadjusted Finished Goods equals $180,000. R

> Kavallia Company set a standard cost for one item at $328,000; allowable deviation is ± $14,500. Actual costs for the past six months are as follows: June $330,500 July 343,000 August 346,800 September $314,000 October 332,000 November 323,000 Required:

> Guillermo’s Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of direct labor hours worked: 386 hours Actual rate paid per direct

> Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The

> Guillermo’s Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of quarts of oil used: 6,020 quarts Actual price paid per quart of o

> Refer to Brief Exercise 9-9. Required: 1. Calculate the yield ratio based on the standard amounts given. 2. Calculate the standard cost per pound of the yield (rounded to the nearest cent). 3. Calculate the standard yield for actual input of 2,000 pounds

> Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia uses two types of direct labor: machine operators and packers. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-siz

> Guillermo’s Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 24 minutes and 6.2 quarts of oil are used. In June, Guillermo’

> Green Earth Landscaping Company provides monthly and weekly landscaping and maintenance services to residential customers in the tri-city area. Green Earth has no variable administrative expense. Fixed administrative expenses for June, July, and August i

> The external auditors for Heart Health Procedures (HHP) are currently performing the annual audit of HHP’s financial statements. As part of the audit, the external auditors have prepared a representation letter to be signed by HHP’s chief executive offic

> Emery Manufacturing Company produces component parts for the farm equipment industry and has recently undergone a major computer system conversion. Samson Achebe, the controller, has established a troubleshooting team to alleviate accounting problems tha

> Silverado, Inc., is a closely held brokerage firm that has been very successful over the past five years, consistently providing most members of the top management group with 50 percent bonuses. In addition, both the chief financial officer and the chief

> Emily Henson, controller of an oil exploration division, has just been approached by Tim Wilson, the divisional manager. Tim told Emily that the projected quarterly profits were unacceptable and that expenses need to be reduced. He suggested that a clean

> John Rodriguez and Patty Jorgenson are both cost accounting managers for a manufacturing division. During lunch yesterday, Patty told John that she was planning on quitting her job in three months because she had accepted a position as controller of a sm

> Jade Shultz is a junior majoring in hotel and restaurant management. She wants to work for a large hotel chain with the goal of eventually managing a hotel. She is considering the possibility of taking a course in either financial accounting or cost mana

> Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone a

> The U.S. division of MegaBig, Inc., has excess capacity. MegaBig’s European division, located in Lisbon, has offered to buy a component that would increase the U.S. division’s utilization of capacity from 70 to 80 percent. The component has an outside ma

> The following are the exchange rates of various currencies for $1 on July 1 and on October 1. Required: 1. Indicate whether the dollar has strengthened or weakened against the euro, the Canadian dollar, and the yen. 2. A U.S. company purchases merchandis