ECO359H5 Study Guide - Midterm Guide: Net Present Value, Transaction Cost, Risk Neutral

96 views7 pages

violetwoodchuck983

10 May 2011

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

You must show all your work in order to receive full credit. If you need scratch paper, please raise your hand and someone will bring it to you. All writing instruments must be down when time has been called. Please remain seated until the test papers have been collected and counted. If you finish the test with less than 10 minutes before the end of the test, please remain seated with your exam until time is up. Be sure to print and sign your name on the sign-in sheet before you leave the test room. Please do not turn this sheet over to look through the. Exam until everyone has an exam in front of them and. Decide whether the statement is true, false or uncertain and explain the arguments for your answer. Answers without an explanation will not receive credit. If the answer you give is based on any assumptions, be sure to state them clearly.

Related Questions

- âAnalyzing Managerial Decisions: Setting Tuition and Financial Aidâ

The Board of Ursinus College in Pennsylvania raised its tuition and fees 17.6 percent to $23,460 in 2000. It subsequently received 200 more applications than the year before. The president of the college surmised that âapplicants had apparently concluded that if the college cost more, it must be better.â Other colleges that raised tuition to match rival colleges in recent years include University of Notre Dame, Bryn Mawr College, Rice University, and the University of Richmond. They also experienced an increase in applications. In contrast, North Carolina Wesleyan College lowered their tuition and fees about 10 years ago by 22 percent and attracted fewer students. The college president concluded that âit didnât work out the way it had been hoped. People donât want cheap.â You are hired as a consultant to a President of a liberal arts college in the East. You are asked to evaluate a recommendation by the collegeâs Admissions Director, Susan Hansen, to increase tuition and to reduce financial aid to students. Susan argues that the data from competing colleges suggest that the demand curves for colleges slope upwardâthe quantity demanded increases with price. Susan projects that the increase in tuition and reduction in financial aid will solve the schoolâs financial problems. Last year, the college enrolled 400 new students who each paid an effective tuition of $15,000 (after financial aid), totaling $6,000,000. She projects that with the increased demand from charging an effective tuition of $25,000, the college will be able to enroll 600 new students (of equal or better quality), totaling $15,000,000.

Question 1. Evaluate Susanâs analysis and recommendation

Smith Jr., Clifford W.; Jerold Zimmerman; James Brickley. Managerial Economics & Organizational Architecture (Irwin Economics) ). McGraw-Hill Higher Education. Kindle Edition.

1.(Please Note: There may be more than one correct answer)

If Peggy says to Larry, "I'll give you $50 if you stand on your head for one hour":

	a.	Larry must verbalize his assent in order to render effective acceptance.
	b.	The statement can form the basis for a unilateral contract.
	c.	Larry must stand on his head to accept Peggy's offer.
	d.	Peggy and Larry have created a contigent cont

2. An acceptance is effective as soon as it is dispatched if the offeree uses:

	a.	any reasonable means of communication.
	b.	only a stipulated means of communication.
	c.	only an authorized means of communication.
	d.	an authorized as well as the stipulated means of communication.

3.Under the UCC, an order requesting "prompt" shipment of goods:

	a.	impliedly invites acceptance only by a prompt promise to ship.
	b.	invites acceptance by either a prompt promise to ship or by prompt shipment of goods.
	c.	requires acceptance via writing within a "reasonable" time frame.
	d.	impliedly invites acceptance only by a prompt shipment of goods.

4. (Please Note: There may be more than one correct answer)

On February 21, 2012, Stateville College President Erhlich sent a letter to Lt Governor Alfred E. Neuman asking Neuman to speak at theStateville College commencement on the topic "Do Brains and Politics Mix?" On February 24, Neuman responded in a fax, "I'll speak if you will pay a $50,000 speaking fee." On February 25, President Erhlich heard Neuman say something unintelligent on the morning news program and sent an email to Neuman which said "I revoke my offer for you to speak at commencement." Ten minutes later, Neumanchecked his email on his smartphone, and five minutes after that Neuman called Erhlich and said, "I've changed my mind. I accept your offer and I'll be glad to speak for free." Which of the following is a correct statement of the law?

	a.	Neuman's fax was a counter-offer which terminated Ehrlich's offer.
	b.	If Neuman's February 24 fax can be viewed as an inquiry rather than a counter-offer, and Ehrlich had received Neuman's call before Neuman received Ehrlich's email, Ehrlich would have been bound to a contract with Neuman despite his attempt to revoke because his revocation would only have been efffective when received by Neuman.
	c.	Under these circumstances, Ehrlich had no right to revoke his offer at any time before receiving Neuman's call.
	d.	Even if Neuman had phoned to accept before reading Erhlich's email, no contract would have formed because the February 25 email was not effective to revoke the offer made on February 21.