The firms focus on improving marginal returns. Apart from this, they focus on specialization which increases the output. The amount of labor the firm plans to hire depends on the level of output it requires. The firm keeps adding new workers until output reaches its crest or peak.
Answer:
a) If bribes cost $1,000 each, how much will a housing inspector make each year in bribes?
So, if the corrupt inspector approves two newly built structures each week, ti means that he is bribed twice per week. There are 52 weeks in a year, so he gets a total of 104 bribes (52 x 2). If each bribe costs $1,000, then he makes a total of: $1,000 x 104 = $104,000 in bribes per year.
c) Corrupt officials may have an incentive to reduce the provision of government services to help line their own pockets.
This statement is true. Corrupt officials will want to have private companies they can obtain bribes from provide government services. It increases the probability of them making money from bribes.
d) What if reducing the number of inspectors from 20 to 10 only increased the equilibrium bribe from $1,000 to $1,500?
Reducing the number of inspectors in hafl means that each inspector now gets twice the bribes. Because the equilibrium price did not double as did the quantity of bribes, each inspector will make less money than expected, but they will still the incentive to collect all the four bribes per week.
Answer:
The correct answer for option (a) is 7.17% and for option (b) is $48,546.69.
Explanation:
According to the scenario, the given data are as follows:
(a) Present value = $3,000
Future value = $6,000
Time period = 10 years
So, we can calculate the annual rate of return by using following formula:
Rate of return = (( FV ÷ PV)^1/t -1)
= (( $6,000 ÷ $3,000)^1/10 -1)
= (2)^0.1 - 1
= 1.07177346254 - 1
= .07177 or 7.17%
(b) Present value = $12,000
Rate of interest (r) = 15%
Time period = 10 year
So, we can calculate the Future value by using following formula:
FV = PV × ( 1+r)^t
= $12,000 × ( 1 + 15%)^10
= $12,000 × 4.04555773571
= $48,546.69
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