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olga nikolaevna [1]
3 years ago
13

Consumers know that some fraction x of all new cars produced and sold in the market are defective. The defective ones cannot be

identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $10,000 each. New cars sell for $8,000 and used ones for $2,000. (Note that since buyers are risk-neutral, the price of a new car reflects the expected value of purchasing a car that may or may not be defective.) What is the fraction x?
Business
1 answer:
frez [133]3 years ago
3 0

Answer:

x=0.25

Explanation:

Assuming that consumers value every non-defective car at $10,000 each, only defective used cars are for sale. Therefore, consumers value defective cars at $2,000.

The expected value of a new car is given by the defective new car rate (x) multiplied the defective value, added to the non-defective car rate (1-x) multiplied by the non-defective car value.

EV = 8,000= 2,000x + 10,000(1-x)\\x=\frac{2,000}{8,0000}\\ x=0.25

The fraction x is 0.25. That is, 25% of new cars sold are defective.

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Answer: See explanation

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3 years ago
What organization issues management marketing and technical publications
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SBA organization issues management marketing and technical publications.

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6 0
2 years ago
Sprockets Corporation is thinking about replacing a piece of manufacturing equipment with a remaining useful life of six years a
Sindrei [870]

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Decrease its total net income by $18,000.

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3 years ago
Should Japanese companies such as Nintendo and Toyota with business in Mexico have hedged against adverse changes in the peso/ye
svetoff [14.1K]

<u>Solution and Explanation:</u>

These companies with the businesses in Mexico are not affected due to the adverse exchange rates and have nullified it, because they have their operations in the neighboring nations such as Canada and USA. Here, These companies do not use Yen as a currency for the exchange and since Mexico has NAFTA agreement with the USA and Canada, then these companies take the benefits of the duty free trade. Hence, a superior quality, scale of production and savings in duty and tariff, will make them get better off and nullify the impact of the exchange rate.

So, these companies have done it with the help of use of local currency and the US dollar as exchange currencies, and benefit of free trade with the member nations of NAFTA. These companies can also export the goods to those nations such as Brazil, Argentina to cater the demand in these nations. Here also, Yen will not be used.

8 0
3 years ago
The following account appears in the ledger prior to recognizing the jobs completed in January:
deff fn [24]

Answer:

Following are the solution to this question:

Explanation:

In point a:

Journal Entry :

Account                                      Dr                            Cr.

Goods completed              \$358,680

Processing work                                                 \$358,680

Complete total labour costs

= \$70,950 + \$82,770 + \$ 43,360 + \$ 161,600 \\\\ = \$ 358680

In point b:

Uncompleted jobs cost:

\text{Balance, January 1} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \   \$17,510\\\\\text{Direct materials} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \   \$142,360\\\\ \text{Direct labor } \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \             \$153,560\\\\\text{Factory overhead } \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \  \$80,720\\\\\text{Cost of Finished Goods Transferred} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ (\$  358680)\\\\\text{Cost of Unfinished Jobs on Aug 31} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \$ 35470\\\\

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3 years ago
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