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denpristay [2]
3 years ago
8

A consumer values a house at $525,000 and a producer values the same house at $485,000. If the transaction is completed at $510,

000, what amount of tax will result in unconsummated transaction? a. A tax of $14,000 b. A tax of $15,000 c. A tax of $9,000 d. A tax of $18,000
Business
1 answer:
REY [17]3 years ago
6 0

Answer:

d. A tax of $18,000

Explanation:

If the price is higher than $525,000 which is his reservation price, the buyer will not buy the good

(1+t) > $525,000 / $510,000

1+t > 1.03

t > 0.03

t > 3%

3% of $510,000 = $15,300. So if the tax is greater than $15,300, the buyer will not buy the good . Hence, the answer is option (D) A tax of $18,000 as this tax is higher than $15,300 while other option are less than $15,300

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2 years ago
How can a country gain from specialization and​ trade? A. A country can specialize in producing that for which it has an absolut
strojnjashka [21]

Answer:

C. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

Explanation:

<em>Comparative advantage</em> is simply evaluating the opportunity cost of other benefits or costs, if the country is opting to choose for a specific category of goods for production purposes.

For example, let's say US can produce 20 Television (TV) sets and 50 Air Conditioners in a month. Here, the opportunity cost of producing 1 TV set is 50/20 i.e. 2.5 Air Conditioners. Similarly, the opportunity cost of producing 1 Air Conditioner (AC) is 20/50 i.e. 0.4 TV set. Hence, US should produce Air Conditioners over TV sets as per <em>Comparative Advantage</em> concept.

Take another example, let's say UK can produce 50 Television (TV) sets and 20 Air Conditioners in a month. Hence, the opportunity cost of producing 1 TV set is 20/50 i.e. 0.4 Air Conditioner. On the other hand, the opportunity cost of producing 1 AC is 50/20 i.e. 2.5 TV sets. Thus, UK should produce TV sets over AC's as per <em>Comparative Advantage </em>model.

Hence, US should export AC's to UK and import TV sets from UK to gain from specialization and trade.

<em> In this way nations can gain from specialization and trade by making use of Comparative Advantage theory</em>.

It is to be noted that <em>Absolute Advantage model </em>of Adam Smith is also good as it highlights production of that good by a country, which it can produce in large quantities with fewer resources and minimal time than any other nation in the world. But the <em>Comparative Advantage Model </em>developed by David Ricardo considers opportunity cost and is much more refined than Absolute Advantage Model.

<em></em>

6 0
3 years ago
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A complementary good is the one which can be used only with another good. For example a CD can only run in a CD player or any other suitable device so the sales of CD is dependent upon the availability of device used to pay it. Other examples are tennis ball and tennis racket, mobile phone and sim cards, and others.

According to the given situation the decrease in price of tomato will be an advantage to the consumers as they will be able to purchase them with an affordable price and can produce tomato sauce this will promote the production of spaghetti noodles as tomato sauce is consumed along with spaghetti noodles this way the tomato sauce and spaghetti noodles are complementary goods for each other. The sales and production of one good will affect the sales and production of another.

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