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ZanzabumX [31]
3 years ago
7

Imagine that the U.S. Congress, recognizing the importance of being well dressed, started giveing preferential tax treatment to

"clothing insurance." Under this new type of insurance, you would pay the insurance company an annual premium, the insurance company would than pay for 80 percent of your clothing expenses (you pay the remaining 20 percent), and the tax laws would partly subsidize your insurance premiums.
a. How would the existence of such insurance affect the amount of clothing that people buy? How would you evaluate this change in behavior from the standpoint of economic efficiency?
b. Who would choose to buy clothing insurance?
c. Suppose that the average person now spends $2,000 a year on clothes. Would clothing insurance cost more or less than $2,000? Explain.
d. In your view, is this congressional action a good idea? How would you compare this idea with the current tax treatment of health insurance?
Business
1 answer:
andrezito [222]3 years ago
7 0

Answer:

Part a.

If the Congress of country U to clothing insurance gives a preferential tax treatment, and the insurance company agrees to pay 80% of the clothing expenses and the tax subsidizes the insurance premium, it will result in increase in the consumption of clothes, because people will buy clothes as if they were free.

With this change in behavior there will be decline in economic efficiency because purchasing of formal and expensive clothing is not done on a regular basis, with clothing insurance people will buy less costly daily wear clothes at subsidized rates or for free and the price of clothes will decrease.

Part b.

People who can pay for the 20% remaining cost of clothes will buy insurance clothing and those who can pay the premium. Moreover, the rich will over consume than the poor because they are the ones who will give more importance to good clothing.

Part c.

If a person spends $2000 on clothing the clothing, insurance cost will be more than $2000 because higher the probability of claim higher will be the premium charged by the insurance company.

Part d.  

This is not a good idea by the Congress of country U because good clothing is something every person would like to have. Like in health insurance, people should be insured for big life threatening health issues and for minor health issues people should pay out of their pockets, because people take health insurance benefits for minor health issues since health is more or less free in the COUNTRY U. The high premium costs and high prices are completely ignored.

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Material is a scarce resource. The product uses four pounds of material. How much would the company be willing to pay for one mo
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The amount that the company is willing to pay is $12.50.

<h3>What is CM per pounds?</h3>

CM per pounds means the Contribution margin per pounds that we will calculate below.

Particulars                     Amount

Selling price                   $125  

Less: Variable cost

Material                           $40  

Labor                   $22.5  

Variable cost                  <u>$12.5</u>  

CM per unit                     $50  

Divide: Pounds used       <u>$4</u>  

CM per pound          <u>$12.5</u>

In conclusion, the amount that the company is willing to pay is $12.50.

Read more about Contribution margin

<em>brainly.com/question/15684424</em>

7 0
3 years ago
A company estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter ov
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Answer:

The correct answer is A.

Explanation:

Giving the following information:

A company estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year.

They have, and desire, a 25% ending inventory of finished goods.

Production required for the third quarter:

Sales= 200,000 + 40,000= 240,000

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Beginning inventory= (240,000*0.25)= (60,000)

Total= 245,000

7 0
3 years ago
The attitude adopted by Calvin Coolidge that government should play a small role in business affairs is known as what?
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Answer:

3) laissez-faire

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Laissez-faire is a French expression that means to let us do, or applied to economics, let the economy self regulate itself. It was not a doctrine developed by Adam Smith, but rather by French economists who supported the idea of no government intervention in the economy.

President Coolidge believed that the government should not interfere with businesses and that businesses themselves were able to create prosperity for the nation.

3 0
3 years ago
A year​ ago, the Really Big Growth Fund was being quoted at an NAV of ​$22.28 and an offer price of ​$23.45. ​Today, it's being
Crank

Answer:

9.85%

Explanation:

Data provided in the question:

Initial Offer price = ​$23.45

Current NAV = ​$22.28

Dividends and capital gains distributions over the year  = $1.09 per​ share

Now,

Holding period return

= [Current NAV + Dividends and capital gains distributions - Initial Offer price ] ÷ Initial Offer price

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or

= 0.0985 × 100%

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4 0
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