Monopoly output: MR=400-4q MC=40 MR=MC 400 – 4q = 40 then q=90 unit The reason that producing on half the monopoly output (90*1.5 = 135) a Nash equilibrium outcome is that it will exceed the market demand of Nash equilibrium ($160). 4. Problem #8, p. 221-222 in text. (HINT: First calculate the profits of a market with two firms, and then continue this process for 3, 4, and 5 firms.) a.
Relative to the perfectly competitive equilibrium, the equilibrium outcome for a market dominated by a monopsonist will be higher prices and lower levels of good demanded. c. Government intervention in perfectly competitive markets will lead producer surplus to increase at a cost to consumers surplus. d. Government intervention in perfectly competitive markets will make markets more efficient. e. When regulating a natural monopolist, the government will require the firm to charge prices equal to the perfectly competitive firms’ price. f. A Nash Equilibrium implies
The value to the separate transitions would be higher than a combined one. Being the value of the disk drive business diluted in the Veritas stock value, a separation based deal would trigger a valuation of the Veritas business close to its stock price value, plus a higher price for the disk drive business. Finally Silver Lake Partners’ aims to acquire the disk drive operations and probably are not interested in the Veritas stock, that is a very close exchange of money for stock. Transaction Winners and Losers: Main winners would be Seagate shareholders. Will avoid taxes on the Veritas stock swap and acquire a more liquid asset.
“Assess whether price discrimination is always undesirable” (25 marks) Price discrimination is the act of charging different consumers different prices for the same product, for reasons no associated with cost. First degree discrimination occurs when consumers pay the maximum price that they were willing and able to pay, second degree involves charging a different price for different quantities demanded and third degree occurs when charging different prices to different consumer groups. This statement suggests that price discrimination is always undesirable, however, although there are disadvantages to price discrimination, there are also some advantages that can be derived and therefore although price discrimination is undesirable to an extent, it is not always undesirable. A predominant reason why price discrimination is undesirable is because it can significantly reduce, or in extreme circumstances eliminate, consumer surplus, which in turn signifies a loss of welfare. This occurs with first degree price discrimination as consumers must pay the maximum that they were willing/able to pay, which may lower their real income.
I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
Although the bonds have the lowest cost of issuance among the choices, its Net Present Value (NPV) of $219 million is lower than the HUD 242. The Business Dictionary defines NPV as “the difference between the present value of the future cash flows from an investment and the amount of investment” (Business Dictionary, p. 1, 2012). The collateral requirement for the bonds is also much higher than the HUD 242. Because the collateral includes escrow on ECH’s gross receivables, ECH possibly may have less control over its future revenue stream. The simulator also took note of the four-year time frame of the expansion project versus the three-year spending limit on the bonds.
The case describes a transfer pricing issue that is common in decentralized, divisionalized firms. The case raises issues about internal pricing and, more generally, the operation of a decentralized management structure. Analysis 1: If we see the facts that came out in ensuing the discussion: [pic] It is obvious why ISD take Display tech as their supplier, a total cost difference of € 39,500. Thus, Heidelberg price would result in ISD negative gross margin. Even though if we look in terms of contribution margin, ISD will still get positive numbers if they took the display monitor from Heidelberg, but looking at the objective of having the X73 as the next best thing in a competitive market, longer term it would not be viable for ISD to continue having a negative gross margin.
The interpretation is based on the elasticity formula. The formula has the percentage change in quantity demanded in the numerator and the percentage change in price in the denominator. A coefficient of 1.5 indicates that
Cash Debt Coverage Ratio - Because it uses cash provided by operating activities, it may provide a better representation of liquidity. Calculate the ratio for Kellogg for 2007 and 2006 Is the coverage adequate? Probably so. Kellogg’s coverage is better than that of General Mills, and it approximates a commonly accepted threshold of .40. Receivables Turnover Ratio – Measures the number of times, on average, a company collects receivables during the period.
Is the use of a monthly average price a net advantage or disadvantage to J & L? Using NYMEX contracts will minimize the asset mismatch aspect of basic risk, along with a better liquidity. However, since diesel fuel is not a traded commodity, it cannot be directly hedged and J&L will suffer a certain amount of basis risk. J&L will also need to post a margin for their future contracts at NYMEX. Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX.