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Personal Finance & Savings

Summarize the provisions of HSAs.

The Medicare Modernization Act of 2004 included a provision authorizing the establishment of health savings accounts or HSAs. Such accounts have been proposed in the past, both in this country as medical savings accounts (MSAs) and in other countries, as one mechanism to extend health insurance to those without it and to provide

Some of our individual needs for health care services later in life are determined by choices we ourselves make earlier in life regarding our individual lifestyle. If you believe you will be covered by insurance or other third party payers later in life, how might this influence your individual behavior while young, and hence total demand for health care services for older people?

Some of our individual needs for health care services later in life are determined by choices we ourselves make earlier in life regarding our individual lifestyle. If you believe you will be covered by insurance or other third party payers later in life, how might this influence your individual behavior while young, and hence to

Find total benefit.

Suppose a firm is considering two different activities, activities X and Y, which yield the following schedule of total benefits shown below. The price of X is $2 per unit and the price of Y is $10 per unit. Total benefit of Total benefit of Level of Activity

Taste-for-Discrimination vs Statistical Discrimination

Males under the age of 25 must pay far higher auto insurance premiums than females in this age group. How does this fact relate to statistical discrimination? Statistical discrimination implies that discrimination can persist indefinitely, while the taste-for-discrimination model suggests that competition might reduce discrimina

Maximum Utilitarian Welfare in an Exchange Economy

Consider the problem of a social planner who wants to maximize utilitarian welfare in an exchange economy with two people. His objective is thus maxu1 + u2 ,where u1 and u2 are the utilities of the two individuals. Both have the same utility overconsumption c, so ui = u(ci ) = ln ci , i=1,2 (ln stands for the natural logarithm)

Health insurance and the rise of managed care are investigated.

In 1986, the US federal income tax system changed marginal tax rates so that the top marginal rate fell from 50 to 33 percent. Given the way that fringe benefits are negotiated, what would you expect to happen to the demand for health insurance as a fringe benefit? Why? Suppose, as a worker, your health insurance currently al

Calculation of the Multiplier Effect

What would be the effect of a cut in taxes of $200 billion if the marginal propensity to consume were .9? Why would this policy be different from simply having the government initiate a $200 billion spending program (assuming the income multiplier is 10)? Support your answer with hypothetical calculations.

The poverty rate and the effects of in-kind transfers.

The poverty rate would be substantially lower if the market value of in-kind transfers were added family income. The largest in-kind transfer is Medicaid, the government health program for the poor. Let's say the program costs $7,000 per recipient family. a. If the government gave each recipient family a $7,000 check instead of

External Social Cost: Should the Government Tax Donuts?

Given the nation's problems with obesity and the associated use of health care resources, is it appropriate for the government to use taxes and/or subsidies to encourage healthier diets? For example, there might be a tax on donuts, or subsidies on fresh vegetables. Explain.

The ATR as a percentage of economic profit

A corporation has $7 million in equity. During the tax year it takes in $4 million in receipts and earns $2 million in capital gains from the sale of a subsidiary. It incurs labor costs of $250,000, material costs of $500,000, and pays rent for structures of $250,000. Calculate the corporation's total accounting profit and, assu

Rationalize Lump-Sum Taxes

Explain why lump-sum taxes will not cause any losses in efficiency. Are lump-sum taxes feasible? Lump-sum taxes do not result in substitution effects, but they do affect prices. Is this a contradiction?

Most Effective Financial Management Practices

Discuss which financial management practices are most effective in creating and monitoring an operational budget and discuss which financial management practices are the least effective in creating and monitoring an operational budget.

Five case studies in optimization theory

Using optimization theory, analyze the following quotations: a. The optimal number of traffic deaths in the United States is zero. b. Any pollution is too much pollution. c. We cannot pull U.S. troops out of Iraq. We have committed so much already. d. If Congress cuts out the NASA space station, we will have wasted all th

Optimal capital structure to minimize cost of capital

ROE Starsburg electronics has never used debt, but the treasurer is considering a possible change in the capital structure. For now, assume that only two financing options are being considered for a firm that currently has $200,000 in total assets â?" remaining at zero percent debt (i.e. $200,000 equity) or shifting to $1

Capital Budgeting: proposed acquisition of a new spectrometer for the firm

Capital Budgeting You have been asked by the President of your company to evaluate the proposed acquisition of a new spectrometer for the firmâ??s R&D department. The equipmentâ??s base price is $75,000 and it would cost another $15,000 to install it. The spectrometer falls under 3-year MACRS schedule and will be sold aft

Consumer theory: Budget lines and indifference curves

See the attached diagram. A consumer is in equilibrium at point A. The price of good X is $5. a) What is the price of good Y? b) What is the consumer's income? c) At point A, how many units of good X does the consumer purchase?

Marginal analysis and fixed & variable costs

Consider the following costs of owning and operating a car. A $25,000 Ford Taurus financed over 60 months at 7 percent interest means a monthly payment of $495.03. Insurance costs $100 a month regardless of how much you drive. The car gets 20 miles per gallon and uses unleaded regular gasoline that costs $3.50 per gallon. Fi

Impact of tax on price of land

Suppose that the current market rate of interest is 10 percent. The market rent of a parcel of land is $6,000 per year. A 10 percent land tax is imposed. As a result of the tax, the price of the land parcel: a. falls from $60,000 to $30,000. b. increases from $30,000 to $60,000. c. falls 10 percent. d. falls 20 percent.

Short-Run/Long-Run Costs and Output Decisions

Name a business (for example, a restaurant, book store, home supply store, etc.) Make a list of some of its fixed costs, and a second list of some of its variable costs. Why it is so important to differentiate between fixed and variable costs?

Taxpayer's Marginal Tax Rate (MTR)

A worker lives in a state that has its own income tax. The worker is in the 31 percent federal tax bracket. In addition, he is subject to a 9 percent MTR for his state income tax. Assume that mortgage interest is deductible both on his federal and state income tax, and that state income taxes are deductible on the federal inc

Corporate profit, tax liability, and average tax rate (ATR)

This problem deals with calculating a corporations total accounting profit and calculating its tax liability using a tax rate table. Also, calculate the average tax rate (ATR) of the corporation. A complete version of the question and a copy of the tax table to be used can be found at the pdf file attached to this problem.

Calculate present worth, future worth and annual worth

Which of the four projects listed blow would you choose if you only want to invest in one project if the criteria is a) Present Worth, b) Future Worth or c) Annual Worth? All projects are for five years and the risk-free interest rate is 10%. Invest $14,000 today and receive $25,000 in five years. Invest $10,000 today, rece

case study

Global Insurance is a disability insurance company. Traditionally, it has organized its corporate headquarters around functional specialties. After an application for an insurance policy arrives at headquarters from a field agent, it is processed through a series of functional departments. One department checks to see if th

Finance: Capital budgeting explained

A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new pla

How the Congressional Budget Office DOESN'T Calculate GDP

Does the Congressional Budget Office calculate GDP by simply adding up the sales of all business firms in one year, in other words, do they add up all the transactions in an economy? Explain and justify your answer. Please provide examples to support your claim.

Compare insurance premiums. Predict which will be higher.

Life insurance companies require applicants to submit to a physical examination as proof of insurabiltiy prior to issuing standard life insurance policies. In contrast, credit card companies offer their customer a type of insurance called "credit life insurance" which pays off the credit card balance if the cardharolder dies. W

Substitution effect & income effect (with graphs)

Managers are very interested in how a consumer makes a choice among alternatives. In this exercise, we ask you to consider the amount of money you spend purchasing gasoline to operate your automobile for a month and any alternatives available to you assuming your net income available to make those purchases. Also assume gasoline