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# Financial or Public Economic Questions

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1. Consider an economy with two people, Henry and Catherine, who consume two commodities, bread and water. Suppose that, due to a drought, the authorities decide to allocate exactly half the available water to each person. In order to prevent one person from "exploiting" the other, neither person may trade away any water to the other for exchange for more bread. Set up an Edgeworth Box to depict this situation and explain why it is unlikely to be Pareto efficient.

2. Tarzan and Jane live alone in the jungle and have trained Cheetah both to patrol the perimeter of their clearing and to harvest tropical fruits. Cheetah can collect 3 pounds of fruit an hour and currently spends 6 hours patrolling, 8 hours picking, and 10 hours sleeping.
A). What are the public and private goods in this example?
B). If Tarzan and Jane are each currently willing to give up on hour of patrol for 2 pounds of fruit, is the current allocation of Cheetah's time Pareto efficient? Should he patrol more or less?

3. Rodolfo and Mimi share an apartment. The table below shows, for each temperature in the apartment, the marginal benefit (MB) to Rodolfo, the MB to Mimi, and the marginal cost (MC) of attaining that temperature:
Temp (degrees) MB to Rodolfo MB to Mimi MC
66 8 12 14
67 7 10 17
68 5 8 21
69 2 6 26
70 1 3 32

Explain why the apartment's temperature in this problem is a public good, and find the efficient temperature.

https://brainmass.com/physics/temperature/financial-or-public-economic-questions-112177

#### Solution Preview

1. Consider an economy with two people, Henry and Catherine, who consume two commodities, bread and water. Suppose that, due to a drought, the authorities decide to allocate exactly half the available water to each person. In order to prevent one person from "exploiting" the other, neither person may trade away any water to the other for exchange for more bread. Set up an Edgeworth Box to depict this situation and explain why it is unlikely to be Pareto efficient.

When the water is allocated equally between Henry and Catherine, there is only one allocation of bread between them that is Pareto optimal. It is unlikely that the bread would be allocated in such a way. When bread is not allocated in such a way, Henry and Catherine could each be made better off by trading water and bread with each other. Forcing them to have a particular water allocation (and thus a particular bread allocation) is not ...

#### Solution Summary

Pareto efficiency is evaluated.

\$2.19

## Financial management discussion questions

Discussion 1:

1. Dumping, while illegal, would offer products to consumers at very low prices. As a consumer, what is your opinion of this? Explain your reasoning.
2. Tariffs effectively raise the price of goods imported from different countries. How do you feel about this?
3. In your opinion, have U.S. companies effectively lobbied for antidumping regulations and tariffs just to gain a competitive advantage domestically? Has this been effective? Why or why not?

Discussion 2:

1. What process must a company take to raise capital? Are there different methods for different types of companies? What are the risks and benefits of each?
2. If taking a company public is such a good idea, why don't all companies choose to do so? What are the risks? What are the benefits?
3. What is the difference between an IPO and an SEO? Which would you choose to invest in and why?

Discussion 3:

1. Provide an example of a short-term financing strategy and a long-term financing strategy. In what financial scenario would each strategy be most applicable? Is one method preferable to the other? Explain your rationale.
2. Give two examples of credit policy affecting the cash conversion cycle. Is relying on credit as a form of capital management advisable? Why or why not?
3. Of the three types of loans available for corporations, under what scenarios would each be appropriate? why?

Discussion 4:

1. Explain the six different brand elements and how they apply to Coca Cola
2. Select an article and identify the issues and some of the ways that this dispute can be solved through conciliation, arbitration, and litigation.
3. What would your recommendations be?

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