19-2 College Degrees Required for Police Officers
The requirements for all police officers to have a college degree serves as a screening qualification. This serves to deter other applications which do have the same qualification. Dropping the requirements so that to create a large pool of possible police offices maybe not the best option, and this means, police officers can be recruited easily and released easily. However, police recruitment agencies must avoid high turn-over as this cost of recruitment, the sensitivity of the position, and training does not allow them to keep on laying off the officer and recruiting new ones. As such, a college degree allows the police officers to have some significant investment in their qualifications, and therefore, non would wish to leave the job. The recruited officers will try their best to be retained and not invite sacking.
19-5 “Soft Selling” and Adverse Selection
Soft selling happens when one party is not sure of the product’s usefulness. Usually, the seller is confident that the product works, but the buyer does not. Due to buyer doubts, the buyer may be tempted that the seller lies about the usefulness of the product and thus may quote meager prices for the product. Instead of buying something that the buyer is not sure of, or the seller receiving very little for the product, the sellers allow the buyer pays a certain percentage if the product works. This proves to the buyer that the seller has all intentions to sell a working product as any seller who is selling a non-profitable product will not offer this deal. Don't use plagiarised sources.Get your custom essay just from $11/page
20-4 Auto Insurance
There is a 1% chance of accident each year
The accident cost = $ 10, 000
Therefore, the actual insurance price
= 10,000 X 1/100
=$ 100
However, an individual with 5,000 in bank want to pay $ 50
=1/100 X 5000
= $ 50
The individuals with 5,000 in the bank have fewer assets to insure as compared to individuals with 60,000, and that’s they are willing to pay less. They will not be willing to pay the actual fair price of $ 100
20-6 Frequent Flyers
Froed et al. (2018) Business travelers have less-elastic demand than leisure travelers because they have fewer alternatives due to time and geographic demands. The business travelers need to be close to conferences, seminars or were close to the venue they are visiting and do not want to waste their time traveling to and from the venue. For leisure travelers, they are more price-sensitive and want to feel the good value of their money, and thus, they are always looking for good packages to enhance their travel experience. Business travelers also do not pay for their won tickers. Since it is not easy to identify the leisure and business travelers for the airlines to implement price discrimination, the airlines identify the leisure travelers by their need to plan for vacations months in advance. For business transplants, their plans are often within a short period.
However, some business often takes note of the advantages the leisure travelers enjoy by making advance-ticket purchases and thus also try to take advantage of such discounts. This renders the price discrimination unprofitable.
21-3 Incentive Conflicts
The following are the principal-agent characteristics
- Managers generally have a shorter time horizon than owners; thus, managers do not fully take into account the future lengthy run profitability of the firm.
- Managers do not always operate in the best interest of owners because managers care about the noncash benefits of their jobs.
22-1: Transfer Pricing
The price table with the unit of boxes increase and earnings decrease
| Price | Quality | Revenue (Price X Quality) | MR (MRn– MRn-1) | MC | Profit (MR-MC+Pn-1 ) |
| 10 | 1 | 10 | 10 | 3.5 | 6.50 |
| 9 | 2 | 18 | 8 | 3.5 | 11.00 |
| 8 | 3 | 24 | 6 | 3.5 | 13.50 |
| 7 | 4 | 28 | 4 | 3.5 | 14.00 |
| 6 | 5 | 30 | 2 | 3.5 | 12.50 |
| 5 | 6 | 30 | 0 | 3.5 | 9.00 |
| 4 | 7 | 28 | -2 | 3.5 | 3.50 |
| 3 | 8 | 24 | -4 | 3.5 | -4.00 |
| 2 | 9 | 18 | -6 | 3.5 | -13.50 |
| 1 | 10 | 10 | -8 | 3.5 | -25.00 |
The upstream Paper at $7 will earn 14
Company-wide profits are
= (10 + 9 + 8 + 7) – 3.50 X 4
=34-14
= 20
Companywide profits are $ 20
If the mill transfers at the marginal cost, the downstream will consume at 7 units
The company wide profits
= (10 + 9 + 8 + 7 + 6 + 5 + 4) – 7 X 3.50
=49-24.50
=24.50
References
Froeb, L., McCann, B., Shor, M., & Ward, M. (2018). Managerial economics (5th ed., pp. 243-293). Boston: Cengage Learning.