The U.S. Bureau of Labor Statistics reports that the average salary for postsecondary economics teachers in the Raleigh-Durham-Chapel Hill metropolitan area, which has many top universities, rose to $105,200 (based on a 52-week work year) in 2003. According to the Wall Street Journal (Timothy Aeppel, “Economists Gain Star Power,” February 22, 2005, A2), the salary increase resulted from an outward shift in the demand curve for academic economists due to the increased popularity of the economics major, while the supply curve of Ph.D. economists did not shift.

a. If this explanation is correct, what is the short-run price elasticity of supply of academic economists?

b. If these salaries are expected to remain high, will more people enter doctoral programs in economics? How would such entry affect the long run price elasticity of supply?

In the estimation of incremental cash flows for a new project, several costs and issues are considered.

a) In reference to the lecture materials for cash flow estimation, list the seven important issues to be kept track of in estimating incremental cash flows for expansion, replacement, or new capital projects. [No explanation is required for this part.]

. b) In reference to the list of important issues in part

(a) above, specify the type of issue/cost that best describes the following scenario. [No explanation is required for this part.] Scenario A company that manufactures and sells washing machines and dryers is planning to adopt a new project that will produce a new washer-dryer machine that incorporates both washing and drying features in one machine. The company’s financial manager estimates that if this new project is adopted, the sales of the existing washing machines and dryers will drop by a total of $2 million. Click here to enter text.

c) In reference to the cost in the part

(b) Scenario, should this cost be included in the incremental cash flows? Why or why not? [Word limit: 80 words. Answers beyond word limit will not be marked]