IBM is investing $3 billion in a private-public partnership with New York State, GlobalFoundries, Samsung and equipment vendors,” to create ultradense computer chips (John Markoff, New York Times, July 9, 2015). TOTALLY MADE-UP SCENARIO: Suppose that during their affiliation, Samsung has paid IBM $200 million for creating a special version of these ultradense chips for Android products. Suppose further that the contract included certain requirements for size, speed and other qualities. Then suppose that after beta testing these chips, Samsung claimed that IBM’s efforts failed to live up to their contractual agreements. (2 points each: 1 for explaining the concept, and 1 for applying it correctly) a. Was either party earning rent? What assumptions do you have to make to assert this? b. Was either party earning quasi-rent? What assumptions do you have to make to assert this? c. Could IBM have held up Samsung? And/or could Samsung have held up IBM? Explain.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
“IBM is investing $3 billion in a private-public partnership with New York State, GlobalFoundries, Samsung and equipment vendors,” to create ultradense computer chips (John Markoff, New York Times, July 9, 2015).
TOTALLY MADE-UP SCENARIO: Suppose that during their affiliation, Samsung has paid IBM $200 million for creating a special version of these ultradense chips for Android products. Suppose further that the contract included certain requirements for size, speed and other qualities. Then suppose that after beta testing these chips, Samsung claimed that IBM’s efforts failed to live up to their contractual agreements.
(2 points each: 1 for explaining the concept, and 1 for applying it correctly)
a. Was either party earning rent? What assumptions do you have to make to assert this?
b. Was either party earning quasi-rent? What assumptions do you have to make to assert this?
c. Could IBM have held up Samsung? And/or could Samsung have held up IBM? Explain.
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