Stanley department stores reported net income of $755,000 for the year ended december 31, 2018. additional information: common shares outstanding at jan. 1, 2018 75,000 incentive stock options (vested in 2017) outstanding throughout 2018 12,000 (each option is exercisable for one common share at an exercise price of $22.00) during the year, the market price of stanley’s common stock averaged $26.4 per share. on aug. 30 stanley sold 15,000 common shares. stanley’s only debt consisted of $34,000 of 10% short term bank notes. the company’s income tax rate is 40%. required: compute stanley’s basic and diluted earnings per share for the year ended december 31, 2018.

Suppose that fixed costs for a firm in the automobile industry (start-up costs of factories, capital equipment, and so on) are $5 billion and that variable costs are equal to $17,000 per finished automobile. because more firms increase competition in the market, the market price falls as more firms enter an automobile market, or specifically, , where n represents the number of firms in a market. assume that the initial size of the u. s. and the european automobile markets are 300 million and 533 million people, respectively. a. calculate the equilibrium number of firms in the u. s. and european automobile markets without trade. b. what is the equilibrium price of automobiles in the united states and europe if the automobile industry is closed to foreign trade? c. now suppose that the united states decides on free trade in automobiles with europe. the trade agreement with the europeans adds 533 million consumers to the automobile market, in addition to the 300 million in the united states. how many automobile firms will there be in the united states and europe combined? what will be the new equilibrium price of automobiles? d. why are prices in the united states different in (c) and (b)? are consumers better off with free trade? in what ways?