Q1. During a coffee-room debate among several young MBAs who had in recent times graduated, among all one of the young executives flatly stated, "The most this company can lose on its Brazilian division is the amount it has invested (its fixed costs)." Not everyone agreed with this statement. In which sense this statement is correct? In what conditions could it be false? Explain.
Q2. Explain why the food stamp program can have the same effect on the consumption pattern and well-being of recipients as an outright cash transfer of similar price. Why do you imagine it is not converted into an explicit cash transfer program, thereby saving the cost of printing and redeeming food stamps?