- All questions are compulsory and should be attempted.
- The marks allocated to each part of the question are indicated in brackets.
- Wherever indicated, your answers should be supported by appropriately labelled diagrams, or examples.
- Make sure you answer each question in your own words with no evidence of copying or pasting from internet or published sources. Such copying/pasting constitutes academic dishonesty and is taken very seriously at the university. Turnitin report may be used as an evidence if this is the case.
- As a guidance, a 2 mark question should not exceed 50 words, and a 4 mark question should be answered within 100 words. There is no penalty for exceeding a bit over these word limits in your answers.
- Referencing is required for Question 3 Section 2.
- A Turnitin submission is required for this Assignment.
Assignment Summary:
| Section | Marks |
| Section-1: & True/False and explain Questions | 18 |
| Section-2: Short Answer Questions | 32 |
| TOTAL: | 50 |
Section-1: True/False and Explain Questions: (Total: 18 Marks)
Indicate whether each statement is true or false, and briefly justify your answer. Each question is worth two marks. You should draw a labelled diagram or provide an example to explain your answer, wherever appropriate.
1. Given the downward sloping demand curve and an upward sloping supply curve for sanitizers, a 10% increase in supply of sanitizers and a 5% increase in demand for sanitizers, will increase equilibrium quantity of sanitizers in the market.
2. A change in the labour market policy for fruit pickers in Australia, allowing backpackers to pick strawberries will increase the equilibrium price and quantity for strawberry jam.
- Suppose that the Board of Directors of the local symphony proposes that the admission price to listen to the orchestra be raised as a means of raising additional funds to support music programs. Its members are implicitly assuming that the price elasticity of demand for a ticket is elastic.
- With a new player Didi now in the rideshare market in New Zealand apart from Ola and Uber, the elasticity of demand for rideshares will fall.
- Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that there’s an economic profit of $20,000.
- For any business, all sunk costs are fixed costs, but the reverse is not true.
- Assume a bakery that currently uses 100 kilograms of flour is considering buying another 80 kilograms to bake more cakes to meet the demand. Economists would classify this as a long-run decision.
- Diminishing marginal returns can set in for fast food restaurant in the long-run.
- Airbus estimated that its Long-Run Average Costs (LRAC) fell by $0.2 million with the production of an A380 aircraft. This suggests Airbus experienced economies of scale.
Section -2: Short Questions (Total: 32 Marks)
(Your answers should be brief and precise)
Question 1
Market analysis (12 Marks)
- Consider the following market demand schedule and graph for Air New Zealand domestic flights. Answer the questions that follow:
- What is the equilibrium price and quantity in the market for domestic flights? (2 marks)
- At a price of $2000, is there a shortage or surplus in the market? By how many flights? Would you expect the equilibrium price to be revised downwards by Air NZ based on this assessment, and why ? Briefly explain your answer.
(4 marks)
- Consider the market for public taxis working on route to the airport. What would happen to the equilibrium price and quantity in the market for public taxis if the demand for domestic flights, a complementary good, was to decrease.
(2 marks)
- Visit the following URL :
http://data.daff.gov.au/data/warehouse/agcomd9abcc004/agcomd9abcc20150915/AgCommodities201509_1.0.0.pdf and read pages 27 to 35 about Wheat. Then answer the following questions :
- Which commodity or commodities could be regarded as a substitute for wheat?
- Explain which are the non-price determinants involved in the change in both markets (i.e. wheat and a substitute grain) according to this report on wheat.
(4 marks)
Question 2
Elasticity and its application (10 marks)
Consider the following demand curve for domestic flights provided by Air New Zealand.
- By making use of the point method, calculate the price elasticity of demand at point B. Indicate whether demand is relatively elastic, inelastic or unit elastic. (Show all your workings. Round to 2 decimal places).
(3 marks)
- Based on your answer from question (a), would you advise the CEO of Air New Zealand, Greg Foran, to increase, decrease or leave the price of domestic flights unchanged in order to increase total revenue? Clearly explain why.
(3 marks)
Question 3
Would you expect price elasticity of demand for tickets for a Rugby World Cup game in New Zealand to be different for each game? Why or why not? Explain your answer, thinking about the teams that would participate and differences between group stages (pool games) and the knock-out games, in the context of your knowledge around factors affecting price elasticity of demand. Use an appropriate reference to explain your answer.
(4 marks)
Question 4: Costs of production (10 marks)
- Assume that you have taken 12 months’ leave without pay from your full-time job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the fit-out of your premises to accommodate your work requirements. You have paid for these set-up costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500 and your implicit costs are $45 000.
Given the above information, explain
- Which of the above would constitute your explicit costs ?
- What would be the revenue you need to earn if you are looking for a $5000 economic profit ?
(4 marks)
- Using an appropriately labelled diagram, explain why marginal cost (MC) crosses the Average Total costs (ATC) curve at its minimum point.
(4 marks)
- A firm is operating in the short‐run with a fixed amount of capital, 1 unit, and a variable amount of labour. Suppose the cost of the single unit of capital is $100 and the cost of hiring each worker is $20. Using this information, fill in the TFC, TVC, TC and MC columns in the following table.
| Labour Input | Capital Input | Total Product | TFC($) | TVC($) | TC($) | MC($) |
| 0 | 1 | 0 | ||||
| 1 | 1 | 5 | ||||
| 2 | 1 | 15 | ||||
| 3 | 1 | 23 | ||||
| 4 | 1 | 27 | ||||
| 5 | 1 | 29 | ||||
| 6 | 1 | 30 |
(2 marks)
THE END
1. All questions are compulsory and should be attempted.
2. The marks allocated to each part of the question are indicated in brackets.
3. Wherever indicated, your answers should be supported by appropriately labelled diagrams, or examples.
4. Make sure you answer each question in your own words with no evidence of copying or pasting from internet or published sources. Such copying/pasting constitutes academic dishonesty and is taken very seriously at the university. Turnitin report may be used as an evidence if this is the case.
5. As a guidance, a 2 mark question should not exceed 50 words, and a 4 mark question should be answered within 100 words. There is no penalty for exceeding a bit over these word limits in your answers.
6. Referencing is required for Question 3 Section 2.
7. A Turnitin submission is required for this Assignment.
Assignment Summary:
| Section | Marks |
| Section-1: & True/False and explain Questions | 18 |
| Section-2: Short Answer Questions | 32 |
| TOTAL: | 50 |
Section-1: True/False and Explain Questions: (Total: 18 Marks)
Indicate whether each statement is true or false, and briefly justify your answer. Each question is worth two marks. You should draw a labelled diagram or provide an example to explain your answer, wherever appropriate.
1. Given the downward sloping demand curve and an upward sloping supply curve for sanitizers, a 10% increase in supply of sanitizers and a 5% increase in demand for sanitizers, will increase equilibrium quantity of sanitizers in the market.
2. A change in the labour market policy for fruit pickers in Australia, allowing backpackers to pick strawberries will increase the equilibrium price and quantity for strawberry jam.
3. Suppose that the Board of Directors of the local symphony proposes that the admission price to listen to the orchestra be raised as a means of raising additional funds to support music programs. Its members are implicitly assuming that the price elasticity of demand for a ticket is elastic.
4. With a new player Didi now in the rideshare market in New Zealand apart from Ola and Uber, the elasticity of demand for rideshares will fall.
5. Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that there’s an economic profit of $20,000.
6. For any business, all sunk costs are fixed costs, but the reverse is not true.
7. Assume a bakery that currently uses 100 kilograms of flour is considering buying another 80 kilograms to bake more cakes to meet the demand. Economists would classify this as a long-run decision.
8. Diminishing marginal returns can set in for fast food restaurant in the long-run.
9. Airbus estimated that its Long-Run Average Costs (LRAC) fell by $0.2 million with the production of an A380 aircraft. This suggests Airbus experienced economies of scale.
Section -2: Short Questions (Total: 32 Marks)
(Your answers should be brief and precise)
Question 1
Market analysis (12 Marks)
a) Consider the following market demand schedule and graph for Air New Zealand domestic flights. Answer the questions that follow:
a) What is the equilibrium price and quantity in the market for domestic flights? (2 marks)
b) At a price of $2000, is there a shortage or surplus in the market? By how many flights? Would you expect the equilibrium price to be revised downwards by Air NZ based on this assessment, and why ? Briefly explain your answer.
(4 marks)
c) Consider the market for public taxis working on route to the airport. What would happen to the equilibrium price and quantity in the market for public taxis if the demand for domestic flights, a complementary good, was to decrease.
(2 marks)
d) Visit the following URL :
http://data.daff.gov.au/data/warehouse/agcomd9abcc004/agcomd9abcc20150915/AgCommodities201509_1.0.0.pdf and read pages 27 to 35 about Wheat. Then answer the following questions :
i) Which commodity or commodities could be regarded as a substitute for wheat?
ii) Explain which are the non-price determinants involved in the change in both markets (i.e. wheat and a substitute grain) according to this report on wheat.
(4 marks)
Question 2
Elasticity and its application (10 marks)
Consider the following demand curve for domestic flights provided by Air New Zealand.
(a) By making use of the point method, calculate the price elasticity of demand at point B. Indicate whether demand is relatively elastic, inelastic or unit elastic. (Show all your workings. Round to 2 decimal places).
(3 marks)
(b) Based on your answer from question (a), would you advise the CEO of Air New Zealand, Greg Foran, to increase, decrease or leave the price of domestic flights unchanged in order to increase total revenue? Clearly explain why.
(3 marks)
Question 3
Would you expect price elasticity of demand for tickets for a Rugby World Cup game in New Zealand to be different for each game? Why or why not? Explain your answer, thinking about the teams that would participate and differences between group stages (pool games) and the knock-out games, in the context of your knowledge around factors affecting price elasticity of demand. Use an appropriate reference to explain your answer.
(4 marks)
Question 4: Costs of production (10 marks)
a) Assume that you have taken 12 months’ leave without pay from your full-time job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the fit-out of your premises to accommodate your work requirements. You have paid for these set-up costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500 and your implicit costs are $45 000.
Given the above information, explain
i) Which of the above would constitute your explicit costs ?
ii) What would be the revenue you need to earn if you are looking for a $5000 economic profit ?
(4 marks)
b) Using an appropriately labelled diagram, explain why marginal cost (MC) crosses the Average Total costs (ATC) curve at its minimum point.
(4 marks)
c) A firm is operating in the short‐run with a fixed amount of capital, 1 unit, and a variable amount of labour. Suppose the cost of the single unit of capital is $100 and the cost of hiring each worker is $20. Using this information, fill in the TFC, TVC, TC and MC columns in the following table.
| Labour Input | Capital Input | Total Product | TFC($) | TVC($) | TC($) | MC($) |
| 0 | 1 | 0 |
|
|
|
|
| 1 | 1 | 5 |
|
|
|
|
| 2 | 1 | 15 |
|
|
|
|
| 3 | 1 | 23 |
|
|
|
|
| 4 | 1 | 27 |
|
|
|
|
| 5 | 1 | 29 |
|
|
|
|
| 6 | 1 | 30 |
|
|
|
|
(2 marks)
THE END
- All questions are compulsory and should be attempted.
- The marks allocated to each part of the question are indicated in brackets.
- Wherever indicated, your answers should be supported by appropriately labelled diagrams, or examples.
- Make sure you answer each question in your own words with no evidence of copying or pasting from internet or published sources. Such copying/pasting constitutes academic dishonesty and is taken very seriously at the university. Turnitin report may be used as an evidence if this is the case.
- As a guidance, a 2 mark question should not exceed 50 words, and a 4 mark question should be answered within 100 words. There is no penalty for exceeding a bit over these word limits in your answers.
- Referencing is required for Question 3 Section 2.
- A Turnitin submission is required for this Assignment.
Assignment Summary:
| Section | Marks |
| Section-1: & True/False and explain Questions | 18 |
| Section-2: Short Answer Questions | 32 |
| TOTAL: | 50 |
Section-1: True/False and Explain Questions: (Total: 18 Marks)
Indicate whether each statement is true or false, and briefly justify your answer. Each question is worth two marks. You should draw a labelled diagram or provide an example to explain your answer, wherever appropriate.
1. Given the downward sloping demand curve and an upward sloping supply curve for sanitizers, a 10% increase in supply of sanitizers and a 5% increase in demand for sanitizers, will increase equilibrium quantity of sanitizers in the market.
2. A change in the labour market policy for fruit pickers in Australia, allowing backpackers to pick strawberries will increase the equilibrium price and quantity for strawberry jam.
- Suppose that the Board of Directors of the local symphony proposes that the admission price to listen to the orchestra be raised as a means of raising additional funds to support music programs. Its members are implicitly assuming that the price elasticity of demand for a ticket is elastic.
- With a new player Didi now in the rideshare market in New Zealand apart from Ola and Uber, the elasticity of demand for rideshares will fall.
- Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that there’s an economic profit of $20,000.
- For any business, all sunk costs are fixed costs, but the reverse is not true.
- Assume a bakery that currently uses 100 kilograms of flour is considering buying another 80 kilograms to bake more cakes to meet the demand. Economists would classify this as a long-run decision.
- Diminishing marginal returns can set in for fast food restaurant in the long-run.
- Airbus estimated that its Long-Run Average Costs (LRAC) fell by $0.2 million with the production of an A380 aircraft. This suggests Airbus experienced economies of scale.
Section -2: Short Questions (Total: 32 Marks)
(Your answers should be brief and precise)
Question 1
Market analysis (12 Marks)
- Consider the following market demand schedule and graph for Air New Zealand domestic flights. Answer the questions that follow:
- What is the equilibrium price and quantity in the market for domestic flights? (2 marks)
- At a price of $2000, is there a shortage or surplus in the market? By how many flights? Would you expect the equilibrium price to be revised downwards by Air NZ based on this assessment, and why ? Briefly explain your answer.
(4 marks)
- Consider the market for public taxis working on route to the airport. What would happen to the equilibrium price and quantity in the market for public taxis if the demand for domestic flights, a complementary good, was to decrease.
(2 marks)
- Visit the following URL :
http://data.daff.gov.au/data/warehouse/agcomd9abcc004/agcomd9abcc20150915/AgCommodities201509_1.0.0.pdf and read pages 27 to 35 about Wheat. Then answer the following questions :
- Which commodity or commodities could be regarded as a substitute for wheat?
- Explain which are the non-price determinants involved in the change in both markets (i.e. wheat and a substitute grain) according to this report on wheat.
(4 marks)
Question 2
Elasticity and its application (10 marks)
Consider the following demand curve for domestic flights provided by Air New Zealand.
- By making use of the point method, calculate the price elasticity of demand at point B. Indicate whether demand is relatively elastic, inelastic or unit elastic. (Show all your workings. Round to 2 decimal places).
(3 marks)
- Based on your answer from question (a), would you advise the CEO of Air New Zealand, Greg Foran, to increase, decrease or leave the price of domestic flights unchanged in order to increase total revenue? Clearly explain why.
(3 marks)
Question 3
Would you expect price elasticity of demand for tickets for a Rugby World Cup game in New Zealand to be different for each game? Why or why not? Explain your answer, thinking about the teams that would participate and differences between group stages (pool games) and the knock-out games, in the context of your knowledge around factors affecting price elasticity of demand. Use an appropriate reference to explain your answer.
(4 marks)
Question 4: Costs of production (10 marks)
- Assume that you have taken 12 months’ leave without pay from your full-time job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the fit-out of your premises to accommodate your work requirements. You have paid for these set-up costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500 and your implicit costs are $45 000.
Given the above information, explain
- Which of the above would constitute your explicit costs ?
- What would be the revenue you need to earn if you are looking for a $5000 economic profit ?
(4 marks)
- Using an appropriately labelled diagram, explain why marginal cost (MC) crosses the Average Total costs (ATC) curve at its minimum point.
(4 marks)
- A firm is operating in the short‐run with a fixed amount of capital, 1 unit, and a variable amount of labour. Suppose the cost of the single unit of capital is $100 and the cost of hiring each worker is $20. Using this information, fill in the TFC, TVC, TC and MC columns in the following table.
| Labour Input | Capital Input | Total Product | TFC($) | TVC($) | TC($) | MC($) |
| 0 | 1 | 0 | ||||
| 1 | 1 | 5 | ||||
| 2 | 1 | 15 | ||||
| 3 | 1 | 23 | ||||
| 4 | 1 | 27 | ||||
| 5 | 1 | 29 | ||||
| 6 | 1 | 30 |
(2 marks)
THE END
1. All questions are compulsory and should be attempted.
2. The marks allocated to each part of the question are indicated in brackets.
3. Wherever indicated, your answers should be supported by appropriately labelled diagrams, or examples.
4. Make sure you answer each question in your own words with no evidence of copying or pasting from internet or published sources. Such copying/pasting constitutes academic dishonesty and is taken very seriously at the university. Turnitin report may be used as an evidence if this is the case.
5. As a guidance, a 2 mark question should not exceed 50 words, and a 4 mark question should be answered within 100 words. There is no penalty for exceeding a bit over these word limits in your answers.
6. Referencing is required for Question 3 Section 2.
7. A Turnitin submission is required for this Assignment.
Assignment Summary:
| Section | Marks |
| Section-1: & True/False and explain Questions | 18 |
| Section-2: Short Answer Questions | 32 |
| TOTAL: | 50 |
Section-1: True/False and Explain Questions: (Total: 18 Marks)
Indicate whether each statement is true or false, and briefly justify your answer. Each question is worth two marks. You should draw a labelled diagram or provide an example to explain your answer, wherever appropriate.
1. Given the downward sloping demand curve and an upward sloping supply curve for sanitizers, a 10% increase in supply of sanitizers and a 5% increase in demand for sanitizers, will increase equilibrium quantity of sanitizers in the market.
2. A change in the labour market policy for fruit pickers in Australia, allowing backpackers to pick strawberries will increase the equilibrium price and quantity for strawberry jam.
3. Suppose that the Board of Directors of the local symphony proposes that the admission price to listen to the orchestra be raised as a means of raising additional funds to support music programs. Its members are implicitly assuming that the price elasticity of demand for a ticket is elastic.
4. With a new player Didi now in the rideshare market in New Zealand apart from Ola and Uber, the elasticity of demand for rideshares will fall.
5. Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that there’s an economic profit of $20,000.
6. For any business, all sunk costs are fixed costs, but the reverse is not true.
7. Assume a bakery that currently uses 100 kilograms of flour is considering buying another 80 kilograms to bake more cakes to meet the demand. Economists would classify this as a long-run decision.
8. Diminishing marginal returns can set in for fast food restaurant in the long-run.
9. Airbus estimated that its Long-Run Average Costs (LRAC) fell by $0.2 million with the production of an A380 aircraft. This suggests Airbus experienced economies of scale.
Section -2: Short Questions (Total: 32 Marks)
(Your answers should be brief and precise)
Question 1
Market analysis (12 Marks)
a) Consider the following market demand schedule and graph for Air New Zealand domestic flights. Answer the questions that follow:
a) What is the equilibrium price and quantity in the market for domestic flights? (2 marks)
b) At a price of $2000, is there a shortage or surplus in the market? By how many flights? Would you expect the equilibrium price to be revised downwards by Air NZ based on this assessment, and why ? Briefly explain your answer.
(4 marks)
c) Consider the market for public taxis working on route to the airport. What would happen to the equilibrium price and quantity in the market for public taxis if the demand for domestic flights, a complementary good, was to decrease.
(2 marks)
d) Visit the following URL :
http://data.daff.gov.au/data/warehouse/agcomd9abcc004/agcomd9abcc20150915/AgCommodities201509_1.0.0.pdf and read pages 27 to 35 about Wheat. Then answer the following questions :
i) Which commodity or commodities could be regarded as a substitute for wheat?
ii) Explain which are the non-price determinants involved in the change in both markets (i.e. wheat and a substitute grain) according to this report on wheat.
(4 marks)
Question 2
Elasticity and its application (10 marks)
Consider the following demand curve for domestic flights provided by Air New Zealand.
(a) By making use of the point method, calculate the price elasticity of demand at point B. Indicate whether demand is relatively elastic, inelastic or unit elastic. (Show all your workings. Round to 2 decimal places).
(3 marks)
(b) Based on your answer from question (a), would you advise the CEO of Air New Zealand, Greg Foran, to increase, decrease or leave the price of domestic flights unchanged in order to increase total revenue? Clearly explain why.
(3 marks)
Question 3
Would you expect price elasticity of demand for tickets for a Rugby World Cup game in New Zealand to be different for each game? Why or why not? Explain your answer, thinking about the teams that would participate and differences between group stages (pool games) and the knock-out games, in the context of your knowledge around factors affecting price elasticity of demand. Use an appropriate reference to explain your answer.
(4 marks)
Question 4: Costs of production (10 marks)
a) Assume that you have taken 12 months’ leave without pay from your full-time job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the fit-out of your premises to accommodate your work requirements. You have paid for these set-up costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500 and your implicit costs are $45 000.
Given the above information, explain
i) Which of the above would constitute your explicit costs ?
ii) What would be the revenue you need to earn if you are looking for a $5000 economic profit ?
(4 marks)
b) Using an appropriately labelled diagram, explain why marginal cost (MC) crosses the Average Total costs (ATC) curve at its minimum point.
(4 marks)
c) A firm is operating in the short‐run with a fixed amount of capital, 1 unit, and a variable amount of labour. Suppose the cost of the single unit of capital is $100 and the cost of hiring each worker is $20. Using this information, fill in the TFC, TVC, TC and MC columns in the following table.
| Labour Input | Capital Input | Total Product | TFC($) | TVC($) | TC($) | MC($) |
| 0 | 1 | 0 |
|
|
|
|
| 1 | 1 | 5 |
|
|
|
|
| 2 | 1 | 15 |
|
|
|
|
| 3 | 1 | 23 |
|
|
|
|
| 4 | 1 | 27 |
|
|
|
|
| 5 | 1 | 29 |
|
|
|
|
| 6 | 1 | 30 |
|
|
|
|
(2 marks)
THE END
