ASSIGNMENT 1: 50 marks (weighting 25% of total marks for the unit) (approx. 1000 words + Calculations) Note that when you are answering questions that require mathematical calculations, you should...

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ASSIGNMENT 1: 50 marks (weighting 25% of total marks for the unit) (approx. 1000 words + Calculations) Note that when you are answering questions that require mathematical calculations, you should provide details as to how the answers were derived. In completing your answers, you should use correctly labelled graphs wherever possible. Always provide a brief explanation of each graph, including how it relates to your overall answer/argument. Question 1 (10 marks) 1. Joan, who has been a university student for a year, has just started a new job. She realises that if she works more hours there will be an impact on her grades. The following is Joan’s production possibility table for work and her average grades: Choices Production possibilities Grade (%) Work (hours per week) A B C D E 0 20 40 60 80 60 55 45 30 0 From the figures in the table above: i.Plot the production possibility curve for Joan. (1 mark) ii. Explain the concept of increasing opportunity cost using the production possibility table and curve plotted in Q1ai above. (2 mark) iii.If the opportunity cost of Joan increasing her grade was constant regardless of how many hours she worked, what would be the shape of her production possibility curve? Draw this graph. Which of the two shapes would be more likely, and why? (2 marks) iv.What would be happening if Joan’s combination of her grades and hours of work per week were below the curve as plotted above in Q1ai? (1 mark) v.How could Joan push her combination of her grades and hours of work per week past the current curve? (2 mark) 1. After a period of good growing weather Australia produced a plentiful wheat crop - does this mean that it will not have a scarcity problem in regards to wheat? Provide reasons for your answer (300 words maximum). (2 marks) Question 2 (10 marks) In February 2018, it was reported that Australia’s solar power capacity could almost double in a year. 1. Use demand and supply curves to show the doubling of capacity. (3 marks) 1. Use demand and supply curves to show what is likely to happen to demand over time in response to the capacity increases (see Q2a above). (3 marks) 1. Use demand and supply curves of the solar powered industry and coal-fired power electricity industry to show what is likely to happen to demand and supply of solar power if the government introduces a tax on coal-fired power electricity. (4 marks) Question 3 (10 marks) 1. Explain in your own words, using demand and supply curves, the concepts of consumer and producer surplus. (3 marks) 1. Using demand and supply curves describe and illustrate what would happen to consumer and producer surplus if solar power capacity is increased. (4 marks) 1. The treasurer, Scott Morrison, has stated that business tax cuts will be good for business and workers. Is this a positive or a normative statement? Provide reasons for your answer (300 words maximum). (3 marks) Question 4 (10 marks) 1. Complete the table below outlining the demand for hot doughnuts in winter. In your calculations use the midpoint method to calculate the price elasticities. (5 marks) Price ($) Quantity demanded Total revenue ($) Percent change in price Percentage change in quantity demanded Elasticity value Assessment of Elasticity 0.50 16 1 13 1.50 10 2.00 7 2.50 4 3.00 1 b. Do you think the price elasticity of demand for hot doughnuts in summer would be the same as in winter or would it become more elastic or more inelastic? Explain your answer. (3 marks) c. What would you expect the price elasticity of demand for cigarettes to be? Explain your answer. (2 marks) Question 5 (10 marks) a i. Complete the cost schedule below for a company operating in a free-market (remember that MC and MR values are placed midway between the output figures): Output Total Fixed Cost (TFC) $ Total Variable Cost (TVC) $ Total Cost (TC) $ Average total cost (ATC) $ Marginal Cost (MC) $ Total Revenue (TR) $ Average Revenue (AR) $ Marginal Revenue (MR) $ Profit $ 0 100.00 100.00 1 220.00 2 300.00 3 390.00 4 530.00 5 690.00 1. marks) 1. If the firm is operating in a perfect market where the market price for the good the company produces is $150, how many items should this company produce in order to maximise profit? Explain your answer. (2 marks) 1. Graph the average total cost, marginal cost, average revenue and marginal revenue curves. (2 marks) 1. In your own words explain the concept of diminishing returns and describe what will happen to marginal product, total output and marginal cost when diminishing returns start to occur. (2 marks)
Answered Same DayJul 28, 2020ECO10250Southern Cross University

Answer To: ASSIGNMENT 1: 50 marks (weighting 25% of total marks for the unit) (approx. 1000 words +...

Soma answered on Aug 05 2020
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ASSIGNMENT 1: 40 marks (weighting 25% of total marks for the unit) (approx. 800 words + Calculations)
Note that when you are answering questions that require mathematical calculations, you should provide details as to how the answers were derived. In completing your answers, you should use correctly labelled graphs wherever possible. Always provide a brief explanation of each graph, including how it relates to your overall answer/argument.
Question 1 (1
0 marks)
1. Joan, who has been a university student for a year, has just started a new job. She realises that if she works more hours there will be an impact on her grades. The following is Joan’s production possibility table for work and her average grades:
    
    Choices
    Production possibilities
    Grade (%)
    Work
(hours per week)
    A
B
C
D
E
    0
20
40
60
80
    60
55
45
30
0
From the figures in the table above:
i. Plot the production possibility curve for Joan. (1 mark)
E
D
C
B
A
Joan’s opportunity cost is shown in the above figure. Grade (%) is plotted against the X axis and Work (hours per week) is plotted against the Y axis. The curve is conventional shape and concave to the origin. All the points are also shown in the graph.
ii. Explain the concept of increasing opportunity cost using the production possibility table and curve plotted in Q1ai above. (2 mark)
The concept of increasing opportunity cost implies as Joan wants to get more grades, she has to give up more and more no. of working hours. It simply states, as the production of one good rises (as grade % here) the opportunity cost of producing that good increases. This increasing opportunity cost is evident from its concave shape. As Joan moves from point A to B and wants to increase the grade from 0 to 20% then she has to forego only 5 hrs of work (60-55). But when she moves from point B to C and wants to increase the grade from 20% to 40%, she has to forego 10 hrs of her work (55-45). Similarly, as she wants to increase her grade from 40% to 60% and moves from C to D she has to forego 15 hrs of work (45-30). Thus the foregone cost is rising along the PPF while Joan wants to increase the production of one good. (Robert Hall, 2006)
iii. If the opportunity cost of Joan increasing her grade was constant regardless of how many hours she worked, what would be the shape of her production possibility curve? Draw this graph. Which of the two shapes would be more likely, and why? (2 marks)
If the opportunity cost of Joan increasing her grade is constant then her production possibility curve will be linear as shown in the figure below. The slope along the PPC remain constant regardless the number of hours she worked.
Works hours per week
Grade (%)
Among the two shapes, concave or bowed out shape of the PPF is more likely because of increasing opportunity cost. If the resources are found to be perfectly adaptable for alternative use ( which is very unlikely) then only we can have straight line production possibility curve. Bowed out shape of Joan’s production possibility curve is derived from the increasing opportunity cost. (McEachern, 2009)
iv. What would be happening if Joan’s combination of her grades and hours of work per week were below the curve as plotted above in Q1ai? (1 mark)
If Joan stays the below the production possibility curve as shown above in Q1 then she is not efficiently utilizing all her resource. Some of the resources remain idle for her. The points on the PPF only shows the efficient points – that is the maximum level of output Joan can obtain by utilizing all her resources efficiently. Thus, the point inside the curve is definitely an inefficient point Joan.
v. How could Joan push her combination of her grades and hours of work per week past the current curve? (2 mark)
Joan actually cannot push her combination of grade and works per hour above the curve shown in Q1. This is because the point demonstrates an impossible point- Joan does not have resources to reach that point. The point past the current cure is an impossible point to Joan to attain. (Arnold, 2010)
1. After a period of good growing weather Australia produced a plentiful wheat crop - does this mean that it will not have a scarcity problem in regards to wheat? Provide reasons for your answer (300 words maximum).
     (2 marks)
Scarcity and choice are the major problem of economics. Because the human wants are unlimited but the resources in this world are finite, we have to make choice. Individual as well as the country has to make a rational choice as how much to produce with...
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