please make sure that all the calculations are correct. and also check the graphs and make sure are correct and plz need edit all the assignment. and please check all the grammar and all structure and must be following the requirement pls add improvement. also, make any change that u think is required
The following is a set of hypothetical production possibilities for a nation
Combination bicycles Wheat
(Thousands of tonnes)
Production possibility Curve for nation A
i) Plot the production possibility for nation A
ii) What is the opportunity cost of the first 2000 bicycles produced?
The opportunity cost is 7000 tonnes of wheat
iii) Determine between which point the opportunity cost per thousand bicycles is highest
iv) Show what would happen to the production possibility frontier if nation A introduced an improved fertiliser that was used by its wheat farmers.
Use of improved fertilizer increases the capacity to produce more wheat, therefore, the resultant point will be outside the production frontier curve.
v) Explain how the production possibilities frontiers reflect the law of increasing opportunity costs (parts I to v are worth a mark each)
The law of increasing opportunity cost affirms that increases in the production of one commodity results to a corresponding rise in the opportunity cost of producing the other commodity (Lipsey et al. 1981, pp. 59-63). In this case, a therefore, increase in production of bicycles leads to the production of fewer quantities of wheat.
b) Compare the advantages and disadvantages of a planned economy and a free economy (300 words maximum)(5marks)
Advantages of free economy
In a free economy, there is free buying as well as production alongside lowered business cycle. Consumers are at liberty to buy any product they wish. The supplier of the good can as well produce any product they prefer. Secondly, the market price represents the equilibrium point of market demand as well as supply. In the liberal market, the price of goods and services is regulated by the forces of demand and supply; hence there is no exploitation of consumers by sellers. Thirdly, in a free economy the effort invested in an activity determines the level of benefit an individual receives (Sloman et al. 2014, pp. 162–164).
Disadvantages of Free economy
Based on Sloman et al. (2014, pp. 162–164), free economy has two main demerits and these are probability of the occurrence of market failure. There is also absence of the government intervention to take part in law enforcement activities that are essential to the enforcement of business contracts.
On the other hand, planned economy has the following advantages: prices are well regulated, and therefore everyone can buy goods and services. There is also minimal inequality of wealth, no duplication of resources, small cases of unemployment and efficient disposal of waste. However, planned economy has the following demerits: it has no profit motive, and there is time wastage in passing instructions
a) The Australian wine industry has prospered over the last two decades, expanding rapidly into overseas markets. However, in recent years it has faced some problems. Use demand and supply analysis to explain how these two factors (problems) stated below would affect the price and quantity of Australian wine.
i) There has been rapid increase in the Australian production of wine grapes
The rapid increase in the quantity of wine grapes in the market leads to decrease in the price level of the grapes hence reducing the revenue generated from the sale of grapes.
ii) New wine producers in China and India are producing good quality low cost wine(parts i and ii are worth 2 marks each)
The presence of many competitors lowers the amount of sales a company makes. In this case, a cheap and higher quality wine from china and India lures more customers from purchasing relatively low quality Australian wine. Thus decrease in the level of demand and revenue subsequently (Henderson & McKenzie 1999, p.36).
b) In an attempt to support the Australian wine industry the government sets a minimum price. Do you think this is a good idea/ Explain your decision using graphs(6MKS)
This is a good decision since the price controls safeguards the Australian wine industry from unhealthy competition from its competitors based on variation in prices of wine grapes. The government will set particular price floors and price ceiling within which the industries ought to operate on (Henderson & McKenzie 1999, p.36).
In this diagram no company is supposed to sell bellow the equilibrium price E since the price floor is at point F, hence lowering the level of competition in the market. In effect, this will guarantee the survival of Australian wine industry (Mason & Buultjens 2015, pp.30-31).
A) Explain why a firm can make a loss and continue operating in the short run and under what circumstances it will shut down(3marks)
In the short run and firms under perfect competition generate economic gain, a normal gain or loss. Economic profit occurs at p>ATC, a normal gain, as well as zero profit, occurs at P=ATC and the loss occurs at P<ATC. A firm experiencing economic loss ought to make a decision of whether to shut down momentarily. At point P>AVC, the production of the firm is sustainable. At level P<AVC, the firm ceases operating for some time. This point represents the output as well as the price where total revenue equates total variable cost. This position is achieved when p=AVC (Sloman et al. 2014, p.128).
B). Discuss and show how a price-taking firm determines its profit maximising output level
Price taking occurs in the perfect competitive market. The firm will at all times operate in the production where MC of particular output is equivalent to the market price. In other words the level where P=MC. Therefore, from the diagram, the firm will optimize its profits at by giving an output of 10units and at a price of 22 units (Sloman et al. 2014, p.128).
c) The Byron Company produces high quality bicycles. The firm has fixed costs of $1000 and the wage cost for each worker is $500(assume these are the company’s only cost). Complete the table below. Workers Output Marginal product, Total Cost, Average variable cost and marginal cost.
Labour(workers) Output Workers marginal out put Variable cost($) Average variable cost Marginal cost($) Fixed cost($) Total cost($)
1 20 20 500 500 500 1000 1500
2 50 30 1000 500 500 1000 2000
3 90 40 1500 500 500 1000 2500
4 120 30 2000 500 500 1000 3000
5 140 20 2500 500 500 1000 3500
6 150 10 3000 500 500 1000 4000
7 155 5 3500 500 500 1000 4500
Total cost = variable cost + Fixed cost
Marginal output= change in output/change in labour
Variable cost = wage cost for each worker
Average variable cost= total variable cost/ change in labour
Marginal cost= Change in variable cost/ change in labour (Hatch et al. 2005, pp.19 -22)
Use graphs to explain and illustrate the profit maximising price and output for firms in the perfect market and for those in the monopoly market. Explain why monopoly forms are able to earn supernormal profits in the long run(10marks)
In the case of monopoly, the illustration is typically similar in both short run and long run. Profit optimisation takes place at the point where Marginal Revenue (MR) equates Marginal Cost (MC). Hence, the equilibrium occurs at quantity Qm and price Pm (McTaggart et al. 2007, pp. 261 – 264).
Monopoly has many features, and these are there are constraints to entrance in the market, the demand curve for the whole industry is similar to the one for the firm. Additionally, optimal profits take place at MR=MC. Therefore, this implies that they stipulate a price higher compared to MC that represents an inefficient allocation of resources. At this point, the firm operates at supernormal profits since AR is higher compared to AC (Cowie et al. 1997, pp. 23-24).
Perfect Competition curve in the short run
In this case, the price, average revenue as well as marginal revenue are same. Denoted by P=MR=AR. The optimal profit occurs at MR=MC, where MR is marginal revenue and MC is a marginal cost. When these statements appear on the same diagram, the maximum profit occurs at a point where price equates marginal cost, denoted as P=MC (Sloman et al. 2014, p.128).
Perfect competitive curve in the long-run
Because of entry as well as exit of firms, in this case the equilibrium price occurs at the point equivalent to the lowest point of the average total cost (ATC) curve of the firm as shown in the diagram below. Entire firms in this market generate economic profit equivalent to zero.
Optimal profit occurs at MR=MC, and it has a perfectly elastic demand hence MR=AR=D (McTaggart et al. pp. 261-264).
Explain why pollution is an example of market failure and why the free market will not provide an efficient solution to the problem. Provide a critique of a carbon tax as opposed to the Australian government Direct Action as a solution to this problem (700words maximum).
Market refers to the situation whereby the economy may give out a lot of or insufficient particular kind of products and therefore default in utilizing the available scarce resources efficiently. Market failure occurs due to a variety of impetus. One of these impetuses is externalities. Externalities occur in a situation where the market defaults in considering entire costs as well as the benefit related to the production as well as consumption of finished products. Externalities are divided into external and internal. In this context, pollution is an example of an external cost externality. Pollution involves the introduction of harmful materials on land, air as well as water such as throwing of litter, releasing of harmful fumes into the air as well as the waste material discharged into water bodies. Pollution occurs since it is cheaper for a manufacturing company to discharge its waste into water bodies. This water bodies are nearer and cheaper to access in comparison to the cost of transporting that waste to the right destination (Taylor et al. 2003, p. 368).
According to Kavanagh (2006, pp.40-43) social cost is the total societal cost incurred in the production process. The social cost is the total of private and external costs. In instances of absence of external costs, social as well as private costs are equivalent whereas in the presence of external costs, the vice versa is true. This principle is applicable to this scenario of a polluting manufacturing company. The private cost covers the expenses on purchase of materials, compensation for labour, rent payment as well as other expenses incurred for running a business. However, private cost excludes compensation for the harm committed on rivers due to the release of wastes to water bodies. Since the company is capable of ignoring this cost, this becomes an external cost. This cost is excluded in the company’s decision formulation.
To obtain a solution to this externality problem, the free market should be out of consideration in regulation of firm’s practices in this endeavour. The Government can correct this problem mainly through the following ways: assignment of property rights, direct controls and imposition of pollution taxes. Besides, the Government can as well offer selective tradable permits and the maximum level at which companies should pollute the environment (McTaggart et al. 2007, pp. 375–379).
Pollution taxes refers to the compensation that government levies on the firms that engage in pollution to see to it that the cost of externality has an effect on decision formulation of the company. A carbon tax is an example of a pollution tax. Imposition of taxes raises the total private expenses in production as well as consumption. In effect, this lowers the demand as well as the output of the product causing negative externality. The income generated from pollution taxes is useful in funding projects aimed at mitigating the effect of externality (McTaggart et al. 2007, pp. 375–379).
ECO10250: Assessment details
The assessment for this unit consists of two assignments and a final examination. The two assignments are designed to test your understanding of issues and principles raised in the topics being studied.
The first assignment consists of five questions based on topics covered in the first section of this unit. The second assignment is a report on theeconomy and policy in Australia. The purpose of these assignments is to give you the opportunity to demonstrate the skills you have acquired in this unit. You will need to start gathering information for the second assignment almost immediately.
Assignment due dates and the examination period provided here apply to the Australian study period. These may be varied for students studying elsewhere, please confirm dates with your local tutor.
Students studying in Australia must submit their assignments online via the online submission facility on the MySCU website for this unit. Students studying in overseas locations will be advised on assignment submission by their local tutors. For instructions on how to submit an assignment electronically please click on to the tab in the MySCU learning site for this subject. You must attach an electronic cover sheet (available in MySCU) as the first page of your assignment. You should keep a copy of all submitted materials. You need to submit Assignment 1and Assignment 2 viaTurnitin. You are advised to check yourTurnitin score before you submit your assignment.
The final examination will be based on topics covered throughout the whole study period. It will use a range of test questions. Details of the examination format will be provided at a later date.
References and Referencing
You will be required togather information for your assignments and it is important to be aware that material posted on the web may not always be reliable. You are advised to carefully consider the authenticity of all sources of the information before using it in assignments. In addition, it is expected that some of the information you reference will be from refereed journals.
It is also important to use Harvard-style referencing forALLmaterial used in your work.
SBaT Extension Policy
It is VERY important that YOU make yourself aware of the School’s Extension Policy and Special Consideration Policy.
Students wanting an extension MUST make a request at least 24 hours before the assessment item is due and the request must be received in writing by the unit assessor or designated academic.
Extensions within 24 hours of submission or following the submission deadline WILL NOT be granted (unless supported by a doctor’s certificate or where there are exceptional circumstances – this will be at unit assessor’s discretion and will be considered on a case by case basis). Extensions will be given for a maximum of 48 hours (longer extensions supported by a doctor’s certificate or exceptional circumstances will be considered on a case by case basis).
A penalty of 10% of the total available marks will accrue for each 24 hour period that an assessment item is submitted late. Therefore an assessment item worth 20 marks will have 2 marks deducted for every 24 hour period and at the end of 10 days (including weekends) will receive 0 marks.
Students who fail to submit their assignments according to the correct guidelines provided above will be deemed to have not submitted the assessment item and the above penalty will be applied until the specified submission guidelines are followed.
Extensions can be sought by emailing Jeremy Buultjens (email@example.com). When emailing Jeremy it is essential to put ECO10250 in the subject area of your email otherwise it may be deleted as SPAM.
Re-submissions and re-sits
In this unit there are no provisions for re-submitting assignments. If you have failed the unit after completing all three assessment items, there is an opportunity to re-sit the exam. The following conditions apply in this case:
• If you take up this option, the exam outcome (a pass or a fail) will be used as the sole determinant of your final result for the unit.
• The ability to re-sit the exam will only be open to you if you have submitted ALL assessment items.
• For any student who takes up this option a pass will be the highest result achievable.
Due: 9pmMonday,17 August, 2015(Week 9)
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 graphs wherever possible. Always provide a brief explanation of each graph, including how it relates to your overall answer/argument.
a. The following is a set of hypothetical production possibilities for a nation A.
(thousands of tonnes)
A 0 10
B 2 9
C 4 7
D 6 4
E 8 0
i) Plot the production possibility for nation A.
ii) What is the opportunity cost of the first 2000 bicycles produced?
iii) Determine between which point the opportunity cost per thousand bicycles is highest.
iv) Show what would happen to the production possibility frontier if nation A introduced an improved fertiliserthat is used by its wheat farmers.
v) Explain how the production possibilities frontier reflects the law of increasing opportunity costs.
(Parts i to v are worth a mark each.)
b. Compare the advantages and disadvantages of a planned economy and a free-market (300 words maximum).
a. The Australian wine industry has prospered over the last two decades, expanding rapidly into overseas markets. However, in recent years it has faced some problems. Use demand and supply analysis to explain how these two factors (problems) stated below would affect the price and quantity of Australian wine.
i) There has been a rapid increase in the Australian production of wine grapes.
ii) New wine producers in China and India are producinggood quality low cost wine.
(Parts i and ii are worth 2 marks each.)
b. In an attempt to support the Australian wine industry the government sets a minimum price. Do you think this is a good idea? Explain your decision using graphs.
a. Explain why a firm can make a loss and continue operating in the short-run, and under what circumstances it will shut down.
b. Discuss and show how a price-taking firm determines its profit-maximising output level.
c. The Byron Bicycle Company produces high quality bicycles. The firm has fixed costs of $1,000 and the wage cost for each worker is $500 (assume these are the company’s only cost). Complete the table below.
Workers Output Marginal Product Total Cost Average variable cost Marginal cost
Use graphs to explain and illustrate the profit-maximising price and output for firms in the perfect market and for those in the monopoly market. Explain why monopoly firms are able to earn supernormal profits in the long run.
Explain why pollution is an example of market failure and why the free market will not provide an efficient solution to the problem. Provide a critique of a carbon tax as opposed to the Australian government’s ‘Direct Action’ as a solution to this problem (700 words maximum).
TOTAL FOR ASSIGNMENT 1: 50 marks (weighting 25% of total marks for the unit)
Due: 9pmMonday,14 September, 2015(Week 13)
Length: 1500 words
Prepare a report on the current state of the Australian economy and its management by the Federal government. You need to do this by examining the four economic indicators of economic growth (GDP), unemployment, inflation and trade (including the terms of trade, the current account, net foreign debt and the value of the Australian dollar). In your report you are expected tooutline the target values forthese economic indicatorsas well as the trend in these economic indicators over the last 10 years.Finally, you should outline the current macroeconomic policies of the Federal government and RBA where you think these policies may relate to these four economic indicators and comment on whether you see these policies as suitable in the present economic environment. Given your analysis, you are expected to conclude your report with policy recommendations to achieve targeted economic growth, unemployment, inflation and trade outcomes.
Presentation of report
The report should not exceed 1500 words. This word limit does not include the abstract, tables,graphsand reference list.
The report should be word processed using a font size 12 with 1.5 line spacing.
Structure of report
Your report must include:
• an appropriate title
• an abstract (sometimes called an executive summary) summarising the report
• an introduction in which you briefly explain what you are going to address in the report and why
• the body of the essay broken into sections (section headings are appropriate)
• a brief conclusion that should summarise your analysis and your predictions and recommendations
• appropriate referencing and a reference list as required.
Although the requirements for presentation and structure may appear pedantic, they are not. In the business world you may often find yourselfinvolved in writing a report – perhaps even for multilateral and government organisations such as the IMF or OECD. We suggest that you devote some time to developing this skill. Your future career can only be enhanced by your ability to communicate effectively in writing.
Marking criteria Assignment 2
Your report will be marked against the following criteria:
• Appropriate descriptionof thefour economic indicators- economic growth, unemployment, inflation and trade and the trend in these indicators over the last ten years.
• Succinct description of current macroeconomic policy in Australia and appropriate assessment of its effectiveness.
• Useful conclusions and recommendations about the future direction of policy including threats to current policy settings.
• Evidence in the report of a depth of research and accuracy in referencing (Harvard Style).
• Abstract, presentation, grammar, structure, etc.
TOTAL FOR ASSIGNMENT 2: 100 marks (weighting 25% of total marks for the unit)
Some advice about Assignment 2
Your short “Abstract”needs to describe the aim of the report and a brief overview of the economic targets, government policy and recommendations. It should be approximately 500 words.
The “Introduction” is a brief paragraph or two that outlines the aim of the report and how the report is structured (i.e., what you are examining). The content of your assignment should generally reflect the marking criteria. REMEMBER that an Introduction is different to an Abstract.
The “body” of the report is the content of your research and analysis. You may want to consider dividing you report into different sections with appropriate subheadings.
You should begin the body of your work with adiscussion of the current values of the four economic indicators under investigation (Economic Growth (GDP), Unemployment, Inflation and Trade) and the government targets for each of these. You should also discuss the trends in the economic variables over the past 10 years.This section is worth 20%.
Once you have discussed the variables you should discuss current macroeconomic (Fiscal and Monetary) policy in Australia. In addition to a description of policy you need to provide your assessment of the effectiveness of the policy.The effectiveness of macroeconomic policy will be determined by how close the current figures are to policy targets. For example, did Australia reach targets or not and/or how close has Australia been to meeting targets? You NEED to give your (well thought out) opinions about how well current macroeconomic policyis working based on the data obtained. You need to support your opinions with scholarly research to further enhance/prove/justify/confirm your findings. This section is worth 40%.
In your “Conclusion” you need to discuss what the future is for the economy (the strengths and/or threats) as well as canvass the policies you would recommend to ensure meeting the economic targets. You should again call upon scholarly research to further enhance/prove/justify/confirm your commentary in this section. This section is worth 20%.
A reminder: To complete your assignment you need to ensure you have used correct Harvard referencing throughout the report and that you have correctly formatted your reference list. Only include the references that you actually used in your report. This section is worth 10%.
You should check your “turnitin” value before submitting your assignment. A value of over 50 per cent should be of concern to you.
There are a number of useful resources you can use to gather information but make sure you are using reliable sources. Useful sources of information might include the following web sites:
• Australian Bureau of Statistics <http://www.abs.gov.au>
• The Reserve Bank of Australia <http://ww.rba.gov.au>
• Department of Finance<http://ww.finance.gov.au>
• The Productivity Commission <http://www.pc.gov.au>
• The World Trade Organization <http://www.wto.org>
• ABC News <http://www.abc.net.au/news/>
Some newspaper sites may also be useful. For example, the Australian Financial Review, the Sydney Morning Herald, the Australian, the Guardian and other major newspapers. The editions around the time of economic policy announcements are especially useful.
You will also need to look closely at some recent budgetsthat are usually brought down in May (details can be found at http://www.budget.gov.au) and monetary policy announcements about interest rates can be found at http://www.rba.gov.au. The RBA’s quarterly statement on monetary policy is also a very useful source of information on the economy and its status. If you find some good sources I suggest that you share them with other students on the Discussion Board.
Exam period: TBA
Weighting: 50%of total marks for the unit
The final examination is scheduled for the end of the study period. Students will be fully advised during the study period as to when the exam will be held and the format it will take. The exam will be closed book.