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BUECO5903 Business Economics (Microeconomics)

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BUECO5903 Business Economics Microeconomics

Assignment Instructions:

BUECO5903 Business Economics Microeconomics assignment contains five questions. You are required to answer all five questions.

BUECO5903 Business Economics Microeconomics is an individual piece of assessment. Make sure your submission is an original submission, this means it must be the creation of the person submitting it.You are required to explain your reasoning and use diagrams where appropriate.

Assessment weight: This assessment task constitutes 15 percent of the total assessment for this course.

Due date: Your instructor will advise you of the submission date of this assessment task.

Assignment to be submitted electronically in the drop box in your Module shell.


Question 1 Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the following events:Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.

a) Increasing skilled migration into the country

b) Imposing taxes on manufacturing (hint: define a two-sector producing economy, manufacturing and services).

c) Decreasing the expenditure on research and developments) Implementation of easier rules for foreign investment) The effects of a pandemic.

Question 2 Identify what sort of effects the following listed events have.You are required to define the market under study (for example: the labor market, oil market, etc). Explain whether the event acts on the demand or supply side, and whether the event leads to a quantity or price change, or leads to a shift in demand and/or supply. Make sure to explain what sort of assumptions you are making on the elasticizes of demand and supply.

a) An increase in oil prices as a consequence of a price dispute in the world oil markets

b) The implementation of a minimum wages

c) The implementation of subsidies to milk producers in Australia

d) The implementation of a Carbon tax in the economy. A Carbon tax is charged according to the level of emissions of greenhouse gases in an economy

e) The implementation of an increase in tuition in University studies.


Question 3 Using the following tables) construct the cost schedule for a firm operating in the short run) Graph the average variable cost, average total cost and marginal cost curves.

Quantity- Total Total Total Marginal Average Average Average Production Fixed Variable Cost Cost Fixed Variable Total (thousands) cost cost Cost Cost Cost0 $400 0 $400 — — —- —-1 $640 2 $720 3 $780 4 $820 5 $850 6 $890 7 $980 8 $1200 9 $1700

Question 4 The Pear company sells a smart phone for $250. Its sales have averaged 8,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $350 to $300. As a result, Pear’s sales declined by 1,500 units per month.

(a) What is the cross price elasticity of demand between the Pear and Banana smart phone? Use the averaging formula. What does this indicate about the relationship between the two products?

(b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, what price would the Pear company have to charge to sell the same number of units as it did before the Banana company price cut? Assume that Banana company holds its price of its phone constant at $300. Use the averaging formula.

Question 5 The diagram below illustrates a firm under monopolistic competition:

(a) Label the curves Curve I, Curve II, Curve III, Curve IV.

(b) Graphically identify profit maximizing output and price

(c) Explain how the amount of profit is defined at the maximum-profit output.