microeconomic assignment 2
Question 1 (5 marks, 200 words
(a)Farmer Fitzgerald was heard saying “My farm is profitable, but I can’t afford to stay
in business any longer. I am going to sell the farm and teach at the local TAFE
College.’ In what sense is farmer Fitzgerald using the word profitable here? Why do
you think his sentiment would be unconvincing if he is referring to economic profits?
(b)Why do you think the motorcar production exhibits strong economies of scale but not
the trucking (transportation of goods by trucks) industry?
Question 2 (5marks, 200 words)
Since the peak in 1976, per capita beef consumption in the United States has fallen by almost
30 per cent. Assuming that beef producers operate in a perfectly competitive market and face
a constant cost industry:
(a)Using diagrams, explain the short run effect of declining demand for beef for a typical
farm and for the market.
(b)Using diagrams, explain the long run effect of declining demand for beef for a typical
farm and for the market.
Question 3 (5 marks, 200 words)
(a)After an economics lecture one day, your friend suggests that taxing food would be a
good way to tax revenue because the demand for food is quite inelastic. In what sense
taxing food is a ‘good’ way to raise tax revenue? Explain
(b)In some cities around the world, the housing market is regulated through rent control
(price ceiling). If you wanted to make housing more affordable, would you choose a
price ceiling or a subsidy? Explain.
Question 4 (5 marks, 200 words)
(a)Suppose the lawn-mowing industry approximates a perfectly competitive industry.
Suppose also that a single firm buys all the assets of the lawn-mowing firms and
establishes a monopoly. Contrast these two market structures with respect to price,
output, and allocation of resources. Would you expect the monopoly to survive?
Explain.
(b)The Best Computer Company just developed a new computer chip, on which it
immediately acquires a patent, and becomes monopoly producer/seller. Show and
explain what happens to consumer surplus, producer surplus and the deadweight loss
(DWL) if the firm goes from a single price monopoly to perfect price discrimination.
Marking Reference
Grade (%)
Criterion
80 – 100
•
Demonstrate thorough understanding of the relevant concepts.
•
Information from appropriate sources is integrated with analysis.
Information is accurately referenced using Harvard System, including in
text referencing if applicable.
•
Demonstrated ability to draw conclusions with appropriate justifications.
Explanations are clear and concise.
•
Well formatted, edited, and minimal grammatical and spelling errors.
•
Timely submission.
70 – 79
•
Demonstrate good understanding of the relevant concepts.
•
Information from appropriate sources is integrated with analysis.
Information is accurately referenced using Harvard System, including in
text referencing if applicable.
•
Demonstrated ability to draw conclusions and attempts some justification
for position with explanations.
•
Formatted and edited to good standard, minimal grammatical and spelling
errors.
•
Timely submission.
60 – 69
•
Demonstrate above average understanding of the relevant concepts.
•
Information from appropriate sources is integrated with some analysis.
•
Accurately reference resources using Harvard System, including in text
referencing if applicable.
•
Timely submission.
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