Assignment
Section 1
Question I
Stan buys a 1989 Ford Capri with the intention of repairing, restoring and selling it. He anticipates that it will cost him $20 000 to purchase, repair and restore the car, and that he can sell the finished car for $26 000. When he has spent a total of $10 000 on the project, he discovers that he needs to replace the engine. Stan will incur $6000 in explicit costs to replace the engine. If he replaces the engine he can sell the car for $26 000. He can sell the car without the new engine for $18000. What should he do?
Question II
Suppose you live in a populous neighbourhood. What are the external costs of repairing the roof of your house on the weekend? Use a diagram to illustrate your answer.
Question III
Consider the perfectly competitive market for bananas in Australia using supply and demand model. Explain the effect of each of the following with the help of a diagram on equilibrium price and quantity:
i. Conflict with China.
ii. Flooding in Queensland.
iii. Invention of a new banana plant variety that is relatively easy to grow.
iv. Shortage of workers on bananas farms.
v. Breakout of a new fungal disease that damages banana production across the country.
QUESTION IV
Calculate the relevant price elasticity and income elasticity. Analyse the data carefully for ceteris paribus conditions.
|
|
Price
|
Quantity
|
Wage
|
|
June 1
|
0.20
|
210,000
|
120
|
|
June 15
|
0.25
|
200,000
|
120
|
|
June 30
|
0.25
|
205,000
|
125
|
|
July 15
|
0.20
|
225,000
|
130
|
Section 2
Question I
Suppose the Australian economy is experiencing a recession due to COVID-19. Discuss the impact of successful mass vaccination drive against COVID-19 on the unemployment rate and output in Australia. Demonstrate the relationship using Aggregate Demand and Aggregate Supply model.
Question II
Critically discuss and compare the models of perfect competition and monopolistic competition. Which model is better suited to explain the dynamics of the market for canned tomato soup in Australia?
Format your assignment according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.