Economic Principles Econ 6001

ASSESSMENT BRIEF
Subject Code and TitleECON 6001 Economic Principles
AssessmentOptional Assessment 1
Individual/GroupIndividual
LengthN/A Take Home Test
Learning Outcomes. Analyse, individually, the role of fundamental micro- and macroeconomic principles Analyse the impact of industry competition on individual businesses. Analyse the impact of monopolies and monopolis1c competition within an industryCommunicate complex economic concepts to business professionals.
SubmissionBy 11:55pm AEST/AEDT Sunday of Week 11
Weighting12%
Total Marks12

Instructions:

1. Read the numbered statements for each question.

2.  Decide which are True and which are False.

3. For each question choose the combination of statements that you think contains the largest number of TRUE statements.

4.  Enter the letter associated with that choice in the appropriate box on the ANSWER SHEET at the end of the document (page 10).

For example: Say for Q1, you thought that statements 2, 3, 5, 7, 9, 10 and 12 were all TRUE then you would enter A in the Q1 box on the Answer sheet (Page 10):


Q1. Consider the following statements and decide which are true. Where relevant you should assume that the ceteris paribus assumptions hold true.  Record the correct combination from the possibilities listed below the list of statements.

1.A market is any institutional entity that brings together potential buyers and sellers.
2.There is an inverse relationship between demand and price which is plotted on a demand curve.
3.Consumers demand a larger quantity of a good because with a fixed income they can afford to buy more when the price falls.
4.Consumers demand more of a good when the price of a complimentary good falls.
5.Inferior goods are goods whose consumption falls in a recession when disposable incomes fall.
6.A negative change in demand implies a move down the demand curve.
7.Complementary goods are those that are bundled free with other goods for promotional purposes.
8.An increase in the number of motorists is likely to shift the demand curve for petrol to the right.
9.When the price of a good rises and the demand for another decreases, the two goods are likely to be substitutes.
10.If the price of a good falls and the demand for another rises, the two goods are said to be substitutes.
11.Inferior goods are goods whose consumption falls in a boom when disposable incomes rise.
12.A change in demand occurs when a hairdresser raises the price of haircuts and the salon experiences a decline in the number of customers.
13.A shift to the left of a demand curve indicates that consumers would be willing to buy less at each and every price.
14.Expectations of a price rise will decrease the demand for a good.
15.Advertising usually leads to an increase in the quantity demanded of a good.

Choose the combination of statements that you think contains the largest number of TRUE statements.

A235791012
B1356111415
C2569111214
D1489101113
E246781315
F1348111314

Q2.     Imagine that, ceteris paribus, a cyclone has an adverse impact on the market for tomatoes. Consider the following statements and decide which are true.  Record the correct combination from the possibilities listed below the list of statements

1.We can expect the post-cyclone price to be higher and quantity demanded of tomatoes to be lower.
2.We can expect the post-cyclone price and quantity of tomatoes to be lower.
3.We can expect the demand curve to shift to a lower level as a consequence of the rise in price brought about by the cyclone.
4.We can expect the quantity supplied to rise as a consequence of the rise in price.
5.The steeper the slope of the demand curve, the greater the rise in price that would result from the cyclone.
6.The new equilibrium will involve a move up and along the demand curve which means that the quantity demanded of tomatoes will fall.
7.The cyclone will cause a shortage of tomatoes at the pre-cyclone price.
8.We can expect the post-cyclone quantity to fall but price to remain constant.
9.A return to the original supply and demand conditions would create a surplus at the post-cyclone price.
10.The cyclone will result in a shift of both demand and supply curves. There is less supply because of the cyclone and less demand because prices rise.
11.If the government fixes the price at the pre-cyclone level after the cyclone occurs, a shortage will exist at that price.
12.The supply curve will become horizontal as a consequence of the cyclone.
13.If the supply curve is vertical, the cyclone will still lead to a rise in price and a fall in quantity demanded.
14.A cyclone coupled with a simultaneous rise in demand would definitely raise price but quantity would be indeterminate.
15.The cyclone will cause a surplus of tomatoes at the pre-cyclone price.

Choose the combination of statements that you think contains the largest number of TRUE statements.

A137912131415
B15679111314
C14569101113
D2346781415
E235710111214
F23468101215

Q3.     Consider the following statements and decide which are true.  Record the correct combination from the possibilities listed below the list of statements. Where relevant you should assume that the ceteris paribus assumptions hold true.

1.Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
2.If an elasticity coefficient is equal to –3.5 then we can conclude that a 1% change in the independent variable is associated with a 3.5% change in the dependent variable in the opposite direction.
3.Elasticity measures the responsiveness of an independent variable to changes in a dependent variable.
4.When demand for farm products is price inelastic, farmers’ revenues rise in a drought because the percentage change in price is larger than the percentage change in quantity demanded.
5.The cross price elasticity of demand for goods A and B is –0.66.  This indicates that the two goods are complements.
6.The price elasticity of a nearly vertical linear demand curve would be close to zero.
7.Your friend tells you that he has increased the price of “Old Grandma’s Pies” because he knows that demand for them is price elastic and that this implies that his revenues will increase.
8.If the demand for farm products is price elastic, farmers’ incomes fall when their crop yields rise
9.When the price elasticity of demand for tobacco products is –0.4 and a 1% increase in the budget on the Quit Smoking advertising campaign reduces smoking by 1%, then an increase in the Quit Smoking campaign budget will have a larger impact on smoking than a 1% increase in cigarette taxes.
10.Inferior goods have negative income elasticities whereas normal goods have positive income elasticities.
11.If we do not ignore the sign then the value of the price elasticity of demand coefficient gets larger as we move down the demand curve (i.e. as price falls)
12.The income elasticity of demand for some normal goods is greater than one.  This indicates that demand for those goods is price elastic.
13.The price elasticity of supply for a linear supply curve is positive.
14.A vertical supply curve is called a perfectly elastic supply curve.
15.An income elasticity of 2.45 signifies that a 1% change in income will result in a 2.45% change in quantity demanded.

Choose the combination of statements that you think contains the largest number of TRUE statements.

A124678101215
B2457910111315
C2356711121314
D1367810111214
E36781112131415
F1458910121314

 Q4.    Consider the following statements and decide which are true.  Record the correct combination from the possibilities listed below the list of statements.

1.Bob’s dad owns a news agency. He expects Bob to drop off pamphlets on his way home without pay because he argues that Bob has to get home anyway. That hour’s work is an implicit cost of the news agency.
2.Accounting costs include both implicit and explicit costs.
3.In the long run all factors are variable except for technology which is fixed.
4.In production theory, the short run is a situation which considers the way output changes over relatively short periods of time.
5.For the economist profits are equal to revenues minus all opportunity costs — variable or fixed.
6.Ceteris paribus, the impact of the removal of a shift of workers at an oil refinery over a five year period would be an example of a short run production change.  
7.When McDonalds increases the scale of its operations, this is an example of the long run.

Consider statements 8 –15 using the following graphs. Assume the short run for both graphs.

8.At points immediately to the right of B there are increasing returns to scale.
9.At points immediately to the right of B, the marginal product of labour is increasing
10.At point B, the average product of the variable factor is larger than the marginal product of the variable factor.
11.The marginal product of labour is zero at point A.
12.In Graph 2 the marginal product at D is lower than at C because of the Law of Diminishing Returns.
13.In Graph 2, the average product at C is the same as it is at D.
14.Graph 2 shows that there are constant returns to the labour input.
15.Graph 2 exhibits constant returns to scale.

See next page 6 for Q4 combinations.

Q4 Choose the combination of statements that you think contains the largest number of TRUE statements.

A137912131415
B15679111314
C14569101113
D2346781415
E235710111214
F23468101215

Q5.     Consider the following statements and decide which are true.  Record the correct combination from the possibilities listed below the list of statements.

1.If the returns to the variable input were constant in the short run then the total variable cost curve would be a straight line going through the origin of the graph
2.In the short run the average variable cost curve would be horizontal if the returns to the variable input were constant
3.In the short run, the MC curve would be above the AVC if the average product of labour was falling.
4.On a graph, the average fixed cost curve would be shown as a horizontal straight line.
5.TC = (AVC+AFC)xQ.
6.In the short run, when increasing returns are present, MC and AVC are both upward sloping because the productivity of the variable input is increasing.
7.As output increases the vertical distance between average variable and average total costs narrows.

Answer questions 8 –14 on the basis of the following diagram:

8.The average product of labour is at its maximum at point F.
9.For Q = 0Q1, total revenue is given by the distance 0A.
10.For Q = 0Q1, total costs equal the area measured by the rectangle 0ABQ1.
11.For Q = 0Q1, total variable costs are equal to the area  0CDQ1.
12.For Q = 0Q1, total fixed cost is measured by the distance BD.
13.The MC curve must always cut through the minimum points of the AVC and AFC curves.
14.In the short run, U-shaped AVC curves occur because of diminishing, constant and increasing returns to scale.
15.Economies of scale give rise to the rising portion of the long run average cost curve.

See Page 8 for Q 5 combinations.

Q5 Choose the combination of statements that you think contains the largest number of TRUE statements.

A4689121415
B25810111315
C136791213
D125781014
E34612131415
F123571011

Q6.     Consider the following statements and decide which are true.  Record the correct combination from the possibilities listed below the list of statements.

1.Marginal revenue is the change in revenue associated with the employment of one more worker.
2.Average revenue equals profit per unit of output minus average total cost.
3.Fixed costs have no impact on marginal costs.
4.The output of any one purely competitive firm is so small relative to market output that it has to accept the output desired by customers in that market.
5.A purely competitive firm faces a horizontal demand curve which implies constant average revenue and perfect price elasticity.
6.A purely competitive firm that is out to maximise profits sets its output where MR equals MC on condition MC is rising.
7.For a firm in pure competition, the profit maximisation rule is either MR=MC or P=MC or AR=MC.
8.A purely competitive firm will have to shut down in the short run if it makes a loss.
9.A purely competitive firm always makes a profit when MR is greater than MC.
10.The profit maximizing rule for pure competition is MC=MR. For a monopoly, MR must also be larger than AR.
11.For the purely competitive firm, normal profits occur when ATC exceeds marginal revenue.
12.Profit per unit of output is equal to average revenue minus average total cost.
13.In the short run, a firm will shut down when the price it receives for its products is below its minimum average variable cost.
14.The industry (market) supply curve can be derived by vertically summing the MC curves of individual firms in the industry.
15.A purely competitive firm always makes a profit when AR is greater than ATC.

Choose the combination of statements that you think contains the largest number of TRUE statements.

A1248101114
B2358121315
C1467101114
D3567121315
E2679101213
F1349131415

Enter your choice for each question on the separate Answer Sheet on P10.

TAKE HOME TEST ANSWER SHEET

Please fill in all details clearly.

Student ID         
Full name:  

                        Family name                           Given name

Subject code and title: ECON 6001 Economic Principles
Academic staff member: George Bredon
Take Home TestDue date: Sunday May 7th 2017 midnight

ANSWERS: Enter the correct combination in the box below the question number.

Q1Q2Q3Q4Q5Q6
        

SUBMIT ONLY THIS ANSWER SHEET to george.bredon@tua.edu.au

I declare that the work contained in this assignment is my own, except where acknowledgement of sources is made.

Signed:Date:
  

Order a Similar or Custom Paper from our Writers