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2 a. Explain what the term marginal analysis means. b. Suppose Dell Technologies is currently selling 250 000 Inspiron laptops per month. A manager at
2 a. Explain what the term marginal analysis means. b. Suppose Dell Technologies is currently selling 250 000 Inspiron laptops per month. A manager at Dell argues: 'The last 10 000 laptops we produced increased our revenue by $8.5 million and our costs by $8.9 million. However, because we are making a substantial total profit of $25 million from producing 250000 laptops, I think we are producing the optimal number of laptops.' Briefly explain whether you agree with the manager's reasoning. c. What is meant by increasing marginal opportunity costs? Question 3 a. Explain which of the following statements represent a positive analysis and which represent a normative analysis. (i) A $2 per-packet tax on cigarettes will reduce smoking by teenagers by 12 per cent. (ii) The federal government should spend more on cancer research. (iii) Rising paper prices will increase textbook prices. (iv) The price of coffee at a caf is too high. Tutorial 1 (week 2) b. Briefly explain whether each of the following is primarily a microeconomic issue or a macroeconomic issue. (i) The effect of higher cigarette taxes on the quantity of cigarettes sold (ii) The effect of higher income taxes on the total amount of consumer spending (iii) The reasons for the economies of East Asian countries growing faster than the economies of Sub- Saharan African countries (iv) The reasons for low rates of profit in the airline industry. Question 4 Draw a production possibility frontier showing the trade-off between the production of wheat and the production of barley. a. Show the effect that a prolonged drought would have on the initial production possibility frontier. b. Suppose genetic modification makes barley resistant to insects, allowing yields to double. Show the effect of this technological change on the initial production possibility frontier
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