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a. The following information shows price ($) and quantity demanded (thousands per week) for entrance fees for a local attraction: Price 0 12345678910 Demand109876543210 i) Calculate the elasticity of demand at each price level change using the midpoint method. ii) Describe how the elasticity of demand changes with respect to price. iii) Calculate the change in revenue for each price change. iv) Are the changes in revenue from part iii) consistent with the values of elasticity of demand that you calculated in part i)? Parts I) to iv) are worth 1.5 marks each. It). Your minister for housing wants to increase the number of privately owned low rental housing units available by 7 percent. i) If the elasticity of supply of this type of housing has been estimated to be equal to 0.3 over the relevant period, how much is the percentage increase in rent required? (2 marks) ii) If the rent for these units is currently $70 a week what is the increase in rent required? (2 marks) Question 4 3. Output TFC TVC' Total Cost Average Fixed Average Average cost Marginal Cost Cost variable Cost 0 1 8 10 2 12 3 25 4 2'? 5 4 6 4 7 7 8 5.?5 9 48 6 44 10 70 i) Fill in the columns above (3 marks) ii} At what point domimmrs mg re ms sewn. xplain your ii} At what point do diminishing returns set in? Explain your answer. (I mark) 4b. Assume that you have taken 12 months\" leave without pay from your fulltime job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the tout of your premises to accommodate your work requirements. You have paid for these setup costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500 and your implicit costs are $45 000. i) Give some examples of your explicit costs. ii) Give some examples of your implicit costs. iii) In your shortrun period, how would the law of diminishing returns be likely to apply if the business was doing so well that you started taking on extra staff members? iv) If your total revenue is $80 000, what is your economic prot? Parts I) to iv) are worth 1.5 marks each. Question 5 a. Do you think that the Australian Banking industry is closer to a Monopoly or Perfect Competition market structure? Give reasons for your answer and explain with the aid of a diagram the difference between the two market structures. Also explain which market structure serves the public better? (4 marks) b. The Australian government is considering different methods for pricing carbon emissions. i) What is the general rationale behind introducing a price for carbon emissions? (1 mark) ii) Explain three methods for addressing the external cost of carbon emissions. (1.5 marks) iii) Demonstrate graphically carbon tax pricing to address the external cost of carbon emissions. (1.5 marks) iv) Discuss who you think would carry the cost of a carbon tax for elastic vs inelastic goods and services. (2 mark) Question 1 a. The following is a set of hypothetical production possibilities for a nation. Combination Computers Cars A D 450 B 100 420 c 250 330 D 330 270 E 510 150 F 550 0 i) Plot the production possibility for the nation. ii) What is the opportunity cost of the rst 100 computers produced? iii) What would be happening if this nation is only producing combinations of 200 computers and 300 cars? iv) Show what would happen to the production possibility frontier if this nation introduced an improved new technology that allowed it to double its production of cars. The productivity of computers is unchanged. v) Explain how the production possibilities frontier reects the law of increasing opportunity costs. Parts 1' to v are worth I mark each. b. Suppose that a Council is considering lowering the fees charged for parking in the CBD but not near the Council's beaches for two reasons: a) to substantially raise its revenue from parking fees in the popular CBD area; and b) to discourage people from using the limited amount of parking near the Council beaches. Are these two objectives mutually consistent? Explain why or why not. Describe any assumptions you may need to make in order to answer this question. (5 marks) Question 2 a. In February 2020 it was reported that Australia's solar power capacity could almost double in a year. i) Use demand and supply curves of solar power to show this doubling of capacity. (2 marks) ii) Use demand and supply curves of solar power to show what is likely to happen to demand for solar power over time in response to the capacity increases. (2 marks) iii) Use demand and supply curves of solar power and coal- red power separately to show what is likely to happen to demand and supply of solar power if the government introduces a tax on coal-red power. (4 marks) b. In an attempt to support the solar-powered motor vehicle industry the government decides to set a minimum price for solar-powered vehicles. Do you think this is a good idea? Explain your decision with the aid of a diagram. (2 marks) Question 3 _
