Question
Henri quit his job as a teacher earning AUD 70,000 per year to start his own food kiosk business. To save on rent, Henri utilized
Henri quit his job as a teacher earning AUD 70,000 per year to start his own food kiosk business. To save on rent, Henri utilized his own property. He normally earned AUD 50,000 annual rent from this property. Also, to start the business, Henri used AUD 60,000 from his own savings which he earned 4% interest per year. Further in order to start the business, Henri borrowed $40,000.00 from the bank and was paying 6% interest per year.
Henri's first year of business can be summarized as follows:
| Item | Amount $ |
| Revenue- Food section | 250,000 |
| Revenue- Liquor | 180,000 |
| Revenue-Soft drinks | 40,000 |
| 2 Cashiers expense (wages per worker) | (30,000) |
| Food van | (100,000) |
| Manager wages | (60,000) |
| Food preservatives | (30,000) |
| Equipment expense | (60,000) |
| Motorcycle expense to ease movement in city | (30,000) |
| 2 food freezers (cost per freezer) | (5000) |
Based on your calculations of accounting profit and economic profit, would you advise Henri to return to his teaching job or continue with the food kiosk business?
Show your work! (7 Marks)
ANSWER:
Question 3 (11 Marks)
Assume the table below is extracted from Dodi company Ltd a perfectly competitive firm selling cabbages. Assume that when the firm's selling price is AUD 15, the marginal revenue is also AUD15.
- Complete the table below and answer the questions that follow. 3 Marks
| Quantity (Kg) | AVC | AFC | ATC | MC |
| 2.50 | 7.50 | 5.10 | ||
| 3.50 | 9.00 | 3.00 | 9.00 | |
| 4.50 | 10.00 | 2.50 | 12.50 | |
| 5.50 | 14.00 | 1.80 | 13.00 | |
| 6.00 | 18.00 | 1.67 | 15.00 | |
| 10.00 | 25.00 | 1.43 | 16.00 |
Qty =Quantity; AVC=Average variable cost; AFC = Average fixed cost; ATC=Average Total Cost; MC= Marginal Cost; Rev = Revenue; MR= Marginal Revenue; Kg = Kilogram
ANSWER:
- Based on your answers to the table above, identify the profit maximizing quantiy supplied by the firm. Calculate the amount of profit/loss at this optimal point. Show your work. 4 Marks
ANSWER:
- State and examine the characteristics for a perfectly competitive firm such as Dodi Ltd selling cabbages. 4 Marks
ANSWER:
Question 4 (7 Marks)
The table below is extracted from Happyland Republic, Bureau of Statistics records for 2019-2020. Use the information in this table to answer the questions that follow.
| Items | Base year 2019 | 2020 | ||
| Production | Price | Production | Price | |
| Used cloth (units) | 4,000 | 50.00 | 5,000 | 60.00 |
| Components used tractor factory production (units) | 8,000 | 500.00 | 11,000 | 1,200.00 |
| Cloth (units) | 8,000 | 25.00 | 12,000 | 30.00 |
| Beef gifts during cultural festival (Kg) | 1,500 | 2.00 | 1,700 | 3.00 |
| Milk (litres) | 5,000 | 1.30 | 7,000 | 2.50 |
| Computers (Units) | 2,000 | 500.00 | 2,500 | 600.00 |
| Printers (Units) | 500 | 300.00 | 400 | 355.00 |
| Raw materials for car assembling plant (Units) | 4,500 | 250.00 | 4,450 | 300.00 |
- Calculate Happyland Republic's nominal GDP, real GDP in 2020. Also, calculate the GDP deflator if 2019 is used as the base year. 5 Mark
ANSWER:
- Double counting must be avoided when measuring GDP. State and examine four (4) transactions that are excluded from GDP to avoid overstating the size of the economy of a nation. 2 Marks
ANSWER:
Question 5 (11 Marks)
- According to Australia Bureau of Statistics, in 2020 the population of Australia is about 25.6 million. The adult population over the age above 15 years was reported to be about 21.3 million and the labour force is 16.5 million. The population employed was about 13.4 million. Following this information;
- What is the population of the people that is not included in the labour force? Show your work. 2 Marks
ANSWER:
- Calculate the percentage of the people employed and the unemployment rate in Australia. Show your work. 4 Marks
ANSWER:
- Currently unemployment has increased in Australia. What are the 2 main causes of increasing unemployment in Australia. Your answer should be based on the case study used during this trimester and current events events.
2 Marks
ANSWER:
- Examine the causes of at least two (2) main types of inflation 3 Marks
ANSWER:
Question 6 (7 Marks)
The Australia Federal Government established a AUD 2 billion grant to help sectors affected by the bushfires to get the support they needed to recover. Use the Aggregate Demand and Aggregate Supply Model below to answer the questions that follow.
- Using the Aggregate Demand and Aggregate Supply Model did the 2019/20 cause economic expansion or economic contraction in Australia. Name at least three sectors that were affected by the bushfires and examine the impact of the bush fires to the economy of Australia. 5 marks
ANSWER:
- Employ the Aggregate Demand and Aggregate Supply Model to explain the benefits of the Australia government AUD2 billion grant to the economy.
2 marks
ANSWER:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals Of Investments Valuation And Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
10th Edition
9781266824012
