QUESTION 1 [25 marks]

(a) According to Johnn Capozzi (1978) 'A free lunch is only found in mouse-traps'. Explain why do economists argue that 'there is no such thing as a free lunch'? [5]

(b) Why should policymakers think about the role of incentives in managing market economy? [5]

(c) Discuss main reasons why government intervenes in the agricultural market in Namibia. [15]

QUESTION 2 [25 marks]

(a) Identify and discuss four key differences between monopolistic competition and perfect competition. [8]

(b) Why is the monopolistic competition market structure considered as inefficient when compared to the perfectly competitive market structure? [10]

(c) Do you agree that "market power is not such a bad thing."? Motivate your answer. [7]

QUESTION 3 [25 marks]

'Competition exists in every field, and, believe it or not, it can actually be good for your business venture' -anonymous. It is argued that 'Competition is the best stimulant of economic activity since it guarantees the widest possible freedom of action to all'. Adopted from European Commission, First Report on Competition Policy

(a) Sugest to the new Minister of Energy, on the need to introduce competition in the energy sector in Namibia. In your note you should make the case for competition, and why the current circumstance of monopoly is inferior to competition, from an economic point of view. (15)

(b) To say that the government can improve on markets outcomes at times does not mean that it always will succeed. Discuss why government intervention often fail to improve market outcomes [10]

Question 4 [25 marks]

In October of 1993, the Yugoslavian government created a new currency. One was worth one mullion of the old dinars. The government simply removed six zeros from the paper money. This did not stop the inflation. Between October 1993 to January 15, prices increased by 5 quadrillion percent. Many Yugoslavian business refused to take the Yugoslavian currency and instead used the German Deutsche Mark. The average daily rate of inflation as 100%.

In January 1994, the government introduced the 'super' dinar equal o 10 mullion of the 'new' dinars.

(a) In your view, why did the Yugoslavian businesses refuse to take the Yugoslavian currency and instead used the German Deutsche Mark? [5]

(b) What is price stability and why is it important particularly for business environment? [10]

(c) Explain why should deflation which is described as falling of general price level cause problems to the whole economy? (10)

QUESTION 5 [15 marks]

(a) Discuss the difference between GDP & GNP? (5marks)

(b) Is Growth Desirable and Sustainable? Economists typically see economic growth as desirable and sustainable. But not all social observers agree. Explain why? Hint: what are Antigrowth views? [10]

(c) Discuss the reasons behind the fluctuations in the Gross Domestic Product of Namibia. [10]