Question 1 [25 Marks]

Assume a monopolistic firm with a constant marginal cost (MC). The firm's demand schedule is given by table 1 below.

Calculate the firm's total revenue. Average revenue and marginal cost. Output Price (Rands) Total Revenue Marginal Revenue

output price(R) total revenue marginal revenue

3 300

5 250

8 220

9 200

13 180

15 160

19 140

24 100

30 60

1.1 Find the firm's total revenue schedule, entering the data into the table where indicated. (10)

1.2 Use these data to determine the marginal revenue schedule (Show calculations) (10)

1.3 Assuming a constant marginal of R40, what output level and price will maximize the firm's profit? (5)

Question 2 (25 Marks)

Price stability is one of the main macroeconomic objectives hence monetary authorities pursue monetary policy to Suppose that you are a member of the Monetary Policy Committee of the SA Reserve Bank. The economy is experiencing a sharp increase in inflation.

2.1 What are the options for the SARB, what response do you recommend and why? [hint: tools of monetary policy] (15)

2.2 Despite its success, monetary policy has certain limitations and faces real-world complications. Briefly discuss some of the complications. (10)

Question 3 (40 Marks)

Read the case study below and answer the questions that follow.

It has certainly plunged the world economy into a very deep but mercifully a short recession. Everybody's been hurt. I don't think anybody's really been spared by this - it's a combination of fear, uncertainty and the reaction to the lockdowns. Now, a lot of people blame this deep recession on the lockdowns, but I don't think that's a fair assessment. If you look at a country like Sweden, even though they didn't have a lockdown, their economy still suffered pretty severely. It is mostly the uncertainty and the fear of catching the virus that is stopping consumers going to the places they normally would, and that's hurting the economy. Looking at historical precedents, it's about three times as bad as the global financial crisis of 2008 in terms of GDP decline on an annual basis. It's not quite as bad as the Great Depression in the 1930s, where the output drop was sustained over a three to four-year period, and the unemployment rate went up to 25% in the US. This time so far it only went up to 13% in the US, but it's the worst downturn we've had globally since the 30s. https://www.google.com/search?q=covid+and+the+economy&oq=covid+and+the+e&aqs=chrome.1 .69i57j0i457j0l6.9014j0j7&sourceid=chrome&ie=UTF-8

Discuss in detail, with examples, how the COVID 19 pandemic has affected the global economy. (Hint: relate to the macroeconomic objectives)