Question 1:

Consider that all restaurants need to apply a new technology to check in clients and make sure that they are Covid safe. Implementing this technology is compulsory an generate a fixed annual cost of 500 dollars, independent of whether it produces any output.

a. How does this fee affect each firm's fixed, marginal, and average costs?

b. What would happen to the supply of restaurants?

Question 2:

During the pandemic, many workers started to work from home using digital technologies. Children also started home-schooling using digital technologies. At the same time, technological progress has accelerated in the IT industry. Assume that the market for computer is in perfect competition and initially at the equilibrium. Explain the impact of the pandemic on the supply, demand, equilibrium on market of computers. Give a graphical representation.

Question 3: Consider the market for taxis within Australia. Assume that new regulation cancels the earlier requirement for all taxis to have a special licence.

a. What would happen to the supply of taxi rides? Assuming that customers do not care about the licences, what would happen to the demand for taxi rides? What would happen to the equilibrium price of taxi rides? What would happen to the equilibrium quantity of taxi rides? Show your answers in a diagram and explain.

b. Is the change in equilibrium quantity less, more, or equal to the horizontal shift in the demand or supply curve? Explain why, using your previous diagram.

c. Now assume that, together with the regulatory change in part a., customers start using bicycles more frequently as their mode of transport. Explain the combined effect of these two changes on.

Question 4:

Consider the market for station wagons. For each of the events listed below, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply is increased or decreased.

1. a. People decide to have more children.
2. The price of mini-vans rises.
3. A strike by steelworkers raises steel prices.
4. Engineers develop new automated machinery for the production of station wagons.
5. A stock market crash lowers people's wealth.
6. IMPORTANT: In all the above cases, is the change in equilibrium quantity less, more, or equal to the initial change in demand or supply? Why is this?
7. IMPORTANT: Now assume the changes in parts a. and c. happen simultaneously. Explain what will/may happen to the equilibrium price and quantity.

Question 8: Explain how Real GDP is calculated.

a. Discuss the limitations of GDP as a measure of changes in a country's welfare over time.

b. Discuss the limitations of international comparisons of Real GDP.