QUESTION 1 Moving Water Around (6 marks) Dams in the Snowy Mountains hydro-electricity scheme have electricity generating turbines on a chute that connects lower and upper reservoirs. During the day, water is drained from the upper reservoir to the lower to produce electricity. But at night, electricity is used to pump the water back up to the upper reservoir. Since the water is just going back and forth, how can wealth be generated?

QUESTION 2 Stuck in Broken Hill (6 marks) You purchased a roundtrip ticket to a friends wedding in Broken Hill on Saturday for $400, but on Sunday you discover your return flight is cancelled due to weather. The airline will not be able to get you back home until late Monday but Greyhound has an overnight bus route that arrives at 6:00 am Monday for $60. What is the opportunity cost of missing work on Monday?

QUESTION 3 Cooling Systems (6 marks) Carl is the lead engineer on a smart cooling system that works with minimal energy and is voice-activated. Given the revolutionary nature of the system, it took many failed tries to create a system that actually worked, a cost of $30,000. Now each unit sells for $6500 and it costs $5000 in raw materials and labour to produce. Carl receives an order for four new units for a customer, but when he takes the order to his manager, the manager is enraged and asks Carl why he wanted to produce something at a loss. What costs would the manager be looking at to come to this conclusion?

QUESTION 4 Natural Gas Boom (6 marks) Technological improvements in hydraulic fracturing, or fracking, have decreased the cost of extracting smaller pockets of natural gas. What effect does this have on supply and demand as well as on the equilibrium price and quantity? Use a diagram and explain fully.

QUESTION 5 MBA Degree Programs (6 marks) Every year various business magazines rank the quality of the different MBA programs. Why dont all prospective students flock to the highest-ranked program?

QUESTION 6 Airline Pricing (6 marks) Qantas Airways has announced a new scheme for frequent flyers to upgrade to business class seats. Under the previous system, passengers with a specified amount of frequent flyer points were allowed to upgrade to available business class seats. Now, frequent flyers can also bid a mix of frequent flyer points and cash for upgrades. A minimum dollar amount of cash will be required, and Qantas will give guidelines on the likelihood that a proposed bid will be successful. Why would Qantas believe that its profits will be increased by the new scheme? (3 marks). Why would Qantas give a guide to whether the cash bid made by a passenger for an upgrade will be successful? (3 marks