Question 1

Use the following demand schedule to calculate total revenue. For each price, indicate whether the demand is elastic, unit elastic or inelastic.

Table 1 - Demand Schedule

Price ($)	Quantity demanded	TR ($)	Price elasticity of demand
5.0	0
4.5	4
4.0	8
3.5	12
3.0	16
2.5	20
2.0	24
1.5	28
1.0	32
0.5	36
0.0	40

  

Question 2

Taxes imposed on petrol, tobacco products and alcohol are an important source of revenue for governments in most countries. In Australia, these taxes are known as excise taxes. For a good with inelastic demand, the tax burden will fall more heavily on the buyers. Explain why this is the case with clear examples.

Question 3

Part A

The Marope Economy has the capacity to produce the goods and services that are outlined in Table 1 below. You are required to:

a. Draw a Production Possibility Frontier (PPF) and list all efficient points of production.

b. Marope Economy wishes to produce 520 billion units of consumer goods. Plot this output on the Frontier and state whether this is an efficient point or not.

Table 2 - Production Possibilities

Output (billions of units per year)	A	B	C	D
Consumer goods	480	420	240	0
Consumer services	0	120	240	300

Part B

Use graphs to demonstrate how the following factors will change the PPF.

a. A decrease in migration

b. An increase in natural resources

c. Changes in technology

Question 4

a. Using the table, construct the cost schedule for a firm operating in the short run.

b. Graph the average variable cost, average total cost and marginal cost curves.

Table 3 - Total, Marginal and Average Costs

Total product (Q)	Total fixed cost (TFC)	Total variable cost (TVC)	Total cost (TC)	Marginal cost (MC)	Average fixed cost (AFC)	Average variable cost (AVC	Average total cost (ATC)
0	$50	$0	$50
1			70
2			85
3			95
4			100
5			110
6			130
7			165
8			215
9			275