QUESTION 1

Wares' income is $20 a day. The only things Wares is interested in are kebabs and shomleh (a yogurt drink). The price of a kebab is $2, and the price of a shomleh is $4.

a)Calculate an equation for Wares' budget line (with kebabs on the left side). 2 mark.

b)Draw a graph of Wares' budget line with the quantity of shomleh on the x-axis. 1 mark.

c)What determines the budget line's slope? 1 mark.

QUESTION 3

A new wheat disease destroys wheat crops around the world. Because of paranoiacally severe quarantine restrictions, Australian wheat farms are not exposed to the disease. Assuming the international wheat industry is perfectly competitive and is initially in long-run equilibrium, explain how the wheat disease affects a representative Australian wheat producer's

a)Average revenue in the short run. 1 marks.

b)Output in the short run. 1 mark.

c)Economic profit in the short run. 1 mark.

QUESTION 4

Explain how each of the following events changes the demand for or supply of airline tickets. Roughly draw demand-supply cross diagrams to illustrate the effects on the equilibrium price of airline tickets. (No numbers are required.)

a)The price of jet fuel rises. 2 marks.

b)The price of a kilogram of luggage increases. 2 marks.

QUESTION 7

China implemented a price ceiling on petrol to help poor households.

a)Assuming the laws of demand and supply apply, draw a rough graph to illustrate the petrol shortages created by this price control. (No numbers are required.) 2 marks.

b)Assuming a black market for petrol did not emerge, show on your rough graph the consumer surplus, producer surplus, and deadweight loss due to the price control. 3 marks.

QUESTION 14

There is no doubt that a 'gender pay gap' exists in Australia and many other countries.

a)Why do some economists think that discrimination in the labour market is an unlikely explanation for the persistent inequality in earnings between women and men? 2 marks.

b)Can you think of any plausible objections to their argument? 2 marks.