Question A2 (15 marks) (a) Jackson is an engineer in an international company. His annual income is $3 million a year. Due to the outbreak of Coronavirus in Hong Kong and the lack of local production of medical mask, he considers to open a local company to produce this product. Besides the data of monthly operational expenses found in following chart, Jackson needs to spend $40,000 to examine his rented industrial building to ensure a clean factory environment which can meet the ISO 13485 standard before his production starts. In the meantime, he needs to order 2 set of machines which cost $200,000 each from Taiwan. The estimated resell value is $150,000 each after one year. Monthly operational expenses Raw materials 5:: alaries (Admin Staff) Rent 100,000 - 20,000 40,000 60,000 80,000 100,000120'5: Currently, Jackson owns 55 million in shares. To nance the setup capital of this medical mask company, Jackson needs to sell half of his shares which can yield the dividends of $250,000 a year. In order to run his new company, Jackson has to quit his currentjob. Since he targets both the local and overseas markets, Jackson estimates the total revenue is $8 million for the first year of operation. Calculate the annual Economic prot of Jackson's new company for the rst year of operation. List the cost items and show your workings. Do you recommend Jackson to start his new business? Explain briefly. (10 marks) (b) Ideal Co. Ltd is a local company which produces medical mask. Due to the outbreak of Coronavirus in Hong Kong, the CEO considers buying a new set of machines to enlarge the production scale. TWO models of the same budget ($200,000) are available and the information is shown below: Model A Resell value after ONE year $115,000 Annual re -air and maintenance fee $25,000 Annual electricity consumption $30,000 $75,000 Which set of machines will you suggest the Company to purchase? Explain briefly with relevant data and working. (5 marks) Question A4 (20 marks) Happy Coconut is one of the 500 price taking firms in selling bottles of coconut juice which is a perfectly competitive market in Country H. The equilibrium price of cooonut juice is $46 per bottle. The following table presents the costs at different output levels for this company. (a) (b) (C) Output Total Cost Marginal Cost Average Total Cost (Bottles 0f (dollars) (dollarS) (dollars) Coconut Juice) 0 30,000 500 39,000 1,000 45,000 1,500 55,000 2,000 70,000 2,500 93,000 3,000 11,7000 What are the profit maximizing output quantity and price of Happy Coconut? What is the amount profit (loss) made bythe company? Show your workings. Explain briefly. (3 marks) Based on the given information and your answers in part (a), draw a set of market-firm diagram and label the critical data of price, quantities, average variable oost and average total cost at the profit-maximizing quantity. Clearly indicate the profit (loss) area in your diagram. No explanation is needed. (6 marks) Suppose there has been a bad harvest of the oooonut. Explain how this affects the market of oooonut juice and how to make the Happy Coconut suffers from bad time. Explain and illustrate this situation in the same market-firm diagram of part (b). (11 marks) (Remark: Significant mark deduction if the instruction is NOT followed and a new set of diagram is drawn for illustration of part (c) separately.) SECTION B : Macroeconomics Answer questions in this section. WRITE your answers in the standard answer sheets. A_ll diagams must be newly drawn by hand. No typing is accepted. Mark penal imposed if any of these instructions are NOT followed strictly. gaggign Bi [1: marks) (a) Can \"Alipay\" be treated as money? Explain in terms of functions of money. (3 marks) (b) The general public of Paula Island holds $688 million cash and there is excess reserve of $564 million in the country's banking system. The following table shows the current balance sheet of the banking system. __ 23,200 23,970 23,200 Total 23,200 (i) Calculate the money su pply (M1) and the required reserve ratio of the banking system of the country. Show your workings. (4 marks) (ii) Suppose the country is in the quick expansion stage of the economic cycle so the central bank decides to increase the required reserve ratio by 3% from the current ratio. At the same time, the general public withdraws $950 million from the banking system. Prepare a new balance sheet ofthe banking system of the county after it is fully loaned up. Show your workings. (4 marks) (c) Refer to question (b)(ii) above, identify the type of monetary policy the central bank conducts with the increase of the required reserve ratio. Explain how the money supply of the country will be affected. (4 marks) Question B2 (20 marks) (a) Country X has the economic data in the table in 2019. Components $Million Private consumption expenditure 500 Government consumption expenditure 100 Net domestic fixed capital formation 250 Changes in inventories 30 Total exports of goods 800 Re-exports of goods 200 Imports of goods 900 Exports of services 300 Imports of services 150 Depreciation 60 Intermediate goods 80 (i) Based on the above data, calculate Country X's Gross Domestic Product at market value. List the component items and show your workings. Name the approach you use for calculation. (6 marks) (ii) Suppose 2019 is the base year and the potential Gross Domestic Product is $1010 million. Name and calculate the output gap. Most likely, Country X in which stage of business cycle? (3 marks) (iii) In 2020, a businessman in Hong Kong bought a face mask machine for 200 thousand USD from Taiwan in February and Hong Kong government announces a HK$10,000 handout scheme to citizens aged 18 and above in September 2020. How would the above issues affect Hong Kong's 2020 Gross Domestic Product? (6 marks) (b) Suppose 180 thousand people are employed, 20 thousand people are unemployed, and 50 thousand people are out of the labour force. Calculate the labour force participation rate. (5 marks)(a) Answer the following questions by using demand and supply analysis for the market of (i) (ii) (iii) 0?) printer. Suppose the production of printer is now oompletelyautomated. Use the demand and supply analysis to explain how it affects the market of printer. What are the effects on the equilibrium prioe and equilibrium quantity of printer? No diagram is needed but you need to describe how the curve(s) shift(s). (3 marks) Suppose the price of ink for printers increases substantially reoently. Use the demand and supply analysis to explain how it affects the market of printer. What are the effects on the equilibrium price and equilibrium quantity of printer? No diagram is needed but you need to describe howthe curve(s) shift(s). (3 marks) After considering both effects of part (a)(i) and (a)(ii), what are the combined effects on the equilibrium price and equilibrium quantity of printer? Suppose we observe that the quantity sold increases in the market of printer. Provide the theoretical explanation of this possibility and illustrate your explanation with a demand and supply diagram. (5 marks) Nintendo is a consumer electronics and video game company. You conducted a marketing research a month ago and estimated the current supply and demand functions of Nintendo Switch. They are described by the following equations: Supply: 05 = 1,000 + 2P Demand: DD = 34,000 8P where 0.0 is the quantity demanded (in units) and GS is the quantity supplied (in units). P is the price (in dollar term). Define equilibrium. Calculate the equilibrium price and equilibrium quantity of Nintendo Switch. Show your working. (4 marks)