Reference no: EM132926969

Coursework - All questions must be answered

(1) When chef Paolo prices his speciality ‘pizza-n-all' meal at £25, he sells 20 meals a day.
When he prices his pizza meal at £22, he sells 21 meals a day.

A. Suppose Paolo reduces his price from £25 to £22. Explain the impact of the price reduction on the revenue he receives from the first 20 meals he sells.
B. Calculate the additional revenue generated from the additional meals he sells when he lowers his price to £22.
C. Calculate the marginal revenue Paolo receives from the 21st meal. How does that amount relate to the amounts you calculated in (a) and (b)?
D. Is Paolo's decision to reduce his price from £25 to £22 a good one? Why or why not?

(2) See the four statements below:
(i) Economies of scale lower total cost of production
(ii) Economies of scope give rise to natural monopolies
(iii) Diseconomies of scale justify the breakup of conglomerates
(iv) The benefits from vertical integration justify hostile takeovers.
A. All are correct
B. (ii) is correct
C. None is correct
D (iii) and (iv) are correct

(3) Livestock farmers frequently give antibiotics to their herds. The antibiotics create drug-resistant bacteria, making them less effective. This harms future users of antibiotics who will be using less-effective drugs
A. What is the nature of the market failure?
B. Explain whether livestock farmers are more likely to overuse or underuse antibiotics.

(4) Which of the following statements is TRUE?
I. In the face of a positive externality, a perfectly competitive market produces less than the socially optimal quantity of output.
II. If vaccinations create an external marginal benefit, the marginal social benefit of vaccinations will always exceed their private marginal benefit.
III. In unregulated markets, negative externalities create deadweight losses, but positive externalities do not.
IV. In the face of a negative externality, a perfectly competitive market produces more than the socially optimal quantity of output.
A. I, II and IV are correct
B. III only is correct
C. I and III are correct
D. I and IV are correct

(5) Fill the missing spaces in the sentence below: The fact that market outcomes fail to achieve Pareto efficiency in the case of ______, implies that ______.
A. externality; government regulation is necessary
B. natural monopoly; private property rights are unethical
C. public goods; government action may improve the allocation of resources
D. public goods; government must maximize income tax revenues

(6) Students at a nearby college often complain about assignments requiring group work. The statement "I could have done a better job by myself" is often heard. Using the theory of public goods explain whether the quality complaint heard by students makes sense

(7) Explain whether government spending on space exploration is an injection or a withdrawal from the economy. Does your answer change if all increase in space exploration pays for USA produced hardware?

(8) Using your own example explain how the macroeconomic objectives of a government might conflict.

(9.A) How is the demand for money related to the velocity of circulation money?
(9.B) How is the velocity of circulation of money related to inflation?

(10.A) Recent measurements have shown a significant deterioration in the quality of the Scottish seaside. Which of the following statements are compatible with this observation?
A. The real value of GDP has increased
B. The real value of GDP remains the same
C. North Sea oil wells have dried up
D. The price of swimming costumes has gone down
(10.B) The impact of Covid-19 on happiness is negative because
A. it decreased economic activity
B. it coincided with Brexit
C. it forced social isolation
D. it obliged people to develop new Information Technology skills
(i) A is correct
(ii) A and B are correct
(iii) A and C are correct
(iv) All of the above are correct

(11) In the table below, C is consumption expenditure, I is investment, G is government expenditure, and NX is net exports. All figures are in pounds.

The equilibrium level of real GDP is:
(A) £2200
(B) £2500
(C) £2400
(D) £2300

(12) When the consumption function lies above the 45-degree line, households
(a) spend on consumption a decreasing percentage of any increase in income.
(b) save all of any increase in income.
(c) are dissaving.
(d) spend on consumption an increasing percentage of any increase in income.

(13) In the diagram below, the multiplier is
(a) 1.5
(b) 2.0
(c) 3.0
(d) 2.5

(14) Assume the following economy: Autonomous Consumption = £3 mils; Marginal Propensity to Consume = 0.8; Business Investment = 52; Government spending = £127 mils income tax rate = 40%.
(a) Find the equilibrium size of income Y
(b) Identify whether the government runs a budget deficit or a budget surplus

(15) An increase in expected inflation will shift
a. both the short-run and the long-run Phillips curves to the right.
b. only the short-run Phillips curve to the right.
c. only the long-run Phillips curve to the right.
d. the short-run Phillips curve to the right and increase the slope of the long-run Phillips curve.

(16) An increase in worker productivity brought about by the introduction of new technology into the workplace will
a. shift the long-run Phillips curve to the left.
b. shift the long-run Phillips curve to the right.
c. decrease aggregate demand, since workers will lose their jobs.
d. cause the aggregate demand curve to become horizontal.

(17) Suppose that the government in the economy of the diagram below regards 9 percent unemployment as unacceptable. If the government insists on reducing the unemployment rate from 9 percent to 7 percent, regardless of the consequences, then
a. pressure will build in the economy to continuously reduce the rate of inflation.
b. the long-run Phillips curve becomes horizontal, freezing the rates of inflation and unemployment.
c. the inflation rate will increase but the unemployment rate will stay at 7 percent.
d. in the long run the rate of unemployment remains unchanged, but inflation will likely accelerate.

(18) Will the following lead to cost-push or demand-pull inflation?
(a) The discovery of a large and rich vein of gold in the banks of Lagan
(b) More militancy in wage demands by trades unions
(c) A fall in output as a result of a prolonged lockdown of business while the government pays for salaries of furloughed workers
(d) A higher tax on microchips
(e) Increasing industrial concentration leading to oligopolistic industrial structures

(19). Explain why deficit finance of government expenditure may lead to ‘crowding out'

(20) In the UK a Big Mac burger costs £3.19. In the highly attractive tourist island of Dreamland it costs 18.98 local currency units (LCUs). The current actual exchange rate (bank conversion price of the sterling pound) is £1 to 4 LCUs of Dreamland. If the Purchasing Power Parity theory is correct in the long run, do you expect Dreamland's LCU to appreciate or depreciate vis-à-vis the sterling pound?

(21) Assume that when digging to plant flowers at the backyard of Jordanstown a very rich vein of gold is discovered. If the government (a) monetises (b) sterilises this windfall how will the sterling pound - EU euro exchange rate be affected?

Attachment:- Economics and the Business Environment.rar