ECO100 INTRODUCTION TO ECONOMICS-Economics Assignment Help

Assessment type:

Problem-solving Exercises and short report writing – Individual work.

Assessment topic:

Problem-solving exercises and short report writing in Economics

Task details:

QUESTION 1:

Amponsah Fashions Ltd (AF) is a firm in the perfectly competitive fashion dresses industry.

a. Fill the table and graph the results.

b. According to the cost curves, describe and explain where diminishing returns sets in.

c. What is the relationship between ATC and MC, AVC and MC? Explain.

d. Describe AF’s minimum efficient scale (MES).

e. AF is selling in a perfectly competitive market at price of $40 per unit. What is the profit maximising output for AF? Explain. What is the profit or loss for AF? Should AF continue to produce in the long run?

f. If the market price falls to $20, what is AF’s profit-maximising output in the short run? Determine AF’s profit or loss? What should AF do in the long run? Explain.

QUESTION 3:

The cigarette market can be described by the following equations:

Demand: P = 10 – Q (1)

Supply: P = Q – 4 (2)

where p is the price in dollars and Q is the quantity in cartons.

a. What is the equilibrium price and quantity?

b. Suppose the government imposes a tax of $1 to reduce cigarette consumption and also raise government revenue. What will the new equilibrium quantity be? What price will the buyer pay? What amount per carton will the seller receive? How much is the inefficiency of the tax to the economy? Illustrate your answer with the demand and supply diagram represented by equations (1) and (2)

QUESTION 2:

The government was concerned with teenage binge drinking and alcohol related harm in the community. Therefore, the government imposed a tax on Alcopops (i.e. pre-mixed alcoholic drinks) commonly drank by teenagers at social functions. The aim of the tax was to reduce teenage drunkenness and alcohol related harm, but also to raise tax revenue. However, by the end of the financial year the no of teenage drunkenness and alcohol-related harm remained unchanged, and the amount of tax revenue raised was 25% less than expected.

a. As an economist, are you were not surprised about the outcomes of the government’s tax policy. Critically discuss why you were not surprised by the outcome of the tax policy. Use the demand and supply diagram and your understanding of the most appropriate microeconomic concept and tool that you have learned in this unit to illustrate your answer.

b. Explain to the government the incidence of its tax policy. Clearly show the diagram in part (a) relative distribution of the tax burden between sellers and buyers of Alcopops. Also, explain why the outcomes of the tax were not efficient.

c. Recommend at least two alternative policies that the government could implement to reduce teenage drunkenness and alcohol-related harm. You must critically evaluate your recommended policies.

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