Reflective assessment 2

Reflective assessment 2

Due date

Week 3: Session 7

Details

NOTE: Student must explain their answers in detail to be awarded good grades. Graphs should be used wherever possible to support the explanation. This assignment is worth 30 percent of the overall marks for this unit

Total = 25 marks.  Marks will be converted to 30 per cent.

PLAGIARISM - ALLOWABLE SIMILARITY INDEX IS 20%

QUESTION 1

1. Why is it important to differentiate between explicit and implicit cost?    1 Mark

2. Classify the following costs as explicit or implicit.  Explain your answer

• Nike spent 1 billion on advertising expenditure
• Jims Transport spent 5000 of fuel
• BHP paid interest on company issued bonds
• Rio Tinto spent 200 million on executive salaries.      0.5 * 4 = 2 Marks

QUESTION 2

If you owned a business and labour is the only variable input, explain:

1. using numerical examples, how decreasing marginal product of labour will affect your marginal returns and marginal cost.   2 Marks
2. how a change in marginal cost can affect your average total cost and your profit.    2 Marks

QUESTION 3

1. 1. Define a price maker and explain why the demand curve of a monopoly is more inelastic than the demand curve of a monopolistic competitive firm.     2 Marks

2. 2. Define normal profit and explain why making normal profit is a requirement for any firm who wishes to remain in business in the long run. 2 Marks

3. 3. Why is a perfectly competitive market structure very unlikely to exist in the real world? 1 Mark

4. 4. Why does the share market closely reflects a perfectly competitive market?   1 Mark

QUESTION 4

 Frank owns a Café and for the last 2 months his total revenue was not sufficient to cover his average total cost resulting in an economic lost.  What are Frank’s options in the short run to minimise his loss. NOTE: There are two options available to him.3 Marks

QUESTION 5

 A manufacturer must decide what level of output is profit maximising quantity. Use graph(s) to illustrate and explain how the manufacturer can use marginal analysis to decide on this level of quantity.  2 Marks

QUESTION 6

1. Assume Frank owns a café along Chapel Street, where there are 10 other similar cafes within walking distance.  What type of market structure is Frank in.? Explain.  2 Marks

2. What can Tom do to maximise his chances of making an economic profit in the short run.2 Mark

QUESTION 7

Define game theory and apply the game theory matrix diagram to illustrate and explain a strategic decision you have made recently. 3 Marks