MPE781 Assessment Task 1

Description

The assignment provides you with an opportunity to conduct research on/analyse problems related to a contemporary economics issue: International Freight Assistance Mechanism, a temporary measure to help restore critical global supply chains which have been impacted by COVID-19 by the Australian Government. You will need to apply the existing economic theories to develop a consistent argument with good reasoning while evaluating the given problem set critically. Please attempt so that your writing is of high quality and professionally presented, and that it can easily be understood by the general audience, not just economists.

Specific Requirements

Your assignment submission should start with a cover page in which all of the following information should be provided: your full name, student ID and the total word count. Please note that the followings are excluded from the word count: cover page, footnotes, references, tables, figures and appendix (if any).

Following the cover page, please provide your answers to the following four questions. Note that all of these questions are compulsory. Please make sure you are familiar with the assignment marking rubrics (the last page on this document) prior to answering these questions.

Question 1: (10 marks)

In your own words, summarize the key developments of the International Freight Assistance Mechanism (IFAM) in Australia, started in April 2020. In particular, please explain the rationales behind IFAM (or the program), the amount of money that has been committed by the Australian Government to the program to date (i.e., to around August/September 2021) and on which area(s), how the program works and how long the Australian Government intends to run this program.

Much of the information you need can be found in the Austrade’s website - the following link is a good starting point:

https://www.austrade.gov.au/news/news/international-freight-assistance-mechanism

It is highly recommended that you undertake some research to gather information supporting your claims outside the Austrade’s website; for instance, some facts on the effects of COVID-19 on Australian businesses would help formulate your argument regarding the rationales behind IFAM.

Question 2: (10 marks)

Suppose that the products subject to IFAM’s support are all sold in an international (world) market and that the market for them was perfectly competitive before the starting of the COVID-19 pandemic (pre-COVID).

1. Do you think that the Australian business firms who have participated in this market for a long time were all able to make a strictly positive economic profit pre-COVID? Explain your answer with the help of a
2. Now consider the effects of COVID-19 pandemic on the Australian business firms as above. Specifically, assume that the demand for Australian products in the international markets remains the same, but that COVID-19 pandemic resulted in a global supply chain disruption due to higher freight costs and less flights Using a graph, explain these effects of COVID-19 on the output choices and profitability of the Australian business firms (including potential firm entry and exit, if any).
3. If the IFAM program helps to lower the marginal cost of production for the Australian business firms, using a graph, explain what would happen in equilibrium regarding firm entry and exit when firms receive the IFAM

Question 3: (10 marks)

Now, consider an Australian business firm who is a monopolist in the international market for is unique product.

1. Using a graph, explain the effects of COVID-19 pandemic on the output choice and profitability of this Australian business firm (suppose that COVID-19 pandemic does not alter the demand side of the market but, as in Question 2, it increases the marginal cost of production for this Australian business firm).
2. If the IFAM program helps to lower the marginal cost of production for this Australian business firm, using a graph, explain what would happen to this business firm with regard to its output choice and profitability when it receives the IFAM

Question 4: (10 marks)

Find a country in the world other than Australia that has implemented a similar support program/mechanism to IFAM. Give a brief description about that program/mechanism and provide one policy recommendation based on that example which you would recommend to the Australian government to improve the efficiency of the IFAM program. In case there is no useful recommendation from the example, please provide your own recommendation based on your understanding of the IFAM’s development. [Hint: (i) the example of program/mechanism that you are to provide does not have to be air freight related; it can be any policy support for business firms to export their products during the COVID-19 pandemic and (ii) the policy recommendation can be anything you find relevant, so long as you can provide the (economic) rationales behind your recommendations.]

Learning Outcomes

The assignment allows you to demonstrate achievement towards the unit learning outcomes. The ULOs are aligned with specific graduate learning outcomes – that is, the skills and knowledge graduates are expected to have upon completion of their studies – and this assessment task is an important tool in determining achievement of those outcomes.

If you do not demonstrate achievement of the unit learning outcomes, you will not be successful in this unit.

It is good practice to familiarise yourself with the ULOs and GLOs as they provide guidance on the knowledge, understanding and skills you’re expected to demonstrate upon completion of the unit. In this way they can be used to guide your study.