Reference no: EM1390454

Part-1

1. Theory of the Firm:

a) If, in an efficient brewing industry, firms operating at lowest possible average cost produce 20 barrels of beer per day and the market quantity demanded is 500 barrels per day, how many similarly sized firms will be competing in this market?

b) If, in an efficient water-supply industry, a firm that operates at lowest possible average cost produces 200 million litres of tap water per day and the market quantity demanded is 100 million litres per day, how many firms will operate in this market?

c) Given your answers above, name the market structure for the beer market and for the tap water market?

d) Define the break-even price in the beer market.

e) If the market price of beer falls below its break-even price (for example as a result of reduced demand), how will firms respond, in the short-run and the long-run?

2. Subsidies and income distribution:

a) Comment on the possible use of a subsidy to correct for market failurein the New Zealand housing market for first home buyers.(Your answer should include a sentence or two stating why you think there is failure in this market.)

b) Why is income inequality regarded by many people as a form of market failure?

c) Describe how tax creditsare used in New Zealand to modify the distribution of income

3. The final two marks are awarded, on an individual basis, for participation in marking other groups' scripts.

Part-2

QUESTION 1:MARKETS IN NEW ZEALAND

You will write about one of the following markets in Auckland:

1 Cafes
2 Boat designers
3 Bus services to Rotorua
4 Solar energy equipment
5 Rental property managers
6 Storage
7 Tree services
8 Bicycle retailing
9 Indian restaurants
10 Flights to London
11 Motels

a) Calculate: =MOD(your student ID num,11)
using EXCEL, to get a number from 1 to 11.

b) Identify your market; ie the market that matches your answer in (a).

c) Using information from the ‘Yellow Pages' or other appropriate sources; give an estimate of how many firms supply this market.

d) Identify a leading firm in this market.

e) Identify the competitivemarket structureforyour market, giving a reason for your choice.

f) Identify and define a different market structure, giving an example of another industry, not in the above list.

Considerchanged circumstancesthat would lead to ashift in the demand for, or the supply of, the goods or servicesproduced by the firms in your market.

(i) Identify and discuss one possible changethat would cause anincreasein demandin your selected market.Your answer should include a diagram showing the impact on equilibrium price and quantity supplied.

(ii) Identify and discuss one changed circumstancethat would cause a decrease in quantity demanded(but not a decrease in demand) in your selected market.

(iii) Suggest two different events - one resultingfrom a demand-shift and one from a supply shift - that would cause adecreasein market pricein your market.

h) Comment on whetherthe good or service supplied in your market is likely to be price elastic or price inelastic.

i) Identify periods (months of the year, or days of the week) ofpeakdemand and off-peak demand for your market. Notewhether demand is more price elastic in peak or off-peak periods. Also give an example of an industry not in the above list that does not operate for all of the year.

j) Comment on whetherthe outputs of your selected market are internationallytradable?Your answer should note whether local firms in your market are subject to international competition.

QUESTION 2:IMPERFECT COMPETITION:

You will write about the structure of this industry by discussing one of the following firms:

1 BNZ
2 Rabobank
3 Kiwibank
4 ASB Bank
5 HSBC
6 SBS Bank
7 TSB Bank

a) Calculate: =MOD(your student ID num,7)+1 using EXCEL, to get a number from 1 to 7.

b) Select thefirm that matches your answer in (a).

c) Identify:
• two services that your firm supplies to New Zealand firms or households
• another firm that is not a bank that supplies similar services
• one international service that your firm supplies
• the firm's ownership (NZ government, private, or foreign)

d) Identify a story (2010-14) in stuff.co.nzrelating tothe activities of your firm.

e) Using your company's website, your story from stuff.co.nz, andany other information you have gathered, comment, in two paragraphs, on the size of your firm in its market,and on any ways thatthe New Zealand government influences your firm's market. 

f) Comment on how depreciationof the $NZ exchange rate mightaffectyour firm's activities.

QUESTION 3:AIR POLLUTION

a) Use the Library'sNewzText-plus electronic database to select a 2013 or 2014story about air pollution in New Zealand or in China.
[Note: You are strongly encouraged to choose a different story from the stories your friends have chosen.]

b) In about 300 words, write about the
• argument presented in the article
• marginal private cost and marginal social cost of activities that cause air pollution
• any policies that governments or city councils could adopt to correct excessive pollution levels note that your answer will draw on other material; not only the article from (a)

QUESTION 4:IMPORTS

You will write about New Zealand's trade in with one of the following countries:

1 Spain
2 Portugal
3 Greece
4 France
5 Italy
6 Poland
7 Uruguay
8 Mexico
9 Colombia
10 Madagascar
11 South Africa
12 Turkey
13 Sri Lanka

a) Calculate:
=MOD(your student ID num,13)+1
using EXCEL, to get a number from 1 to 13.

b) Select the country that matches your answer in (a).

c) Using information from Infoshare (Statistics New Zealand), determine (for 2013) total imports from your selected country, total exports to your selected country, and the balance of trade between New Zealand and your selected country. [2 marks]

d) Using information from any source, identify one product that this country exports. Then, using data from Infoshare,determinethe amount of this product (in $) that New Zealand imported from your selected country in 2013.You will find the required Infoshare data under 'Exports and Imports', 'Harmonised Trade - Imports'.

e) Comment onthe coststhat New Zealandersincur - what New Zealanders give up - in order to enjoy the benefits of theseimported goods.

f) Identify the currency used by your selected country, and find (identifying your data source) the present exchange rate between the New Zealand dollar and that currency.

g) Comment on how a depreciation of your selected country's currency would affect its trade with New Zealand.

h) Identify three types of payment that are included in a country's current account.

i) Using tradingeconomics.com, comment on the current account balances (as a percent of GDP)since 2004for your selected country,andfor China, suggesting what problemthese two chartsreveal.

As part of your answer, you will need to click on the "Current Account" to GDPnumber in the website's summary table to see a country's chart. Copy and paste (or save and insert)each chart into your assignment, clearly identifying the charts' source website.

j) Suggest a solution to the problem revealed by these charts.