What constitutes a perfectly competitive market structure

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Reference no: EM13162964

Question 1 Australian Greens health spokesperson, Senator Rachel Siewert on 17 May 2011 has recommended a floor price on tobacco to support an ongoing campaign to improve the general health level of Australians. Write a report describing the consequences and implications for tobacco consumers, producers and Australian society generally, of a floor (minimum) price on tobacco products. Your report should be approximately two pages in length, you should use diagrams wherever appropriate and clearly state any assumptions underpinning your analysis.

Question 2 Henry Ergas writing in the The Australian on Februray 26 2010, in part, made the following comments about paying households for electricity generated from solar panels installed on house roof tops: "The economics of solar panels in homes are even worse. .... these would never be worthwhile for homes connected to the grid without very large public subsidies, for the simple reason that providing electric power on a reliable basis involves massive scale economies.

Shifting electric load to home solar panels therefore increases costs in the electricity system (as it replaces a low-cost power source with a high-cost power source), while saving very few emissions." Write a report which provides the economics justification for these comments. Your report should use various cost concepts, including average total costs, economics of scale and minimum efficient scale. Your report should be approximately two pages in length, you should use diagrams wherever appropriate and clearly state any assumptions underpinning your analysis.

Question 3 The McTaggart text book (p314) suggests the following: "Farming, fishing, wood pulping and paper milling, the manufacture of paper cups and shopping bags, grocery retailing, photo finishing, lawn services, plumbing, painting, dry cleaning, and laundry services are all examples of highly competitive industries." Choose one of these or some other industry and develop an argument to support the case that your chosen industry is highly competitive and has elements of what constitutes a perfectly competitive market structure. Support your argument with empirical evidence wherever possible.

Question 4 Only Regional Express (REX) currently flies the commercial air-route between Griffith (NSW) and Sydney. Go to REX's website to determine and list the various prices available for travel on this route. Write a report providing an economic justification for why REX charges different prices for different travellers on the same route, and discuss what may happen if Qantas entered the market and also offered flights on the same route. In the report you must also outline the characteristics of the different travellers, why REX doesn't charge the same price for all travellers, and discuss how REX might even achieve higher profits.

Your report should be approximately two pages in length you should use diagrams wherever appropriate and clearly state any assumptions underpinning your analysis.

Rationale The aims of this assignment are to encourage and facilitate your learning and mastery of relevant technical skills and their associated theoretical underpinnings, with regard to:

• applications of demand and supply

• production and costs

• perfect competition

• monopoly Marking criteria Marks will be gained for:

• the correct solution to specific numerical tasks;

• the complete workings for the numerical tasks;

• an understanding of the underpinning theoretical concepts;

• the clarity and presentation of solutions;

• directness in fully completing the required task.

Reference no: EM13162964

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