Question

In: Economics

QUESTION 1 1a) A community in Northern Namibia produces only two goods, TVs and CDs. With...

QUESTION 1
1a) A community in Northern Namibia produces only two goods, TVs and CDs. With the aid of properly labelled production possibilities curves illustrate each of the following (putting TVs on the vertical axis).
i) A shift in production from CDs (services) towards TVs (goods). (5)
ii) An increase in the potential output of the community due to a greater availability of the factors of production. (5)
iii) Using well labelled diagrams, explain how the equilibrium price and equilibrium quantity of apples will change as a result of the following;
First scenario : A change in the wages of farm workers from R150 per day to R200 per day. (10)
Second Scenario : A decrease in the price of fertilizers and a concurrent increase in the demand for apple juice. (10)
1b)
i) Briefly explain price elasticity of demand and how it is measured. (5)
ii) Explain with diagrams and relevant examples, THREE (3) categories of price elasticity of demand. (9)
iii) Explain any THREE (3) determinants of price elasticity of demand. (6)
1c)
1c (i) Lonewolf Ltd is the sole manufacturer and supplier of solar panels in the country. As a result of this the CEO claimed in a recent meeting that he can set any price he wishes and sell as many units of his product as he wants at that price. Is this correct? Motivate your answer. (7)
c(ii)Explain using properly labelled diagrams, why a perfectly competitive firm will earn only normal profit in the long-run. (16)
c(iii) Explain SEVEN (7) conditions necessary for a perfectly competitive market to exist. (7)

Solutions

Expert Solution

A)

Production possibilities curves – CDs and TVs

1 The PPF in orange shows the shift in production from CDs towards TVs. The PPF in black is the original PPF.

2 The PPF in purple shows an outward parallel shift because of an increase in potential output of the community due to a greater availability of the factors of production.

b)


Related Solutions

QUESTION 5 Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative...
QUESTION 5 Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative advantage in lace, a move toward free trade will A. harm chocolate workers in the short run, benefit lace workers, but benefit the nation as a whole. B. benefit chocolate workers, harm lace workers in the short run, but harm the nation as a whole. C. harm chocolate workers in the short run, harm lace workers, but benefit the nation as a whole. D....
Question 2 (a) The output and prices in an economy that produces only 3 goods are...
Question 2 (a) The output and prices in an economy that produces only 3 goods are as given in the table below. Use the information in the table to answer the questions that follow. [Show your calculations.] Good Price: 2017 Number of Goods (millions): 2017 Price: 2018 Number of Goods: 2018 Packs of bottled water $4.00 15 $4.30 17 Kilos of Apples $3.00 5 $3.20 7 Bags of Potatoes $5.00 7 $5.30 9 (i) Find the nominal GDP in 2018....
1. A simple economy has 100 workers and produces only two goods – coffee and doughnuts....
1. A simple economy has 100 workers and produces only two goods – coffee and doughnuts. Labour is the only factor of production, but some workers are better suited to producing coffee than doughnuts (and vice versa). The table below shows the maximum amount of output of each good possible from various levels of labour input. Number of workers producing coffee 0 25 50 75 100 Monthly production of coffee (hundreds of pounds) 0 20 50 75 80 Number of...
1a. What is a Production Possibilities Frontier (PPF)? Consider an economy with only two goods: guns...
1a. What is a Production Possibilities Frontier (PPF)? Consider an economy with only two goods: guns and butter. Show the tradeoff between the production of guns and the production of butter by drawing a (bowed outward) PPF (use gun production on the horizontal axis and butter production on the vertical axis). b. In what ways does the PPF reflect: i. scarcity and choice; and ii. increasing opportunity cost? c. How would the PPF be affected by a technological improvement in...
Consider an economy that produces and consumes only two goods. In the following table are data...
Consider an economy that produces and consumes only two goods. In the following table are data for two different years. Assume 2015 as the base year. Year: 2015 2019 Goods Quantity Price Quantity Price Burgers 400 $3 600 $4 Pizzas 400 $4 300 $6 (a) Calculate nominal and real GDP for 2015 and 2019. By what percentage did real GDP increase between 2015 and 2019? What is the annual growth rate of the economy during this period? (b) What is...
A certain economy produces only two goods: beer (B) and whiskey (W). The only scarce resource...
A certain economy produces only two goods: beer (B) and whiskey (W). The only scarce resource is labour. There are 1,000 labour hours available in this economy. One labour hour produces either 100 litres of beer or 50 litres of whiskey. Some citizens supply lots of labour hours, some few. The citizens of this economy all have utility functions of the form U(B, W) = B1/2W1/2 . State if the following statement is true, false, or uncertain. Explain your answer...
country produces only two goods, sweaters and pairs of shorts.The table below provides the number...
country produces only two goods, sweaters and pairs of shorts. The table below provides the number of sweaters and pairs of shorts that were produced in each of three years. It also provides the market price of a sweater and the market price of a pair of shorts in each year. When calculating Real GDP, country treats 2018 as the “base year.”Calculate the: 1) value of Nominal GDP in each year, 2) value of Real GDP in each year, 3)...
Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50...
Suppose a simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced, and sold at $5 each; 11 rugs are produced, and sold at $50 each. In the second year, 54 pillows are produced, and sold for $6 each; 12 rugs are produced, and sold at $52 each. In the third year, 60 pillows are produced and sell for $7.00 dollars each; 14 rugs are produced and sold for 64 dollars each. Calculate...
Question 3 Suppose that two economies (Vietland and Japanesia) each produce only two goods (Car and...
Question 3 Suppose that two economies (Vietland and Japanesia) each produce only two goods (Car and Soap). Vietland requires 1,000 work hours to produce a car, whereas Japanesia requires only 800 work hours to do the same. Japanesia can produce 0.01 ton of soap per hour, whereas Vietland can produce 0.05 ton of soap per hour. Each country has 1,000,000 work hours available per day. Initially, in the absence of trade, each nation chose to efficiently produce (and consume) 500...
Question 5: The country of Pantherville produces two goods: footballs and basketballs. Below is a table...
Question 5: The country of Pantherville produces two goods: footballs and basketballs. Below is a table showing prices and quantities of output for three years: Year Price of Footballs Quantity of Footballs Price of Basketballs Quantity of Basketballs Population Pantherville Year 1 $10 120 $12 200 100 Year 2 12 200 15 300 110 Year 3 14 180 18 275 130 Calculate Nominal GDP for Years 1, 2 and 3 Using Year 1 as the base Year, calculate Real GDP...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT