BEO1105 ASSIGNMENT (20%) SEMESTER 2, 2014 Total = 30 marks. Marks will be converted to 20 per cent. QUESTION 1 The recent events in Syria, Iraq and the fear that the unrest will spread to other Middle Eastern oil producing nations have world markets worried about the disruption to oil production. Using graphical demand and supply analysis, explain the impact on price and quantity in the market for petrol if oil production is disrupted. 3 Marks QUESTION 2 Ceteris paribus, if a tax on petrol results in a large rise in the price of petrol, using graphical demand and supply analysis, explain what would be the impact on price and quantity in the car market for low fuel efficient cars (cars that use more petrol per kilometre) compared with high fuel efficient cars. (Hint: you must answer using separate graphs to compare the impact on market price and quantity on the two types of cars). 2 + 2 = 4 Marks QUESTION 3 Assume, health officials in Hong Kong simultaneously engaged in the mass slaughter of chicken in an attempt to control the spread of chicken flu and warned consumers against purchasing live chickens. Using demand and supply analysis, what is the impact on price and quantity in the market for live chickens? 4 Marks QUESTION 4 If the price of a good increases from $6 to $8, leading to a fall in quantity demanded from 50 to 35 units, what is the price elasticity of demand for the good at this price range? Explain what the calculated elasticity value means. 3 Marks QUESTION 5 a) The smoking of tobacco is claimed to impose great external costs to society. Briefly discuss two external cost factors indicating HOW each factor imposes an external cost to society 2 Marks b) One of the many strategies the Australian government has used to reduce the external costs is by increasing the tax on tobacco. With the use of demand and supply analysis explain the possible impact of this strategy on the market for tobacco. 4 Marks QUESTION 6 Assume, in an industry where firms are making an economic profit, the creation of an internet platform has broken down entry barriers and resulted in a huge increase in the number of firms entering the industry. What will be the implication on profit to the existing firms in this industry? Use graphical demand and supply analysis to support your explanation. 5 Marks QUESTION 7 In an Oligopoly structure where a few firms dominate and control the majority of the market there is often an absence of price competition. Use the game theory matrix to explain why this is so? What are the alternatives available to firms to maintain or increase their market share? 5 Marks Jesse Singh (July 2014).
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