Principles of Economics: ECON11026 Term 3-2016 Assessment 2 - Short Answer Questions Due date: 16 January 2017 Monday of Week 9 ASSESSMENT Part A: Weighting: 30 % (2 marks for in-text referencing, presentation, clarity of explanation and evidence of reference list and 28 marks for the answers to the four questions) 2 Length: Approximately 1500-2000 words (Approx. 400-500 words for each question, excluding graphs, tables and reference list) It is a progressive assignment based on topics studied in weeks 5-8 covering chapters 6, 7, 9, & 10. Please attempt each question on a weekly basis, which will prevent you from asking for extensions. Objectives This assessment item relates to course learning outcomes 3, 4 & 5 as listed in the course profile. Question 1: Refer to Chapter 6- Imperfect Competition (a) Explain why the soft-drink market in Australia may be regarded as an example of an oligopoly. How does this industry differ from a perfectly competitive industry? Compare graphically (use 2 graphs) the prices and outputs that would result under tacit collusion and non-collusive oligopoly. (4 marks). (b) Describe at least two criticisms leveled at the kinked demand analysis. (1 mark) (c) Is price discrimination a bad thing? Explain your answer. (2 marks) Total = 7 marks Question 2: Refer to Chapter 7- Market Failure and Government Policy (a) If perfect markets allocate resources efficiently, why do we need government? In answering this question, make specific references to at least three (3) sources of market failure and explain the role of government in correcting each. Use diagrams to show how efficiency can be restored through government intervention. (4 marks) (b) One form of negative externality is global warming and climate change caused by greenhouse gas emissions. Discuss at least three plausible policy alternatives to address this market failure. (3 marks) Total = 7 marks Question 3: Refer to Chapter 9- Introduction to Macroeconomics (a) What are the latest figures for the unemployment rate, the growth of GDP and the inflation rate? [To find out, visit the Australian Bureau of Statistics (ABS) website at: www.abs.gov.au/] (2 marks) (b) Based on your analysis of the above data, where would you place Australia in the business cycle? Explain your reasoning. (2 marks)(c) The table below gives the national accounts data for a hypothetical economy in 2015. Amount ($m) Gross Private Domestic Investment 755 Government Consumption Expenditure 220 Government Investment Expenditure 95 Household Consumption Expenditure 3920 Taxes 300 Import 475 Exports 380 Savings -100 Using the data in above Table, calculate GDP and the country’s Gross National Expenditure (GNE) using the expenditure approach. (3 marks) Total = 7 marks Question 4: Refer to Chapter 10- The Determination of GDP The table below shows part of a country’s aggregate expenditure schedule (in $ billions) GDP 250 270 290 310 330 350 370 Aggregate Expenditure 280 290 300 310 320 330 340 (a) Refer to the above and calculate the expenditure multiplier for the economy. Assume that full employment is achieved at a level of GDP of $350 billion (1 mark) (b) Is there an inflationary gap or deflationary gap? Illustrate and explain. (3 marks) (c) What government policies can help to close the gap mentioned in part (b)? (1 mark) (d) What effect does the minimum wage legislation have on poverty? (2 marks) Total = 7 marks ------------------------------------------The End-------------------------------------------------------ECON11026: Assignment-2 Marking Sheet Student Name: Question No ECON11026: A-2 Marks Total Comments Q1 = 7 marks a 4 b 1 c 2 Q2= 7 marks a 4 b 3 Q3= 7 marks a 2 b 2 c 3 Q4= 7 marks a 1 b 3 c 1 d 2 Referencing 1 Presentation 1 Total marks Total marks out of 30 30 Additional Markers Comments: Assessment criteria and helpful hints for Written Assessment 2 Use the DADA acronym when structuring your answers to all questions in economics. (Definitions: define the key terms; Assumptions: list or make assumptions as required; Diagrams: draw relevant graphs/tables and explain; and original Analysis: apply the theory to real life economic examples and explain). (i) Please, you must read the chapters each week and work on the assignment questions progressively each week—which will prevent you from asking for extensions and also submit all assessment task on time to pass the course. So please follow a weekly study schedule. (ii) Plagiarism is a real concern, therefore, please remember to reference in-text and also provide a reference list. Do not give your assignment to anyone or copy from other students. (iii) Concepts and key terms must be defined accurately and completely. (iv) The assumptions upon which the analysis is based must be stated at the outset. (v) Diagrams must be drawn properly, correctly labelled and the relations they depict explained on the diagram and in the accompanying text of your answer. (vi) Answers must be complete, addressing the specific tasks nominated in the questions. (vii) Sources must be acknowledged in-text and a list of references provided using the APA Referencing Style. (viii) Where a question has more than one part, so too should the answer. Ensure complete coverage in the analysis section of your answer. (ix) As a minimum, students should reference more than two credible sources to answer theory-based questions.