ECO501: Business Economics

Assessment item 2

Assignment 2

Length: About 2,200 words (please check Part A & B word limits)

Submission method option:
EASTS (online)

Task

Assignment 2 consists of short answer or problem questions (Part A) and essay questions (Part B) and is based on material from chapters 10, 15, 16, 18, 19, 20, 24 and 26.

Answer ALL questions

Part A
Short-answer/problem Questions

Length: About 300 words for each question, excluding tables & graphs, if required.

Question 1 (10 marks)

Explain with numeral example that marginal revenue is always lower than the price when monopolists charge single price for all units to sell.

Question 2 (10 marks)
Starbucks Closed 61 Coffee Shops in Australia
Starbucks slashed its Australian presence after years of multimillion-dollar losses and a failure to make inroads. The world’s largest coffee chain axed 685 jobs and close 61 of 84 stores nationwide.
People interviewed said:
1) there are a lot of good coffee shops;
2) Starbucks had issues with site selection and a limited food menu;
3) Australians like to sit down and relax with a cup of coffee rather than taking it away in a paper cup; and
4) Starbucks was struggling with overpriced coffees that failed to meet the Australian standard.

Answer the following questions:
a) In what market does Starbucks compete?
b) Describe the revenue, costs, and profit that Starbucks expected when it entered this market. Draw a graph to illustrate your answer.
c) How did the factors listed as (1) to (4) above affect Starbucks’ revenue, costs, and profit? Draw a graph to illustrate your answer.

Question 3 (10 marks)

How firm supply curve is derived in the short run? Explain with graphs.

Question 4 (10 marks)

The figure above shows the flows of expenditure and income in Australia. During 2006-07, B was $585 billion, C was $231 billion, D was $241…