ECON861 Assignment 1: Microeconomic Analysis  

ECON861 Assignment 1: Microeconomic Analysis  

Faculty of Business, Economics and Law

Professional Masters

ECONOMICS FOR BUSINESS

 TRIMESTER 1 2021

Date due:      Sunday, 2 May 2021 (11.45 pm)

Total marks: 50 marks

Weighting:    40% of total grade

Instructions:

1. Read the case studies presented and attempt all questions.
2. Wherever indicated, appropriately labelled diagrams or examples should support your answers.
3. Make sure you answer each question in your own words with no evidence of copying or pasting from the internet or published sources. Such copying/pasting constitutes academic dishonesty and is taken very seriously at the university. A Turnitin report may be used as evidence if this is the case.
4. A Turnitin submission is required for this Assignment.
5. Late submissions will incur a penalty, see your Study Guide.
6. All extension requests must be accompanied by appropriate evidence and applied at least 24 hours before the submission deadline.

 Submission:

Present your results in a Word document; graphs can be hand-drawn. Handwritten/drawn parts should be scanned and incorporated into the Word document (you can take a photo and add it in). Upload your Word document onto Blackboard as follows: Select “Assignment 1 Submission” tab > Assignment 1 > click on the link > Browse my computer > select the Word document > Submit. You must upload your document before the deadline.

Case study 1: Cheaper Weet-Bix on the way? (15 marks)

Visit http://data.daff.gov.au/data/warehouse/agcomd9abcc004/agcomd9abcc20150915/AgCommodities201509_1.0.0.pdf and read pages 27 to 35 about wheat. Then answer the questions that follow.

1. Draw a diagram to show the wheat market change that will result in lower wheat prices.
2. Which commodity or commodities could be regarded as a substitute for wheat? Make sure to explain your answer fully.
3. What effect might the lower price of wheat have on the price of substitute grains? Please justify your answer.
4. Draw a diagram to show the change in the market for a substitute grain.
5. Explain the non-price determinants involved in the change in both markets (i.e. wheat and a substitute grain).

Case study 2: How is your business going?    (15 marks)

Assume that you have taken 12 months’ leave without pay from your full-time job as a dressmaker and set up a business ironing and repairing clothes. You have taken out a 12-month lease on a small shopfront in a suburban shopping centre. You have bought all the equipment you need for your business and arranged the fit-out of your premises to accommodate your work requirements. You have paid for these set-up costs out of your previous savings. You will not be able to buy any more equipment during the next 12 months. For the year, your total explicit costs are $25 500, and your implicit costs are $45 000.

1. Give some examples of your explicit costs and explain why you chose them.
2. Give some examples of your implicit costs and explain why you chose them.
3. Explain what period your short run is?
4. Explain what period is your long run?
5. In your short-run period, how would the law of diminishing returns be likely to apply in your case if the business was doing so well that you started taking on extra staff members? Please explain fully.
6. If your total revenue is $80 000, what is your economic profit?
7. If you were breaking even, would you stay in business or go back to your old job? Please justify your applied rationale.

Case study 3: Is this monopoly a good idea?      (20 marks)

Read the article in the assessment folder named ‘Electricity Market Regulatory Reform and Competition – Case Study of the New Zealand Electricity Market’ written by Shen and Yang. Then answer the questions that follow.

1. Please define and explain the defining features of a monopoly. How are monopolies created? You will also have to draw from your course content to answer this question.
2. Please define and explain the benefits of vertical integration.
3. Explain fully what the New Zealand Electricity Corporation (ECNZ) is and when it was formed.
4. Please fully explain why greater transparency alone was not a sufficient check on monopoly power.
5. Under the Electricity Industry Reform Act 1998 (EIRA), the ECNZ was split into three competing state-owned generators (Genesis Power, Meridian Energy and Mighty River Power). The vertically integrated distribution and retail businesses were required to achieve full ownership separation no later than 31 December 2003. Please explain the expected benefits from ownership separation fully.
6. Please list all current major generation companies and state the total amount of electricity generated.
7. Please discuss the barriers of entry of new retailers into the electricity market.

https://www.eria.org/Chapter%206-Electricity%20Market%20Regulatory%20Reform%20and%20Competition-Case%20Study%20of%20the%20New%20Zealand%20Electricity%20Market.pdf

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