ECO701 Economics and the Business Environment Coursework 2 Questions | Ulster University

ECO701 Economics and the Business Environment Coursework

Coursework 2

This coursework contains a series of questions. Please complete all of the questions utilising economic concepts,models and wider reading. There is no specific format required i.e. report or essay format, but you are expected towrite in  appropriate  Professional  and  Academic  English.

Please note  the question  that  you  are  addressing  andprovide an answer to the question. The word limit of this coursework i.e. completion of all questions is  2000  words  (excluding graphs, tables andreferences).

The Deadline for submission is by 23:59 on the 28/08/2022. Submissions should be made via the Blackboard site forthis module. The submission link can be found in the Assessment section, titled as: Coursework 2 Deadline: 28/08/22by 23:59. 

Question 1

Please review the diagram below for a firm that is a local monopoly selling scooters with custom designs. The ownersof this company have conducted relevant research to forecast their demand, marginal revenue, marginal cost andaverage cost, which are shown in the diagram below. Answer the subsequent questions given your interpretation ofthe diagram to provide the owners with advice in relation to their conduct and competing in their market.

a. Use the profit maximising condition to advise on the quantity that the firm should produce and the pricethey should charge.
b. Given the information in the diagram what would the total revenue and total cost of this firm?
c. Would the firm earn supernormal profit or make a loss? What is the size of the profit or loss? 
d. Identify   the   equilibrium  quantity   and  price   if   the   firm   is   forced   to   operate   as   a   perfectly  competitiveenterprise.

Question 2

Answer  the   following   questions   related  to   Externalities  and   Market   Failure   by   selecting   the   correct  option   oraddressing the stated requirement of the question. Ensure that you provide an appropriate rationale for the answerprovided included marking use of appropriate diagrams where possible.  

a) What is the nature of the positive externality associated with medical research? (5 marks)

A. Institutions that engage in research and development may develop more profitable products.
B. Institutions   that   engage   in   research   and   development  may   be  able   to   lower   their   production   costs   ofmedicines that they make.
C. The   research   may   lead   to   discoveries   that   enable   other   institutions   to   develop   further   medicalenhancements.
D. Institutions that engage in research can pay more taxes.

b) Which of the following statements is TRUE? (5 marks)

I. In the face of a negative externality, a monopolistic market produces less than the socially optimal quantity ofoutput.
II. If public transport creates an external marginal benefit, the marginal social benefit of public transport services willalways exceed their private marginal benefit.
III. In unregulated markets, positive externalities create deadweight losses, but negative externalities do not.
IV. In the face of a positive externality, a perfectly competitive market produces more than the socially optimalquantity of output.
A. II and IV are correct
B. II only is correct
C. I and III are correctD. I and IV are correct

c) Use the concepts of merit and demerit goods to explain why the government may decide to increase the subsidiesfor prescription medicine and increase the taxes on alcohol products. You are encouraged to make use of widerreading/research as well as  applicable  diagrams  to  support your discussions/explanations in this question.(15marks)

Question 3

The   current   state   in   the   economy   are   as   follows;   Autonomous   Consumption:   10000,   Marginal   Propensity   toConsume: 0.3, Investment: 15000, Government Spending: 35000, Net Exports: -1000, Income Tax rate: 30%. Thegovernment wishes to conduct an injection into the economy to achieve a 40000 increase in national income. Whenproviding answers to the questions below, please provide answers by 2 decimal places, unless stated otherwise.

a) Calculated the current equilibrium income in the economy
b) The government increases spending by 30000. Does this achieve the desired increase of 40000?
c) If the answer to be does not achieve the desired increase of 40000 in national income, how much should thegovernment increase its spending to achieve the 40000 increase in national income (to the nearest wholenumber)? (Hint: consider the what the multiplier in this economy is)(10 marks)

Question 4

a) The UK Government wants to prioritise increasing economic growth in the economy. To support this thegovernment decides to reduce the rate of corporation tax. Using your knowledge of macroeconomics explainthe affect this could have on the macroeconomic variables and any policy conflict that may occur. Ensurethat you utilise Aggregate Demand and Aggregate Supply Diagrams to support your explanations. (10 Marks)

b) The Central Bank wants to reduce the rate of inflation. To achieve this, the Central Bank decides to increasethe  interest  rate.  Using   your   knowledge   of   macroeconomics   explain   the   affect   this   could   have  on   themacroeconomic variables and any policy conflict that may occur. Ensure that you utilise Aggregate Demandand Aggregate Supply Diagrams to support your explanations. (10 marks) 
c) Explain the relationship between inflation and unemployment according to the long-run Phillips Curve. (10 marks)

d) It can be hard to find jobs for those who are frictionally unemployed because:

i. they typically do not meet the qualifications or skillsets required for the available jobs
ii. the economy is in a recession/a downturn
iii. they voluntarily quit their last jobs and employers may view them as unreliable
iv. there are seasonal factors affecting their employment

Please select the answer that you believe best addresses the statement. Please ensure that you provide aclear rationale for your answer.

Question 5

You are asked for advice on what currency to investment given current news/speculation. The currencies beingconsidered are:

a) Japanese Yen,
b) Australian Dollarc) Singapore DollarWhen conducting your research on news/speculation related to these currencies you come across some particularlyinsightful articles that have the following headlines: The Bank of Japan moves to buy billions of dollars worth ofbonds;   The   Reserve   Bank   of   Australia   is   considering   limiting   money   supply   due   to   concerns   with   inflation;Favourable business conditions increase Foreign Direct Investment interest in Singapore.Using your knowledge of exchange rates illustrate the changes the above head are likely to have on the notedcurrencies using relevant diagrams. Make recommendations on which currencies should be sold and which shouldbe purchased given your analysis. (N.B. please use the information provided in this question to address your answernot current data on the related exchange rates).