The Role of Government in Markets

Running head: BACHELOR OF APPLIED MANAGEMENT
Bachelor of Applied Management
Name of the Student
Name of the University
Course ID

1BACHELOR OF APPLIED MANAGEMENT
Table of Contents
Section A: Business Decision Making.......................................................................................2
Question 1..............................................................................................................................2
Question 2..............................................................................................................................3
Question 3..............................................................................................................................5
Question 4..............................................................................................................................7
Section B: The role of Government in markets.........................................................................8
Question 1..............................................................................................................................8
Question 2............................................................................................................................10
References................................................................................................................................13

2BACHELOR OF APPLIED MANAGEMENT
Section A: Business Decision Making
Question 1
i.
Table 1: Short run cost
Labor Output TFC TVC TC AC MC AVC AFC
0 0 25 0 25
1 4 25 25 50 12.50 6.3 6.3 6.25
2 10 25 50 75 7.50 4.2 5.0 2.50
3 13 25 75 100 7.69 8.3 5.8 1.92
4 15 25 100 125 8.33 12.5 6.7 1.67
5 16 25 125 150 9.38 25.0 7.8 1.56
ii.
4 6 8 10 12 14 16 18
0.00
5.00
10.00
15.00
20.00
25.00
30.00
AC, MC, AVC and AFC
AC
MC
AVC
AFC
Output
Cost
Figure 1: Average cost, Marginal cost, Average variable cost and Average fixed cost
iii.
The analysis of average and marginal cost of production reveal a relationship between
the two. The figure shows that when both marginal and average cost are decreasing, then
marginal cost is less than average cost. The marginal cost curve thus lies below the average
cost implying marginal cost decreases at a faster rate than average cost. At the minimum
point of average cost, marginal cost equals average cost. After reaching minimum average
cost starts to increase. Beyond the minimum point of average cost, both average cost and

3BACHELOR OF APPLIED MANAGEMENT
marginal cost increases (Cowell, 2018). When both average and marginal cost are increasing,
the marginal cost is greater than average cost. The marginal cost curve thus lies above the
average cost meaning marginal cost increases at a faster rate than average cost.
Question 2
i.
The market structure of a convenience store is likely to be monopolistically competitive in
nature. Monopolistically competitive market refers to the form of market characterized by
larger number of relatively small firms selling an otherwise similar but differentiated product.
The characteristics of a monopolistically competitive market that a convenience possesses are
as follows.
 One feature of monopolistically competitive is presence of large number of small
firms. Like monopolistically competitive market, there are various convenience stores
competing with each other in the locality.
 The large number of seller in the monopolistically competitive market serve a
relatively large number of buyers (Baumol & Blinder, 2015). Similarly, there are
large group of consumers demanding different products sold in the convenience stores
making the market monopolistically competitive.
 One important feature of monopolistically competitive market is product
differentiation. Different stores though sell the almost similar product but differentiate
their products in terms of packaging, discount offers or using other characteristics of
the product.
 Like monopolistically competitive market, firms here can freely enter or exit the
market.
ii.
The type of market structure of ASB bank is oligopolistic in nature. Oligopoly refers to a type
of market, which is dominated by few large firms selling either identical or differentiated
products. The major reason for identifying banking ASB bank as oligopoly are as follows.
 Like oligopoly market, there are relatively small number of players in the industry.
Currently there are 29 registered banks in New Zealand. Of them four Australia
owned bank (ANZ, BNZ, ASB and Westpac) has 86 percent market share while the
five New Zealand banks own 8 percent market share (rbnz.govt.nz, 2019).