Economics Assignment - Analysis and Solutions

This economics assignment covers topics such as progressive tax, cost-benefit analysis, union wages, and the law of diminishing marginal product of labour. It provides expert analysis and solutions to these topics.

Running head: ECONOMICS ASSIGNMENT
Economics assignment
Name of the student
Name of the university
Author Note

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ECONOMICS ASSIGNMENT
TABLE OF CONTENTS
Answer 1)...................................................................................................................................2
Answer 3)...................................................................................................................................3
Amswer5)...................................................................................................................................4
Answer 9)...................................................................................................................................5
Answer 10).................................................................................................................................6
Answer 6)...................................................................................................................................7
Reference list..............................................................................................................................9

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Answer 1)
From the question it can be seen that the income of Jack is $10000 and he is taxed ten
percent. On the other hand the income of Jill is $100000, however he is being taxed only five
percent. Based on the economic analysis it can be said that the scheme is totally unfair. As
with the knowledge of progressive tax system, the low income earners should be paying low
taxes compared to the higher income earners. Progressive tax states that people who earn
lower income and spend most of the income for maintaining the standard of living should pay
lower amount of tax and people who earn a high income should pay more tax. The degree on
how the tax should be structured depends on the rise in income. Therefore, it can be said that
as the income of Jill is more than the income of Jack, Jill should be taxed more than Jack,
who earns less. So, Jill should be taxed more for supporting the well and Jack should be taxed
less for supporting the well. Through progressive tax a high amount of tax will be charged
more from higher income people (Piketty, 2014). A progressive tax can be a tax structure
where the rate of tax will rise when there is an increase in income. In order to support the
well, both Jack and Jill should either be taxed an equal amount of money or should follow the
progressive tax system.
So it can be said that taxing jack more than Jill is unfair and should follow the
progressive tax structure. The system of progressive tax also have tiered tax rates. When
progressive tax structure is being followed there is a presence of income equality. This type
of tax structure also lead to social justice where people who can afford more will be paying
high taxes and the people with low taxes will be paying lo taxes. Therefore, from the above
discussion it can be said that the one with higher income should be taxed much more than the
people with lower mount of income.

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Answer 3)
The policy of paying bonus for each dead rat which will be brought to the town pound
will have a profitable outcome. In order to save people from rats, the council have decided to
kill rats as it used to make the life of the people unpleasant. The proposed policy of paying
money for each of the dead rat is a good policy. As when people will be provided money for
bringing dead rats in the ton pound, they will be motivated in bringing dead rats and in this
way the population of rats will start decreasing. The level of bonus can also be increased with
the increase in number of dead rats brought by the people of the town (Pigou, A. 2017). The
rats used to create havoc in the lives of the people which used to bit people and eat crops. In
order to cut down the population of the rats paying bonuses will be helpful as it will motivate
the people to kill rats and bring them to the town pound. Bonus in the terms of money should
be paid to people for brining dead rats in the town pound. Paying bonus will increase the
motivation of the citizens for bringing the dead rats and therefore the work of killing rats will
become easy. The government will not have to employ other staffs for doing the work.
Bonuses will also implement competition in the work. It can also offer bonuses based on the
hours of doing works. The method of offering bonus to the individuals will have a positive
outcome as more and more people will be motivated in bringing dead rats in the town pound.
If on the other hand the government had fixed his staffs for killing rats, they might not have
worked effectively. However, when the citizens are given the responsibility of bringing the
dead rats to the town pound, they will perform the job in much more responsible way as they
have been provided bonuses.

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Amswer5)
Jack Quack should dump the share as the purchase price for the stock was around
$1000 and the current price for the share was around $62, which shows that the stock price
has fallen about 93.8% and this sharp fall does not define normality in the volatility in the
share price. However, it is crucial to consider that the retirement age or the holding period for
the Investor Jack Quack is around 15 years is a long-term time for the investment but the
sharp volatility in the share price ignores normality in the price and return distribution of the
share price. The sharp fall may be due to high valuation multiple and due to internal problems
in the company. The expectation that Jack Quack would be able to further make profit from
the same is quite low as the share price for the company now needs to break through and
above 1000 which will then make a profit opportunity for the company (

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Baumol & Blinder, 2015). However, it is advisable to dump the stock and realize the
loss arriving from the same because holding the stock and the expectation of return and value
creation from the company is very less.
Jack Quack should further asses the volatility of the same and he should do an internal
analysis and the same should be also conducted through a proper research on the aspect of
stock both from fundamental and technical perspective. Jack Quack as an investor should
always asses the market perspective for investment and conduct a proper analytical research
on the company so that the investor is aware of the company fundamental and important
news and information. The investment perspective is always considered from the investors
risk and return profile and the same should be reflected by the amount invested in the assets.
Answer 9)
The above line states that if the law of diminishing marginal product of labour did not
hold, the food supply of the world could be easily growing in the flower pot. The law of
diminishing returns states that when large units of variable inputs are usually on a given
quantity of fixed inputs, the output might initially increase at an increasing rate although it
will eventually increase at a diminishing rate. The law states that the marginal product of a
variable factor will diminish after sometime even if it increases in the beginning (Layson,
2015). It also states that when some of the factors are constant while the other factors
changes while the technology is same, diminishing factors will take place eventually both in
industries as well as in agriculture. The quoted line states that the food production of the
world can be grown in a flower pot, however in the real world this will not take place as all
kinds of production will face diminishing marginal product of labour someday. So the quoted
line will hold true if the diminishing law of marginal products was not present. It states that
as more and more variable input is usually included in the fixed input, the output will be

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going to fall. The success of the unions mainly depends on the bargaining strength which also
depends upon the ability of the unions to restrict the supply of labour. As the work force of
the XYZ Corporation is huge, therefore the union demands and wins a wage increase. Unions
also have indirect impacts on the wages. Union wages are generally attached to jobs instead
of the attributes. One of the main aim of the trade unions is maintain the terms and condition
of the workers. The success of the unions mainly depends upon the bargaining strength of the
workers.
Answer 10)
Unions are those organizations which negotiate with the business and other types of
organizations. One of the significant aim of the trade unions is to maintain the workers
condition and term. Union induced wage can increase the total wage bill when the bargaining
strength is more. The strength of the union bargaining is will increase and will therefore lead
to higher union wage premium. The union induced wage will rise the total wage only when
the number of people representing the union have a high percentage. The success of the
unions for raising wages will also get affected when the price elasticity of demand for the
commodities in the industry will be low in case of oligopolistic competition. From the point
of view of microeconomics, it is known that the success of unions will take place when there
will be presence of bargaining strength. Therefore, it can be said as the full work force of the
XYZ Corporation is unionized, the demand of the unions were met (Blanchflower, 2014).
However, evidences also suggested that the impact of union wages usually differs across
workplaces and the workers. However, union membership will not always increase the
overall standard of wages of the workers. Sometimes strong unions also set benefits and pay
which the employers of the non-unions follow. It can also be said that the unions sometimes

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help workers as well as hurt them. The [power of the unions basically rests on two major
things one is the restriction of labour supply and the other is the increase in the labour
demand. Unions will only work at that time when the strength of the particular union is large
and then it helps in raising the wages of the workers. The increase in the wages of the union
also comes at the expense of the workers of non-unionized group who does not have the
equal level of representation with management. Therefore, in order to conclude it can be said
that the unions of the XYZ Corporation will help in increasing the wages of employers as the
whole work force is unionized.
Answer 6)
The question is simply based on the basis of the cost benefit analysis. The cost benefit
analysis states that it is a process in the business which is mainly used to analyse any kind of
decisions. The analyst in this case will find the benefits of the situation and then find the costs
associated with it. The cost benefit analysis is mainly used to determine which options will
provide the best approach for comparing the potential courses of action (Blanchflower, 2014).
The cost benefit analysis will also determine whether the benefit is outweighing the cos or
not and it also calculates by how much. This cost benefit analysis is also used for comparing
the total cost against the expected benefits. The stated question shows that the total benefits is
outweighing the total cost.by the amount of $76,300. As it has been seen that the total
benefits of building then dam is outweighing the cost, it can be said that a much larger dam
can be easily built. At each stage, it can bee seen that total benefits outweighs total cost, there
is no question of not building the dam. From the data provided in the question it can be seen
that the benefit earned at the stage 3 the difference between the benefit and the cost is huge
followed by the stage 2. If building a larger dam provides different kinds of benefits along
with recreation along with flood control, then it is advisable to build the dam as the benefit
which will be achieved from building the dam is much more compared to the cost. The

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analysis of cost and benefit will only be successful when the total benefit will outweigh the
cost. Therefore, from the cost benefit analysis it can be found out that the project of
constructing a dam will be successful as the benefit achieved from building the dam is lot
more than cost of constructing it.

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Reference list
Ahmad, M. I., Ghohui, W., Hasan, M., Sattar, A., Ahmad, M., & Rehman, R. U. (2018).
Performance of Moving Average Investment Timing Strategy in UK Stock Market:
Individual Stocks versus Portfolios. Journal of Economic and Social Studies, 7(2).
Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy. Nelson Education.
Blanchflower, D. G. (2014). Union relative wage effects in the United States and the United
Kingdom. LERA For Libraries.
Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit analysis:
concepts and practice. Cambridge University Press.
Chiu, M. M. (2015). Family inequality, school inequalities, and mathematics achievement in65
countries: Microeconomic mechanisms of rent seeking and diminishing marginal returns.
Teachers College Record, 117(1), 1-32.
Chordia, T., Goyal, A., & Shanken, J. (2015). Cross-sectional asset pricing with individual stocks:
betas versus characteristics.
Cowell, F. (2018). Microeconomics: principles and analysis. Oxford University Press.
Ferwerda, J. (2014). Cost-benefit analysis. Chapters, 1-1.
Hall, T. (2015). Cost-Benefit Analysis.
Layson, S. K. (2015). The increasing returns to scale CES production function and the law of
diminishing marginal returns. Southern Economic Journal, 82(2), 408-415.
Microeconomics, E. E. (2015). KELVIN WONG. Cell, 808, 386-8406.

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Pigou, A. (2017). The economics of welfare. Routledge.
Piketty, T. (2014). A global progressive tax on individual net worth would offer the best solution to
the world’s spiralling levels of inequality. LSE American Politics and Policy.
Piketty, T. (2014). Capital in the 21st Century.
Van Eijck, J. (2015). Strategies in social software. In Models of Strategic Reasoning (pp. 292-317).
Springer, Berlin, Heidelberg.