Economics: Microeconomics and Macroeconomics Study Material

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Course ID

ECONOMICS1
Table of Contents
Part A: Microeconomics............................................................................................................2
Question 1..............................................................................................................................2
Question 2..............................................................................................................................2
Question 3..............................................................................................................................3
Question 4..............................................................................................................................3
Part B: Macroeconomics............................................................................................................4
Question 1..............................................................................................................................4
Question 2..............................................................................................................................5
Question 3..............................................................................................................................6
Question 4..............................................................................................................................6
Question 5..............................................................................................................................7
Reference list..............................................................................................................................9

ECONOMICS2
Part A: Microeconomics
Question 1
Australian banks are found to operate in an oligopoly market. Four largest banks in
Australia- ANZ, NAB, Westpac and Commonwealth bank together account nearly 80 %
share in the lending market of Australia (abc.net.au, 2019). The dominance of major banks
and presence of significant entry barriers make Australian banking an oligopoly market.
During global financial crisis, the banking sector of most countries face serious credit
crisis. In contrast to most nations, Australia successfully kept the banking sector protected
from the crisis. Australian Prudential Regulatory Authority intervened in the banking industry
and announced a guarantee up to $1 million covering all banks on October 12, 2008. In
addition to this, the four-pillar policy in Banking that prevented merger between dominating
banks of Australia proved to be helpful for survival of Australian banks in the phase of crisis.
There were three factors contributing to steady performance of Australian banks during
crisis- The first is moderate level of competition, relatively stronger regulation and necessary
government intervention.
Question 2
Collusion in the oligopoly market allows the players to gain advantages of a
monopoly market. Under collusion, firms joined to set a high price maximizes industry profit
as a whole. The collusive oligopoly is similar to a monopoly and extracts maximum profits
from customers (Karl et al., 2019). Similarly, if the four major Australian banks decide to
collude they would act as a monopolists, charge a higher price, restrict the quantity and enjoy
supernormal profit. This is shown in figure 1