Economics for Managers: Study Material with Solved Assignments

Get study material with solved assignments, essays, dissertations, and more for Economics for Managers course. The document covers various topics such as quantity, cost, market equilibrium, competitive and monopoly market, mining industry, AUD appreciation, and reference price. It also includes a table of contents and references.

Running head: Economics for Managers
Economics for Managers
Name of the Student
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1Economics for Managers
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................4
Answer 4..........................................................................................................................................4
Answer 5..........................................................................................................................................6
Answer 6..........................................................................................................................................7
Answer 7..........................................................................................................................................8
Reference.......................................................................................................................................10

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Answer 1
Quantity
Cost per unit
($) Total Cost ($) Marginal Cost ($) Average Cost ($)
1 284 284 284
2 255.6 511.20 227.20 255.60
3 230.04 690.12 178.92 230.04
4 207.04 828.14 138.024 207.04
5 186.33 931.66 103.52 186.33
6 167.70 1006.19 74.53 167.70
7 150.93 1056.50 50.31 150.93
8 135.84 1086.69 30.19 135.84
9 122.25 1100.27 13.58 122.25
10 110.03 1100.27
(0.
00) 110.03
11 99.02 1089.27 -11.003 99.02
12 89.12 1069.47 -19.80 89.12
13 80.21 1042.73 -26.74 80.21
14 72.19 1010.65 -32.08 72.19
15 64.97 974.55 -36.09 64.97
Breakeven price for selling 10 units is given below
Break even price for 10 units=Total cost for producing 10 units
10
Break even price for 10 units=1100.27
10
Break even price for 10 units=1100.27
10
Break even price for 10 units=$ 110.027
Breakeven price for selling 12 units is given below
Break even price for 12 units=Total cost for producing 12units
12

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Break even price for 12 units=1069.47
12
Break even price for 12 units=$ 89.123
Answer 2
Figure 1: Market equilibrium graph
Source: (Created by the Author)
The equilibrium price and quantity of marker pen market is $20 and 8 units respectively.
At price $29 the profitability of the marker pen sellers is high and to appropriate as much profit
as possible the sellers will produce more number of marker pens and as a result excess supply in
the market will occur and the thus as per law of demand and supply the price will fall to achieve
the demand and supply equilibrium. Thus, the fall in price will increase sales in the market.
0 2 4 6 8 10 12 14
0
5
10
15
20
25
30
35
Demand Supply
Quantity
Price

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Answer 3
During Valentine’s Day people purchase gifts for their loved ones. The gifts include
roses, chocolate and greetings card. It has been seen that the price of roses increases more than
the prices of chocolate and greetings card. It happens due to the exclusiveness of the gift and
availability of close substitutes. In Valentine’s Day, every people at least purchases roses for
their loved ones as rose symbolizes love. On the other hand, demand for chocolates and greetings
cards are also high and thus price of these gifts increase. However, in case of rose there is no
substitute only during Valentine’s Day and thus demand for roses will be higher than other above
mentioned gifts because in case of these gifts there are close substitutes and people may choose
from them. Thus, people have other options for gifting other than chocolate and greetings card.
Therefore, increasing the prices of chocolate and greetings card much might decrease its demand
as people will tend to purchase substitute gifts. Apart from that, it is not necessary to gift
chocolates or greetings card during Valentine’s Day, but gifting rose is. Hence, it is clear that
demand of rose is much higher than chocolates and greetings cards due to the above discussed
reasons and thus the price of rose increases more than the other two gifts.
Answer 4
Competitive market is characterized by infinite sellers competing among themselves to
satisfy the needs of innumerable number of buyers buying the products. In competitive market,
the individual seller does not determine product price because the market deals with large
number of buyers and sellers and thus the sellers have no market power. Thus, the market always
makes normal profit even in long run. In this market the product are identical such that no seller
has exclusiveness product. The large number of firms in the market, low fixed cost and absence
of raw material exclusiveness allows firms to make free entry to and exit from the market.

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Therefore, there is no entry or exit barriers in the market. There is perfect distribution of
resources and the producers are always on pressure of keeping the production cost low. This
concerned market experience perfect elastic demand in long run. The demand curve is
horizontally straight that means both the average and marginal revenue are equal. A very
common example of competitive market is agriculture market.
Monopoly market is the market where only one producer or seller is present, selling only
single product to numerous buyers. The product does not have any substitute. Thus, product
exclusiveness and no other seller in the market gives the only firm the market power and is
maximum under this market structure. Monopoly market is also characterized by high fixed cost
and existing firm creates restriction for new firms willing to make entry in the market resulting in
entry barriers. Thus, entry of new firms are restricted in this case (Burke, Genn-Bash and Haines,
2018). Therefore, the market does not have any competitor. Apart from that, high sunk cost
restrict existing firm to make exit causing presence of exit barrier. The market is perfectly
inelastic as the market has a strong hold on the supply of goods and services. This means the
demand elasticity of the goods produced are zero. The producer set the price according to their
choice. In this market, the price is greater than price set in competitive market or any other type
of market. Thus, the high price of product results in super normal profit. The consumers get
exploited in this market due to inefficient allocation of product and thus the market is
characterized by loss in consumer surplus and social welfare. The demand curve slopes
downward. Thus, the market makes profit even in long run by reducing the product price that
helps in raising the sales. An example of monopoly market is postal industry of Australia, which
is served by the Australia Post.

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The elasticity of demand in competitive market is higher than the monopoly market in
long run. In competitive market for a minute change in price there will higher change in quantity
demanded because many firms operate in long run. Contradicting to this, the opposite happens in
case of monopoly.
Answer 5
In Australia, mining industry is known to be the most important industry and it
contributes a large share in growth of economy. The mining sector of Australia continues to be
world leader in mining products especially iron ore, natural gas and thermal coal. Mining
industry should enhance the competition in international market by introducing new techniques
in the industry.
The basic strategy is to innovate new technologies in the market so that it helps in
improving mining industry of Australia to compete in international market. The transportation
system should be improved in order to reduce transportation cost. As per the report published by
mining department, it was seen that 52 accidents took place in duration of thirteen years.
Therefore, the improvement in technology will help in reducing mining related fatal accidents as
well as increase the mining products due to less involvement of labor and more use of machines.
The more use of machine will be time less consuming. Hence, yield of mines will increase and
consequently productivity of overall mining industry increases. Therefore, more products can be
traded internationally.
The preservation of natural resource is another basic strategy to be implemented in
enhancing mining industry to compete. The mining industry generally deals with the resources,
therefore, if more resources are preserved then more mining products can be produced. Thus, this

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helps in making mining industry of Australia to be one-step forward in competing in
international market. Apart, from that excavation should be made to discover new mining fields.
More mining fields means more production of mining products and hence price competitiveness
of the industry increases. Therefore, the mining industry of Australia will be able to compete
more effectively in the international market and the volume of mining products in international
trade increases.
This sector should improve the labor force management. This means skilled labor who
have better knowledge about the industry should be hired in order to increase the production of
the products. Even the mining industry should give on job training to the employees so that the
employment productivity rises. Hence, this strategy of providing training or hiring skilled labor
will help the mining companies to increase their competitiveness in international market.
Answer 6
The recent trend shows Australian Dollar (AUD) is rising compared to US Dollar (USD)
except the period where economy faced global crisis. The appreciation started since early 2000s.
The probable factor for the appreciation is boom in the mining industries. During the time of
AUD appreciation, the price for importing goods decreased which raised imports to the country.
Export price of Australian products drove up due to appreciation of AUD. Thus, the export of
those goods reduced. As a result, Australian economy faced trade deficit. In this case, the
appreciation did not positively influence the economy of Australia (Blancahrd et al. 2017).
Tourism means home country based tourism as well as foreign tourism. The domestic tourism
gained advantage in travelling overseas as the travelling cost reduced due to the appreciation of
dollar. On the other hand, the foreign tourists who were planning to visit Australia decreased in
number. Thus, the impact of the AUD appreciation on tourism was both negative and positive.

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Recently, the economy of Australia has weakened. When AUD appreciates the export
oriented revenue was lessened, therefore the domestic revenue of the country also reduced. It
means that Australian exports becomes less competitive when trading with Japan who earns its
profit in Yen. The producers who received cost in AUD incurred low profit margins and
sometimes they even incurred losses. This meant that when the price of products in AUD when
converted to Yen became more expensive. This acted as a disadvantage to those products in the
foreign market places or obliging the exporter of Australia to reduce their prices.
These were the probable impact of AUD appreciation on exports, imports and revenues
of Australian products. The possible impact of the appreciation on tourism has been discussed in
brief.
Answer 7
Reference price refers to the price at which the person is eager to buy the product. This
price depends on the psychology of an individual. People usually agree with the concerned
statement. People generally try to find out whether the price of a product is good in terms of the
distance from its competitive price. Reference pricing helps in marketing strategy. They help in
setting the price of the goods in the industry.
Generally, the pricing strategy is based on the assumption of the rational behavior of the
consumer. The reference price states that how much an individual expect the price of the good
according to the environment (Garattini, Curto and Freemantle 2016). The above statement can
be explained in real life. For instance, the price of liquor is $5. If an individual goes to a
restaurant and orders liquor then at that time psychologically he will find that the price of the
liquor reasonable. In contrast, he will find the liquor costly at the same price, if he goes to buy

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the liquor from a shop. Thus, if the price assumed by the consumer increases then it will have
similar impact on demand, if the real price decreases.
An individual will buy more of the product if actual price of the product is lower than its
reference price. Hence, the market will try to strategies its pricing mechanism in such a way that
the consumer find out gain from the product they buy instead of incurring loss. It means to sell
more products a seller needs to identify the reference price and accordingly set the price of the
products in order to increase the attractiveness of the product to the customer. Thus, reference
price plays an important role in determining attractiveness of a product to consumer.

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Reference
Blanchard, O., Ostry, J.D., Ghosh, A.R. and Chamon, M., 2017. Are capital inflows
expansionary or contractionary? Theory, policy implications, and some evidence. IMF Economic
Review, 65(3), pp.563-585.
Burke, T., Genn-Bash, A. and Haines, B., 2018. Competition in theory and practice. Routledge.
Garattini, L., Curto, A. and Freemantle, N., 2016. Pharmaceutical price schemes in Europe: time
for a ‘continental’one?. Pharmacoeconomics, 34(5), pp.423-426.