- a) A farmer is deciding whether or not to add fertiliser to his or her crops. If the farmer adds 1 kilogram of fertiliser per hectare, the value of the resulting crops rises from $80 to $100 per hectare. According to marginal analysis when the farmer should add fertilizer?
- b) Bill has $10 that he can spend on a Superman action figure, a Batman graphic novel or an X-Men T-shirt. Bill decides to buy the action figure, even though the graphic novel was a close second choice. What is the opportunity cost of buying the action figure?
- c) Wheat farmers across Australia have to sell their produce at one fixed price for all wheat produced. Thus, price does not vary in relation to the individual farmer’s quantity of wheat sold. Draw this type of wheat demand curve and decide what value the slope has.
- a) Explain if a firm in the perfectly competitive market would or would not innovate.
- b) What are the two main differences between monopoly and competition?
- c) What happen with firm’s price and revenue operating in competitive market if the firm doubles the amount of output it sells?
The following table shows the quantity of a product demanded at two different prices:
- a) Calculate the proportionate change in quantity demanded when price falls from $16 to $14.
- b) Calculate the proportionate change in price when price falls from $16 to $14.
- c) What is the price elasticity of demand between $16 and $14? Interpret the results.
- d) What is the price elasticity of demand between $16 and $14 if you applied the ‘mid point’ formula? Interpret the results.
- a) The diagram below shows the demand for and supply of petrol. The market is initially in equilibrium at point x. To which equilibrium point will the market move from point x after each of the following changes?
- i) A rise in the cost of refining petrol.
- ii) A fall in bus and train fares.
iii) A fall in the price of crude oil and an increase in the price of cars.