Convincing Features
Assignment Type
Subject
Uploaded by Malaysia Assignment Help
Date
Q1. Suppose that the demand and supply of liter of petrol are given in table 1 below:
Table 1
| Price (RM) | Quantity demanded (liter per day) | Quantity supplied (liter per day) |
| 0.80 | 8 | 24 |
| 0.75 | 10 | 22 |
| 0.70 | 12 | 20 |
| 0.65 | 14 | 18 |
| 0.60 | 16 | 16 |
| 0.55 | 18 | 14 |
Demand
a) What is the equilibrium price and quantity of petrol?
(2)
b) Use a graph paper to draw a demand curve and supply curve based on the table above.
(8)
c) Now suppose that a political crisis in the Middle East lead to a decrease in the supply of petrol by 8 liter per day at every price. Show the change in the graph paper and show the new equilibrium position.
(5)
i) What is the new equilibrium price of petrol? (2.5m)
ii) What is the new equilibrium quantity of petrol? (2.5m)
d) In order to help the consumer, the government imposes a price control of RM0.60 per liter:
(10)
i) Give the name of this price control. (2m)
ii) How much petrol will be demanded by consumer at this price?.(2m)
iii) How much petrol will be offered for sale by suppliers? (2m)
iv) How much petrol will actually be sold?(2m)
v) Calculate the excess quantity of petrol demanded.(2m)
(Total : 25 marks)
Q2. An individual is given a voucher worth RM300 to spend in a Malay Restaurant which sell only Rendang and Satay. The table 2 below show the total utility of satay and rendang that Dr. Mustafa earn after dinner with his family.
Table 2
| No of portions | Total utility of Satay (TU) | Total utility of Rendang (TU) |
| 1 | 100 | 160 |
| 2 | 190 | 310 |
| 3 | 270 | 450 |
| 4 | 340 | 580 |
| 5 | 400 | 700 |
| 6 | 450 | 810 |
| 7 | 490 | 910 |
| 8 | 520 | 1000 |
| 9 | 540 | 1080 |
| 10 | 550 | 1150 |
Answer all question below:
a) If the price of a portion of Satay is RM15 and that of a portion of Rendang is RM30. Identify 4 possibilities of principles to maximize utility (satisfaction)
(12)
b) Investigate the combination of Satay and Rendang to Dr. Mustafa to maximize his utility (satisfaction).
(4)
c) Calculate the total marginal utility earn by Dr. Mustafa in equilibrium.
(6)
d) What is the implication if, Dr. Mustafa spend RM105 on its own income/budget. Justify your answer.
(3)
(Total: 25 marks)
Q3. Based on the case study below.
CASE STUDY : FIXED COSTS AND PRODUCTION CAPACITY AT GENERAL MOTORS
In an industry with 17million unit sales annually, GM admitted in March 2022 that it needed to reduce automobile production capacity by 1 million cars per year to match its current sales of 5 million cars. It represented the second time in its 100-year history (1988 being the easier event) that the company had significantly shrunk its capacity. As part of its decision to reduce its size, GM planned to close 10 of its U.S automobile assembly lines.
In the past, GM alternated between (1) building all the cars it could produce and then using costly clearance sales to attract buyers, and (2) reducing output by running plants below capacity through a slowdown in the pace of the assembly line or elimination of an entire shift. The new strategy called for the company to use 100 percent of its American automobile production capacity five days a week with two shifts per day. If automobile demand increased above this capacity level, third-shift operations would be used to boost production. Ford company had been following this strategy for some time.
In effect, GM and Ford were trading off lower fixed costs over the entire business cycle against (the possibility of) having to incur higher variable costs in long run (e.g. use of higher cost overtime and third-shift operations) during periods of strong demand. As a consequence, GM’s break-even output point declined sharply.
Source: Jacob M. Schlesinger (25 April 2023), “GM to reduce capacity to match its sales” dan Lawrance Ingressia and Joseph B. White (2019),”GM plan to close 21 more factories, cut 74,000 job opportunities, slash capital spending”, Wall Street Journal and “A Duo of Dunces”, The Economist (March, 2018). P63.
With an appropriate diagram, elaborate the concepts of internal and external economies of scale and diseconomies of scale by GM and Ford in U.S automobile industry.
(25 marks)
Q4. The Table 3 below show the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the firm’s total fixed cost (TFC) is RM4.
Table 3
| Output (Units) | Total Revenue (RM) | Average Cost (RM) | Total Cost (RM) | Marginal Cost (RM) | Marginal Revenue (RM) |
| 1 | 8.0 | ||||
| 2 | 5.5 | ||||
| 3 | 4.0 | ||||
| 4 | 3.5 | ||||
| 5 | 3.8 | ||||
| 6 | 4.5 | ||||
| 7 | 6.0 |
Please answer all questions below:
Fill in the values for total revenue (TR), total cost (TC) and marginal cost (MC) in the column provided.
(8)
Determine the profit maximizing output.
(2)
Show the equilibrium of the firm in a diagram.
(8)
If the average revenue falls to RM3 per unit, calculate the firm’s new profit or loss at the equilibrium.
(5)
Based on your answer in part (d), should the firm continue or stop the production? Justify.
(2)
(Total: 25 Marks)
Do you need professional help with your Business Economics assignment for GECO5113? Demand-supply analysis, utility maximisation, and comprehensive case study help are among the expert services provided by Malaysia Assignment Help. Obtain precise, thoroughly researched responses that meet university requirements. Get professional help now to improve your score!
