Economics of Enterprise Answers

Country A is contemplating on imposing an export subsidy to encourage its businesses to export more. Discuss the effect of such an export subsidy.

If there price of apples is R5 each and the price of Orange is R10 each? Explain what the absolute and relative prices of these fruits are

A firm’s demand curve in period 1 is Q=25 - P. Fixed costs are 20 and marginal costs per unit are 5.

Assume a monopolistic firm with a constant marginal cost (MC). The firm's demand schedule is given by table 1 below. Calculate the firm’s total revenue. Average revenue and marginal cost.

3 300 5 250

8 220

9 200

13 180 15 160 19 140 24 100 30 60

1.1 Find the firm's total revenue schedule, entering the data into the table where indicated. (10) 1.2 Use these data to determine

1.3 Assuming a constant marginal of R40, what output level and price will maximize the firm's profit? (5)

Question 2

Price stability is one of the main macroeconomic objectives hence monetary authorities pursue monetary policy to Suppose that you are a member of the Monetary Policy Committee of the SA Reserve Bank. The economy is experiencing a sharp increase in inflation.

2.1 What are the options for the SARB, what response do you recommend and why? [hint: tools of monetary policy] (15)

2.2 Despite its success, monetary policy has certain limitations and faces real-world complications.

Namibia import most of its goods, and to encourage local production it can levy a tariff on imports. Discuss the effects of a tariff on an importing country such as Namibia.

The purchased and installation costs of some pieces of equipment are given as a function of weight rather than capacity. An example of this is the installed costs of large tanks. The 1990 cost for an installed aluminum tank weighing 450,000 kg was $640,000. For a size range from 90,000 to 450,000 kg, the installed cost-weight exponent for aluminum tanks is 0.93. If an aluminum tank weighing 300,000 lb is required, what is the capital investment needed in 2000?

The purchased-equipment cost for a plant which produces pentaerythritol (solidfuelprocessing plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. 

The major part of the building cost will be for indoor construction, and the contractor’s fee will 

be 7 percent of the direct plant cost. All other costs are close to the average values found for 

typical chemical plants. On the basis of this information, estimate the following: (a) The total 

direct plant cost. (b) The fixed-capital investment. (c) The total capital investment.

The table below shows the quantities of coffee produced by the 4 major producers in 2005.

We’ll suppose that these are the only producers. These quantities are expressed in bags. (A

bag of coffee has a weight of approximately 132 pounds). Additionally, we know that the

price of coffee in 2005 was approximately 172 USD per bag (172000 USD per thousand bags).

Producer Bags exported (in thousands)

Brazil 26198

Vietnam 13432

Colombia 10871

Indonesia 6744

Suppose that a Cournot model with a linear demand and constant marginal costs is a good

representation of this market. The demand is 𝑃 = 𝑎 − 𝑄.

b) Suppose that in 2006 the marginal cost of Brazil increases by 10% due to a drought. (This

actually happens from time to time).

i) What would be the effect on the international price of coffee?

ii) On the consumer surplus?

iii) On the market shares of each producer?

r?

businesss plan for competitive business

Price skimming is when you have a very high price that makes your product only accessible upmarket.