ECONOMICS FOR BUSINESS

Economics for Business

Economics for Business

Question 1

(a)

Output/Sales

Costs

Revenue

Average cost

Marginal cost

Average Revenue

Marginal Revenue

0

1

0

12

27

1

13

27

13

11

27

26

2

24

53

12

9

26.5

25

3

33

78

11

7

26

24

4

40

102

10

10

25.5

23

5

50

125

10

16

25

22

6

66

147

11

18

24.5

21

7

84

168

12

20

24

20

8

104

188

13

22

23.5

19

9

126

207

14

24

23

18

10

150

225

15

15

22.5

22.5

(b & c)

From the above graph, it can be observed that the profit maximizing level of output and price is the point where marginal revenue is greater than the marginal cost which will yield maximum return through this combination.

(d)

Moreover, from the above table, it can be said that firm is operating in monopolistic competition as the monopolistic competition is a relatively large number of manufacturers that offer a similar but not identical (in terms of customers) products. Unlike perfect competition, monopoly assumes that each firm sells a special type of product that is different quality, design, prestige, so that the consumer has formed "non-price preferences." In the market of monopolistic competition products can be differentiated also by the terms of after-sales service (for durables), proximity to customers, and the intensity of advertising. Thus, firms in this market enter into a kind of competition is not so much by price, number of all possible means of product differentiation (Mankiw, 2006). The relatively unrestricted entry of new competitors into the market is an important characteristic of monopolistic competition. Manufacturers operating in such a market, large enterprises are not so; a relatively small and start-up capital they needed. This spurred them to join the industry and competition with the brands is manufactured goods. Moreover, market model of monopolistic competition describes many real-world markets. Its characteristics are exactly match the majority of service industries (Blink & Dorton, 2007).



Question 2

(a)

In the 2008 to 2009 recession in the UK economy, the economic factors that contributed towards the recession include the lack of credit. Thus, UK economy was affected by lack of credit, UK take the unprecedented coordination of a cut of half a percent of interest rates in an effort to alleviate the crisis. Shares have risen and fallen with news of failures, acquisitions and bailouts. In part, this reflects investor confidence in the banking system. While bank stocks have been hit by bad debts, retailers have been hit as consumer confidence has vanished from falling housing prices. The consumer confidence index stood at its lowest historical levels, and there was a rise in unemployment in the UK.

(b)

In comparison to two previous recessions, the 2008 to 2009 recession in the UK economy was more influential, the reason of this statement is that the lots of people in United Kingdom lost their jobs because the financial crises almost every business that also include stock market, companies and also the individual businesses.

(c & d)

Appropriate measures should be taken in relation the regulations of financial condition of companies, individuals so that the loan or the debts can be repaid by the borrower to the lender. This will help in recovering from the recession of 2008 to 2009.

Question 3

(a)

It is said that if a country produces a surplus of goods and services with comparative advantages in production costs compared to other countries and exports, raises funds to import other goods and services that is ...