1. The following figure shows the short-run cost curves for a perfectly competitive firm
1. What is the shutdown price for the firm?
2. At what price would the firm just make normal profits?
3. What area would represent total fixed cost at this price?
4. Within what range of prices would the firm choose to operate at a loss in the short run?
5. Within what range of prices would the firm be able to make short-run supernormal profits?
2. School-run drivers face shock on road pricing
From an article in the newspaper:
"Last-minute changes to the blueprint for a Greater Manchester congestion charge were revealed yesterday, in a bid to defuse business opposition only days before an important vote by council leaders. The plan to form Britain's biggest congestion charging zone has divided Manchester's business community and led to concerns that individuals and tradesmen who cannot use public transport to get to work will face far higher costs_ If the changes are approved, lorries will be spared the charge for its first year in operation, pending a study to investigate the savings from reduced congestion. People working in Trafford Park, the large business centre close to the outside of the charging zone, will riot have to pay the charge until the tram network reaches the area? The maximum daily charge will also be cut from E10 to [5, with a pledge that no user will pay more than once for entering or leaving a charging zone while the charge is in operation, no matter how many times they cross the boundary. And people on the minimum wage would be given a 20 per cent discount on public transport fares and the congestion charge. The concessions have been tabled in advance of a city-wide referendum on the scheme, which would allow the city to draw on £1.5bn of government funds to upgrade its transport facilities and to complete the Metro link tram network. The result will be followed closely by Whitehall which wants to extend road charging. It will also be scrutinised worldwide because congestion charges normally cover much smaller areas."
1. What are the different elasticities that influence demand for road usage in a mixed market system? How might we expect elasticity to change in the long term as a result of the introduction of congestion charging?
2. What are the short-term options for reducing road congestion?
3. What are the other longer-term options for reducing road use?
4. Congestion charging is an example of price discrimination. Can you think of other examples and what effect they have?
3. About money
1. Identify and explain the main features of money.
2. What are the main economic benefits to be gained from (a well run) banking system?
3. Identify the important risks that banking regulation seeks to manage?
4. Are banks regulated by liquidity or capital adequacy? Is this a problem?
5. Identify and explain the main motives for holding money.
4. About growth
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1995
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1996
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1997
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1998
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1999
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2000
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|
High Income OECD Economies:
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|
|
|
|
|
|
|
GDP growth (annual %)
|
2.3
|
2.7
|
3.1
|
2.5
|
2.8
|
3.4
|
|
Employment in agriculture (% of total employment)
|
4.4
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4.2
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4.1
|
4
|
3.7
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|
|
CO2 emissions (metric tons per capita)
|
12.4
|
12.7
|
12.6
|
12.5
|
|
|
|
Gross capital formation (% of GDP)
|
21.4
|
21.5
|
21.9
|
22.1
|
22
|
|
|
Gross capital formation (annual % growth)
|
3.2
|
4.5
|
5.8
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4.6
|
3.5
|
|
|
School enrolment, tertiary (% gross)
|
59.3
|
60.5
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61.4
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59.1
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|
|
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Life expectancy at birth, total (years)
|
77
|
|
77.6
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|
|
78.1
|
|
Low Income Economies:
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|
|
|
|
|
|
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GDP growth (annual %)
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5.5
|
5.6
|
4
|
0.6
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4.4
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4.2
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|
Employment in agriculture (% of total employment)
|
57.3
|
|
|
|
|
|
|
CO2 emissions (metric tons per capita)
|
1.1
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1.1
|
1
|
1
|
|
|
|
Gross capital formation (% of GDP)
|
25.3
|
23.3
|
23.4
|
20.3
|
19.4
|
20.5
|
|
Gross capital formation (annual % growth)
|
9.6
|
-2.6
|
7.7
|
-5.7
|
3.6
|
5
|
|
School enrolment, tertiary (% gross)
|
6.9
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7.1
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7.3
|
|
|
|
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Life expectancy at birth, total (years)
|
58.4
|
|
58.8
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|
|
58.9
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Source: World Bank, Development Indicators
1. What does the table show?
2. What evidence, if any, does the table provide in support of the convergence hypothesis?
3. What factors, if any, might be associated with improved economic growth
4. Economic growth and the exploitation of non-renewable resources are incompatible. Discuss.
5. Measuring macroeconomic variables and policy issues
1. What are the key macroeconomic variables for an economy?
2. What key macroeconomic variables can a government or central bank control? How have these changed for your economy during the last 5 years?
3. Draw a circular flow of income for an economy that has a government sector and is open to international trade.
4. Identify the leakages, injections and components of aggregate expenditure in your circular flow diagram.
5. Explain why there is a negative relationship between inflation and aggregate demand.