- At the equilibrium quantity how much annual revenue do the producers receive?
20 $ per crate of oranges
- If the government imposes a price floor of $30 per crate how much revenue will producers now receive?
(80 million crates x30 $) = 2,400 $ million
- Discuss whether producers are necessarily better off.
The producers are not better off because when the prices for the oranges is low, many customers demand for them and this would result to extreme losses. On the other hand, when the price for the oranges is high, few customers are capable of buying them although there are lots of oranges in the market.
- The type of externality experienced by workers of Kalgoorlie is a negative one. The market is over producing gold as they are getting a lot of cash from its sale. The illustration for Marginal Private Cost (MPC), Marginal Social Cost (MSC), Marginal private Benefit (MPB) and Marginal Social Benefit (MSB) is as shown.
The government should stop the mining of gold at Kalgoorlie which will stop the cancer infection among the people.
- A common resource is a communal asset or good that provides benefits to all. Common resources are used by people until they are exhausted which leads to a problem. Public goods on the other hand are free to the people even if resources were used to produce them. Examples of tragedy of the commons include: the earth’s atmosphere, uncontrolled water logging, the traffic congestions in the roads and ocean trash current.
Commercial whaling is a modern example of the tragedy of common as fishermen tries to catch as many whales in the ocean as possible. This leads fewer whales that would have brought income for instance through the tourism sector.
- What is a business cycle? What phase is the Australian economy currently experiencing?
A business cycle refers to the ups and downs experienced in the growth of a business activity. The fluctuations which are basically the cycles get to be known by considering the pace at which the business is growing. The Australian economy is experiencing the booming period.
- Define inflation and explain why it is a potential problem?
Inflation is the pace at which the prices for commodities increase leading to decrease in the ability of people to acquire them. Inflation is harmful as it leads to increase of interests in banks. More so, there is also uncertainty as one cannot foretell about anything.
