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Economics for Business - Coursework Example

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Economics for Business Name Institution Course Date Word count (1862) 1) a) Average cost or average total cost is the average cost per unit of output. To find it, divide the total cost (TC) by the quantity of production (Q). Average cost (AC) or average total cost (ATC): total cost divided by unit cost of output ATC= TC/Q (Q) (TC) (ATC) 0 1 1 1 13 13 2 24 12 3 33 11 4 40 10 5 50 10 6 66 11 7 84 12 8 104 13 9 126 14 10 150 15 Marginal cost is the additional cost that results from increasing from increasing output by one unit…
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Economics for Business
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Download file to see previous pages To find it, divide the total revenue (TR) by the quantity of production (Q). Average Revenue (AR) divided by per unit cost of output AR= TR/Q (Q) (TR) (AR) 0 0 0 1 27 27 2 53 26.5 3 78 26 4 102 25.5 5 125 25 6 147 24.5 7 168 24 8 188 23.5 9 207 23 10 225 22.5 Marginal revenue is the additional revenue that results from increasing from increasing output by one unit. This means the additional revenue per additional unit of output. This is the difference between total revenue per every additional unit of output. The marginal revenue is abbreviated using (Z) (Q) (TR) (Z) 0 0 0 1 27 27 2 53 26 3 78 25 4 102 24 5 125 23 6 147 22 7 168 21 8 188 20 9 207 19 10 225 18 b) Graph of average cost and marginal cost verse units per out put Red – Marginal cost Blue – average cost Graph of average revenue and marginal revenue verse units per out put Red – Marginal cost Blue – average cost C) Profit is obtained by subtracting the total revenue from the total costs at the maximum is at five units per put 625- 250 = 375 d)The economic profit for the company is positive, then the firms decision are optimal. That is, its price and output yield a profit larger than any alternatives prices that output. The type of market that this firm is operating on is oligopoly (BBC Economy tracke, 2010). Oligopoly prices are expected to be more stable that those in a monopolistically competitive market. This is evident in the graph that results in long run oligopoly market equilibrium of a Price/output solution that is identical to that of a competitive market. 2) a) Economic factors that led to the most recent recession of 2008/2009 include Main causes if recession Credit crunch in U.K – the U.K mortgage lending caused very serious problems for the Northern Rock. It had a high percentage of risky loans. When the subprime crisis hit, the Northern Rock could no longer raise enough funds for the usual capital market. It had to borrow emergency funds from the Bank of England. As a result of the credit crunch, the U.K saw a change in the mortgage market. The mortgage started to become expensive. Falling of house prices in the U.K - since getting mortgages became difficult, the demand for houses started to fall. This was also related credit crunch. Cost push inflation restricting income and reducing disposable income. The fall in confidence of the financial sector that caused lower confidence amongst real economy. Supply side shock – in this case higher oil prices would increase cost of production and the effect would lead to a short run aggregate supply to shift to the left. Demand slide shock: the factors include higher interest rates which lead to a reduction in investment and borrowing. The fall of real wages, the reduction of consumer confidence, a period of deflation as falling of prices often encourage the delay of spending. b) Comparison to the other two recession The 1979- 1981 recession was caused by the following economic factors: High strength of the pound (British currency) and this made the price of exports became more expensive thereby having a reduced AD (Aggregate Demand). This recession particularly affected the British manufacturing (Bank of England, 2012). The high interest rate was another factor. The ...Download file to see next pagesRead More
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