The Economics of Feminist Policy - Essay Example

Assignment 2 Assignment 2 Question a) Consider a firm in a perfectly competitive market whose marginal cost (MC) is described by MC = 2q, where q denotes the output of the firm. Suppose that the firm produces 10 units of output in the long-run equilibrium. (i) Find the long-run equilibrium price for this market, explaining your reasoning. Answer (i) The long run equilibrium price for this competitive market occurs at the condition when; So first we will determine the marginal cost of the market from given conditions; Also, Therefore, So the long run equilibrium price is £20. (ii) Calculate the total cost incurred by this firm in the long-run equilibrium. Answer (ii) Since the average total cost of a firm operating in perfect competition is equal to its price, marginal cost and marginal revenue. Total cost can be found as (b) Consider a monopolist producer facing a demand curve and marginal revenue (MR) curve described by P = 200 - 2Q and MR = 200 - 4Q, respectively. The firm has a constant marginal cost (MC) of 40 and faces no fixed costs. Find the equilibrium price and quantity if the monopolist wishes to maximise profit and draw a diagram to illustrate. Explain why the firms monopoly power gives rise to a deadweight loss and indicate the area, reflecting this deadweight loss in your diagram. Answer Finding Equilibrium Price and Quantity The profit maximization condition occurs when marginal revenue is equal to the marginal cost, i.e. Therefore quantity required for profit maximization for monopolists is 40. Now we will find the price by putting the value of Q in demand curve equation, i.e. So the equilibrium price that monopolists require for profit maximization is £120. Dead Weight Loss Monopoly creates deadweight loss because the price of the monopoly is above than its marginal cost and the output produced is too small as they restrict the production below than the quantity that is efficient for society (Hirschey, 2008). Question # 2 Which of the following items are included in the calculation of GNP in the UK, and which are excluded? Part (a) Salaries paid to university lecturers Answer Yes, because all income earned in the country are included in the GNP. Part (b) Service charge (tip) of 12.5% charged in a restaurant. Answer Yes as it’s something earned. Part (c) Expenditure on social security benefits Answer Being a part of GNE, it is included in the GNP. Part (d) The income of a second-hand car salesman Answer Yes, it is included in the GNP because all incomes are included in GNP. Part (e) Work carried out at home by a housewife Answer No, since a house work by a house wife is usually payless, hence it is not included in the GNP calculation. Part (f) Work carried out at home by a paid domestic helper Answer Being paid, the worker’s income is included in GNP. Part (g) The value of pleasure from leisure Answer No, since it’s unrealized hence not mentioned in the GNP. Part (h) Free-range, organic eggs sold in the market Answer Being a product purchased by the consumers, their value is included in the GNP. Question # 3 The table below shows the ranking of the first 53 countries according to the calculation of the Human Development Index (HDI) in 2004. Part (a) Explain briefly what the HDI measures. Answer Human Development Index (HDI) The United Nations Development Programme (UNDP) brought the concept of Human Development Index (HDI). This concept is significant because it combines 3 of the essential indicators: An expected time to live as calculated on the basis of statistical probabilities at birth, attainment of education and income (Dawson, Hatt, & Linda, 2001). It was 1st published in 1990; regardless of that the index was calculated again for the past years, since 1975. Now the HDI has turn into a global reference. Basically it is a systematic approach to evaluate what the individuals of a specific country can do and how much they are able to be (Dawson, Hatt, & Linda, 2001). In the index number all of the 3 elements i.e. health, income and attainment of education is weighted equally. For each element, the outcome of the nation is rated on a scale range from 0 to 1, in which the ends of the scope is defined by the highest and lowest data for other nations (Dawson, Hatt, & Linda, 2001). The index number for health is measured from expectation of life at birth. As life expectancy is sensitive to newborn and child mortalities, these counts on extensive access to healthcare and nutrition, it is very much sensitive to social and economic lack of equality (Dawson, Hatt, & Linda, 2001). Education is important for determining the choices available to peoples. It is a key determinant of social and economic mobility. The index of education is computed as one-third rates of enrolment and two-thirds rates of adult literacy, makes it sensitive to both future attainment of education and educational difference. Measurement of income is also included in the HDI. The income index level utilizes the natural log of the total national income divided by the number of people in the nation (Dawson, Hatt, & Linda, 2001). Part (b) Express briefly what you think about the way in which the HDI is constructed. Answer As HDI is combination of three essential i.e. life expectancy of birth, education and income, it is constructed from data related to the fundamental indicators of functioning of human, for example life expectancy at birth, status of health, chances of education, political and employment rights. For every nation such indicators are aggregated and showed as an index number, based on these index numbers countries are ranked in terms of the development of human. The approach is important because it is the shows the extent to which the human is flourishing (Dawson, Hatt, & Linda, 2001). Part (c) Mexico has a much higher income per capita than Cuba, even after considering differences in the prices of the goods and services in Mexico and Cuba. However, Cuba ranks better according to HDI than Mexico. Explain why this might be. Answer The HDI of Cuba is better than the Mexico because of its higher life expectancy. More than fifty years of the socialist revolution of Cuba, regardless of the currently occurring blockade in economy and thin resources, Cuba has reached the higher standard of education and health for its people. Question # 4 In a closed economy, investment is autonomous at a level of £500, while consumption is comprised of autonomous consumption of £50, as well as 90% of disposable income. There is no government sector. Part (a) What is the equilibrium level of income? Answer The economy without any government is referred as closed economy. The equilibrium level of income with in this economy is obtained by; Hence according to the given condition, the AE is given by; Here, and Also, Here, T = 0 Therefore, So, And, Now we can the equilibrium level of income using above equation, Therefore the equilibrium level of income is £5500. Part (b) What would equilibrium income be if investment increased by £50? Answer Now here, The equilibrium level of income is given by; Hence on increasing the investment the equilibrium income level increases, i.e. £ 6000. Part (c) Explain what the multiplier of an economy is and calculate the value of the multiplier in this economy, given the change in investment. Answer Economic Multiplier It is the method of assessing the quantitative effect on transportation projects that are driven by the investment and directly impacts business expansions, attractions, tourism or retention. Generally these multipliers are expressed in terms of regional economic income, output or employment (Sinha, & Labi, 2007). Magnitude of these investment changes depending upon the type of transportation investment and its relationship to other investment to the regional economy, and the size of the existing regional economy. The method of economic multiplier depends largely on the input-output modelling (Sinha, & Labi, 2007). The multiplier in this economy is given by, Now, Question # 5 It is estimated that a particular economy has a multiplier of 2. The marginal propensity to import of the economy is 0.3, while the consumers marginal propensity to save is 0.2. Part (a) Find the marginal tax rate of this economy? Answer The marginal tax rate can be calculated by using the formula of multiplier, i.e. Where, k = Multiplier = 2 s = Marginal Prosperity to Save = 0.2 m = Marginal Prosperity to Import = 0.3 t = Marginal Tax rate =? Using above equation; Part (b) The marginal propensity to import increases from 0.3 to 0.4, Find the new multiplier of the economy and explain why the multiplier has changed? Answer Multiplier is given by the formula; Where, k = Multiplier =? MPS = Marginal Prosperity to Save = 0.2 MPM = Marginal Prosperity to Import = 0.4 Using above equation, On increasing the value of marginal prosperity of imports the value of multiplier decreases because increase in value of MPM increases the denominator value, therefore the overall value of the multiplier decreases (Snowdon & Vane, 2003). References Dawson, G., Hatt, S. & Linda, W.B., 2001. Market, State and Feminism : The Economics of Feminist Policy. 1st Edition. Edward Elgar Pub. Hirschey, M., 2008. Managerial Economics (with InfoApps 2-Semester Printed Access Card). 12 Edition. South-Western College Pub. Sinha, K.C. & Labi, S., 2007. Transportation Decision Making: Principles of Project Evaluation and Programming. 1st Edition. Wiley. Snowdon, B. & Vane, H., 2003. An Encyclopedia of Macroeconomics. Edward Elgar Pub. Read More