ECO0006 Economics for Managers
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DIPLOMA PROGRAMMES
MAIN EXAMINATION
SAMPLE
ECO0006 Economics for Managers
Answer ALL questions.
Question 1 (25 marks)
(a) While it is true that Americans are drinking less milk, demand for other US
produced dairy products continues to grow. Domestically, Americans are eating more cheese, yogurt, and butter that are manufactured from milk. This more than offsets declines in fluid milk consumption.1
(i) Explain the economic relationship between cheese, yogurt and butter.
(4 marks)
(ii) Explain the impact of the American consumption pattern on the market
for milk. Use a demand and supply diagram to illustrate and explain your answer.
(6 marks)
(iii) Based on your answer to (a)(ii), explain the impact of milk prices on the
market for cheese. Use a demand and supply diagram to illustrate and explain your answer.
(6 marks)
(b) Singles Day, with its origins in China, has arguably grown to be the biggest
online shopping sales event in Singapore. On Singles Day last year, the price discounts led to an overall online retail sales jump of 368 per cent compared with an average day the week before.2
(i) Deduce the price elasticity of demand for online shopping. Explain your answer.
(4 marks)
(ii) If the 20% price decrease of Good X on Singles Day resulted in a 35%
increase in demand for Good Y, calculate the cross elasticity of demand between the two goods. Explain the effect of the discount on the total revenue of the retailer of Good Y.
(5 marks)
Question 2 (25 marks)
(a) The following table shows the production and cost figures for a firm selling
kravats.
|
Quantity |
Total Cost |
Average Variable Cost |
Marginal Cost |
Marginal Revenue |
|
0 |
500 |
- |
- |
- |
|
30 |
|
7 |
7 |
8 |
|
|
860 |
6 |
5 |
8 |
|
90 |
1100 |
|
8 |
8 |
|
120 |
1670 |
9.75 |
|
8 |
(i) Calculate the missing values in the table above. Show all relevant working.
(4 marks)
(ii) State the period of production for the firm.
(2 marks)
(iii) Find the profit maximizing output of the firm and the corresponding
profit made.
(4 marks)
(iv) Analyse if this firm will be efficient in the long run.
(6 marks)
(b) Japan announced on July 1 it would restrict exports of three chemicals to South
Korea: fluorinated polyimide, resist and hydrogen fluoride. Those high-tech materials are used in the production of semiconductors and display screens. Japan produces around 70% of the world’s supply of hydrogen fluoride. This makes it difficult for South Korean companies to source for alternatives.3
(i) Deduce the market structure for hydrogen fluoride and state the characteristics of this market. (5 marks)
(ii) Explain the type of profit a Japanese producer of hydrogen fluoride is
likely to make in the long run.
(4 marks)
Question 3 (25 marks)
The table below shows economic data of the Unified Kingdom of Goryeo in 2019.
|
Expenditure (S) |
|
|
Consumption |
25m |
|
Government Consumption |
18m |
|
Government Investment |
30m |
|
Government Transfer Payments |
7m |
|
Inventory |
16m |
|
Fixed capital |
20m |
|
Exports |
5m |
|
Imports |
20m |
|
Labour Statistics |
|
|
Population |
50,000 |
|
Working Age Population |
48,000 |
|
Employed |
35,000 |
|
Unemployed |
5,000 |
(a) Calculate the nominal gross domestic product (GDP) of the economy.
(3 marks)
(b) If the nominal GDP in 2018 was $97m, calculate the nominal GDP growth rate
of the economy in 2019.
(3 marks)
(c) Calculate the labour force participation rate and unemployment rate of the economy.
(6 marks)
(d) Based on your answers to parts (b) and (c), deduce the phase of business cycle the economy is at. Explain your answer.
(4 marks)
(e) If the potential output of the economy is $100m, use an AD-AS diagram to
illustrate and explain how the government can use fiscal policy to bring the economy to long run equilibrium.
(9 marks)
Question 4 (25 marks)
(a) The Federal Reserve cut interest rates for the third time this year as the US
economy continued slowing amid ongoing trade disputes and weak global growth.4
(i) Explain the THREE (3) monetary tools that the Federal Reserve (US central bank) may adopt to increase money supply.
(6 marks)
(ii) Use the money market diagram to illustrate and explain the effect of the
rise in money supply on interest rate and GDP.
(7 marks)
(b) The table below shows the number of cakes and pies that Sally and Ben can
bake per hour.
|
|
Cakes (per hour) |
Pies (per hour) |
|
Sally |
2 |
3 |
|
Ben |
3 |
5 |
(i) Identify the person who has absolute advantage in baking cakes and provide a relevant explanation.
(2 marks)
(ii) Identify the person who has absolute advantage in baking pies and
provide a relevant explanation.
(2 marks)
(iii) Identify the person who has comparative advantage in baking cakes and
provide a relevant explanation.
(4 marks)
(iv) Identify the person who has comparative advantage in baking pies and
provide a relevant explanation.
(4 marks)
2022-08-19