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1. HI5003Final Assessment T1 2022
Student Number: (enter on the line below)
Student Name: (enter on the line below)
HI5003
ECONOMICS FOR BUSINESS
FINAL ASSESSMENT
TRIMESTER1, 2022
Assessment Weight: 50 total marks
Instructions:
 All questionsmust be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Please ensure you follow the submission instructions at the end of this paper.
Purpose:
HI5003 Economics for Business assessment consists of six (6) questions and is designed to
assess your level of knowledge of the key topics covered in this unit.

2. HI5003Final Assessment T1 2022
Question 1 (7 Marks)
Assume that during the years 2022 to 2025 Woodland Republic could produce only two
commodities: tractors and rice. Also, assume that Woodland Republic can procuce at any of the
positions represented by the production possibility schedule below.
A B C D E F G H
Tractors 0 2 4 7 9 11 13 14
Rice (in tons) 100 95 85 70 60 50 30 0
a. Suppose in 2022 the economy is producing at point D. What is the opportunity cost of
producing 6 more tractors in 2023 (3 Marks)
ANSWER a): ** Answer box will enlarge as you type
Since the current operation is at level D, 7 tractors are manufactured and 70 tons rice
is manufactured.
At 6 tons extra, the operation level will shift to point G where 30 tons rice is
produced.
Therefore, Opportunity cost of producing 6 more tractors is 70-30 = 40 tons rice.
Reference: Week 2
b. Use the figure below to answer the questions that follow.

3. HI5003Final Assessment T1 2022
i. Suppose, in 2024 the Minister of Finance in Woodland Republic advises the World
Bank that in order to increase rice production and tractor manufacturing, each
sector requires AUD50 billion, or a total of AUD100 billion. This AUD100 billion is
made available by the World Bank. Explain the impact of these AUD100 billion
budgetary allocations to the economy of Woodland Republic. (2 Marks)
ANSWERi):
With increase in budgetary allocation by the world bank, the aggregate demand and
output is expected to rise. With increase in resources it will be possible to produce
greater quantities of both products leading to an outward shift in the PPC Curve.
ii. Suppose in 2025Woodland Republic begins to manufacture fertilizers. Explain
theimpact of the discovery of fertilizers on the Woodland Republic economy. (2
Marks)
ANSWER ii):
With discovery of fertilisers, the annual output of products will increase and lead to an
increase in overall GDP of the economy. This will cause the PPC curve to shift further
rightward.
Reference: Week 2
Question 2 (11 Marks)
John plans to start a milk and pizza business in 2022. Suppose John owns a rental premises from
which his rental earnings are AUD 3,000 per month. He asks the rental people to leave and uses
the premises for the milk and pizza business.
The table below represents John’s January business summary:
Item Cost (AUD)
1 Milk truck 120,000
Milk stainless cans 20,000

4. HI5003Final Assessment T1 2022
Milk cooler 40,000
2 litre milk packs (Number of packs bought depend on demand. Assume
January average expenditure)
30,000
Pizza ingredients (Ingredients used depend on demand. Assume January
expenditure)
4,000
2 cashiers (Assume a cashier per section [Milk and Pizza]. Also, wages depend on
hours worked. Assume January average wages per cashier)
3,000
2 bakers (Wages depend on hours worked. AssumeJanuary average wages per
baker)
3,500
Pizza packaging boxes (Boxes depend on demand. Assume average January boxes
used)
2,000
Pizza special oven 25,000
i. Milk production per day: 300 litres per day
Note: Assume 90,000 litres per month produced and bought.
ii. Pizza production per day is 500 pizzas. Assume 15,000 pizzas per month are
produced and all that are produced are sold.
Use the table to answer the questions below.
a. Calculate John’s fixed cost and average fixed cost for eachsection. (2 Marks)
ANSWER a):
Fixed Cost of Milk production = Cashier (3000) + Milk Truck (120000) + Cans (20,000) +
Cooler (40000).
= $183,000
Average Fixed cost = $183,000 /90,000 = 2.03 per litre
Fixed Cost of Pizza production = Cashier (3000) + Oven (25000) + Bakers (7000)
= $35000
Average Fixed cost = $35,000 /15,000 = 2.33 per pizza.
b. Calculate John’s variable cost and average variable cost for each section. (2 Marks)
ANSWER b):
Total Variable cost of Milk = 30,000

5. HI5003Final Assessment T1 2022
Average Variable cost of Milk = 30,000 / 90,000 = $0.33 per ltr
Total Variable cost ofPizza = 4000 + 2000 = $6000
Average Variable cost ofPizza = 6000 / 15000 = $0.4 per pizza
c. Assume John sells milk atAUD2.50 per litre. Also, assume John sells each pizza at
AUD10.00.Calculate John’s accounting profit and economic profit for the month of
January. (7 Marks)
ANSWER c):
Sale price of milk = 2.5*90000 = 225000
Sale price of Pizza = 10*15000 = 150000
Cost of Milk = $183,000 + 30,000 = 213000
Cost of Pizza = $35000 + 6000 = 41000
Opportunity loss = 3000
Accounting Profit = Sales - Costs
225000 + 150000 – 213000 – 41000
= $121,000
Economic Profit =Accounting Profit - Opportunity loss
$121,000 – 3000
= $ 118,000
Question 3 (7 Marks)
Assume that Airbus and Boeing are the only firms that manufacture planes in the world. Answer
the questions below.
a. What is the market structure in which Airbus and Boeing operate? Explain your answer
using the market characteristics for the two firms (Airbus and Boeing). (4 Marks)
ANSWER a):
Given that Airbus and Boeing are the only firms manufacturing planes in the world,
they are operating in an Oligopoly Market structure.

6. HI5003Final Assessment T1 2022
Both the firms provide different specifications of airplanes and are the only firms in
the industry. The airplane manufacturing industry has entry and exit restrictions and
limited market players with product differentiation. Therefore, it is rightly classified as
Oligopoly market.
Reference: Week 4
b. Examine the market entry barriers that deter other firms from entering the market
structure for Airbus and Boeing. (2 Marks)
ANSWER b):
The airplane manufacturing business requires a lot of permissions and compliance. Also,
machineries are very expensive. Therefore, costs, customer support, maintenance and
technology are barriers to entry in such industry that deter other firms from entering the
oligopoly market structure in this case.
Reference: Week 4
c. What do you understand by the term “Mutual Interdependence” for Airbus and Boeing.
(1 Mark)
ANSWER c):
Oligopolies are typically characterized by mutual interdependence. Here too, in the case
of Airbus and Boeing, various decisions such as output, price, advertising, and so on,
depend on the decisions of the other firm(s). Analyzing the choices of oligopolistic firms
about pricing and quantity produced involves considering the pros and cons of
competition versus collusion at a given point in time.
Reference: Week 4, Slide 4-9
Question 4 (7 Marks)
a. In 2021, theWoodland Republic Bureau of Statistics publication indicated thatthe
Consumer Price Index (CPI) of the country increased to 109.2 in 2021 from 106.5 in 2020.
Calculate Woodland Republic’s inflation rate in 2021. (3 Marks)
ANSWER a):

7. HI5003Final Assessment T1 2022
Inflation rate = change in CPI / Base year CPI
(109.2 - 106.5) / 106.5
= 2.7 / 106.5
= 2.535%
b. The Woodland Republic’s Population Secretariat published the following information in
2021:
 Total population: 30 million
 Labor force: 80% of the total population
 Employed population: 21.5 million
Use the information provided to answer the following questions:
i. Calculate the population that is excluded from the labour force in Woodland
Republic in 2021 and indicate at least four sectors that are excluded from labour
force. (2 Marks)
ANSWERi):
Population that is excluded from the labour force = (1 - Labour force) * Total Population
= 20% * 30 million
= 6 million
Sectors not included in labour force are caregivers, disabled people, children and people
with health barriers.
ii. Calculate the Woodland Republic’s unemployment rate in 2021. (2 Marks)
ANSWER ii):
Total labour force = 30 million * 80%
= 24 million
Unemployment rate = (Total labour force - employed population) / total labour force
= 6 million / 24 million
= 25%

8. HI5003Final Assessment T1 2022
Question 5 (7 Marks)
(i) Use two (2) coincidental indicators to explain the conditions that are experienced in a
nation during a recession. (2 Marks)
ANSWERi):
Production and employment are two coincidental indicators. Recession directly effects
employment which tends to change in Production and change in production means
fluctuation in demand and supply of goods and services of any Nation. Perfect example
is of Covid-19 pandemic that affected all these indicators which tends to change in
economical factors worldwide.

9. HI5003Final Assessment T1 2022
(ii) Examine the causes of business cycle fluctuations in a nation. (2 Marks)
ANSWER ii):
Cause of business cycle are Productivity, Levelof employment, Demand and supply of
nation’s goods and services.
For example, during covid=19 times, because of lockdowns all businesses had fluctions in
these factors.
Productivity implies lesser production because of manpower,resources, finace which
creates business fluctuations.
Level of employment was impacted because of economic crisis as employment rate went
down because of high wages, high production rates, lockdowns and all theseimpacts
demand and supplyof goodsand services of a Nation.
(iii) Suppose the following information was published by the Australian Bureau of Statistics in
2017:
Item Amount (AUD billion)
Household consumption 5,029.81
Government consumption 20,340.92
Exports 1,386.39
Value of cocaine seized at Sydney Airport 20,500
Value of intermediate goods in tractor
manufacturing
502,003
Gross private domestic investment 352.69
Imports 386.95
Components used in the manufacture of cars 40,000
Gifts 15,236
Government investment 88.19
Value of second-hand goods 500.00
Value of banned endangered species elephant tasks
seized at Melbourne Airport
600.00

10. HI5003Final Assessment T1 2022
Use the information provided to calculate Australia’s GDP in 2017 (3 Marks)
ANSWER iii):
GDP is the market value of products and services of any country within an given financial year.
GDP = C + I + G + NX
Where: Consumption, Investment, Government Spending and Net exports are included in GDP
Here,
According to formula, GDP = 25369.81+440.88+538339+9990.5= $574140.19 is the GDP value in
2017
Question 6 (11 Marks)
Due to the severity of COVID 19 on households, the government of Australia announced Job
Keeper Allowances to be given to the labour force that had lost employment.
a. Examine the impact of Job Keeper Allowances during the COVID 19 recession on
Australia’s economy. (4 Marks)
ANSWER a):
Job keeper allowances is like a subsidy that Australain government gives to employers if
they are eligible, that means a party of Australian GDP was used to save the small
businesses that helps the employes to get paid from the employer in covid time. Because
of lockdowns everyone was not able to work outside so the country have less work force
for business, but necessary business have to be opened for survival like Grocery stores,
Medical institutions. In job keeper allowance which is directly payment to employer and
employes by government directly impacts on GDP, because that amounts was from
country’s GDP. At that time employees supperanuation which is governments property
until the specific age of any employee was taken by the employees, that’s all because of
impact of covid lockdowns, no businesses was running, people cant come outside their
homes.
Job keeper allowance was introduced to save the business, busineses are our permanent
assest which grows and tends to make growth in any nation GDP.

11. HI5003Final Assessment T1 2022
But his allowance was a part of GDP, that ends to decrease economical growth of
Australia. This allowance saved the bussines which arenow again increasing and making
economical growth better than worse.
b. Examine two reasons that could explain why the government of Australia terminated
Job Keeper Allowances though COVID 19 still impacted Australia.(3 Marks)
ANSWER b):
1, Job keeper allowance was terminated because of low recovery of economy by small
business.This allowance was to help the small business to remain continuing and raise
GDP. in this allowance government spendings was more than the businesses
involvement in economy, because of less work force, low productivity and lesser
demand and supply of goods and services in the Nation.
2, This allowance was for few small businesses, but there were other conditions also to
be considered at such time like necessary business, medical instituions that needed
more at the time of covid-19 and so on. The Government terminated this allowance and
saved the remaing GDP and slowly worked towards opening the lockdowns which again
led to increase of economy because of increase in productivity.
For example, some business involves more of nation’s economy while some businesses
involve less.But according the government norms, this allowance was paid to everyone
which impactedgovernment treasuremore. So, for making the essential services strong,
government terminated this allowance on 28 March 2021.
c. Assume the government of Australia spent AUD50 billion on allowances given to Job
Keeper beneficiaries. Assume that despite the family financial stress, 15% of the Job
Keeper Allowances was the total c.Further, assume all other factors remain constant.
Calculate the total effect of the Australian government Job Keeper Allowancespending
on aggregate demandfor the economy.(4 Marks)
ANSWER c):
Spending on allowances by Government: AUD 50 billion.
Total beneficiary savings = 15%

12. HI5003Final Assessment T1 2022
Spendings = 1 – Savings = 85%
Total effect of the Australian government Job Keeper Allowance spending on aggregate demand
for the economy = 50 billion * 85%
= 42.5 billion
It is a wage subsidy for businesses significantly affected by COVID-19 to help them retain and
continue to pay their staff. With Job Keeper Allowance, spending rose by $42.5 billion leading to
rise in GDP.
END OF FINAL ASSESSMENT
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