FLINDERS UNIVERSITY
FLINDERS BUSINESS SCHOOL
BUSN1013 Economics for Business
BUSN9017 Economics for Business
Assignment 1, 2015
Assignment Task – Overall Instructions
The assignment questions are provided below. Only a brief answer is required for each question, but be aware that your answers must still be correct and accurate.
Attached to this document (starting with the Cover Sheet page) is a template which you should use in completing and submitting your answer. Simply copy these pages to a new document, fill in your answers, and then submit on-line using the link provided on FLO (see week beginning 6th April). Remember to submit it as a pdf document.
Marking Criteria
The assignment will be marked out of 55.
This assignment is worth 15% of your final assessment for this topic.
Due Date and Submission
The due date for this assignment is 12noon Thursday 9th April. Assignments are to be submitted via FLO. When submitting your assignment please ensure that you attach the Assignment Cover Sheet as your front page and that you follow all of the instructions on the cover sheet. These instructions are:
• lines are double-spaced
• there is a wide margin (3 cms) on the left hand side of each page
• each page is numbered
• your name appears only on the cover sheet
• your student ID appears on every page.
The penalty for late submission will be 5 marks (out of a maximum mark of 55) per day beyond the submission date.
Kevin Kirchner
March 2015

Assignment Questions
Question 1
Discuss the importance of the concept of opportunity cost. In your discussion you are required to identify and explain:
* The concept of opportunity cost and why it is a fundamental concept in economics
4 marks
* Why the concept of opportunity cost is important to individuals (and illustrate with an example(s)) 4 marks
* Why the concept of opportunity cost is important to firms (and illustrate with an example(s))
4 marks
* Why the concept of opportunity cost is important to governments (and illustrate with an example(s))
4 marks
* The notion of increasing marginal opportunity costs in production (as illustrated by a production possibility curve)
6 marks
* The relationship between comparative advantage and opportunity cost; and hence why comparative advantage is the basis for trade, not absolute advantage
8 marks
Question 2
Refer to the Table below. This table shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland.
* Which country has an absolute advantage in the production of motorcycles and which has an absolute advantage in the production of guitars? Explain your answer.
4 marks
* What is Ireland's opportunity cost of producing one motorcycle?
1 mark
* What is Scotland's opportunity cost of producing one motorcycle?
1 mark
* What is Ireland's opportunity cost of producing one guitar?
1 mark
* What is Scotland's opportunity cost of producing one guitar?
1 mark
* If each country specialises in the production of the product in which it has a comparative advantage, who should produce motorcycles? Explain your answer.
3 marks
* If each country specialises in the production of the product in which it has a comparative advantage, who should produce guitars? Explain your answer
3 marks
One Motorcycle One Guitar
Ireland 10 hours 2.5 hours
Scotland 9 hours 2 hours
Question 3
Refer to the Table below. The table contains information about the corn market. Use the table to answer the following questions.
* What are the equilibrium price and quantity of corn? 2 marks
* Suppose the current price is $9 per bushel. Is there a shortage or a surplus in the market?
1 mark
* What is the quantity of the shortage or surplus? 1 mark
* If the market price is $9 per bushel, what must happen to restore equilibrium in the market? Explain how this would occur. 2 marks
* At what price will suppliers be able to sell 22,000 bushels of corn? 1 mark
* Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market?
1 mark
* What is the quantity of the shortage or surplus?
1 mark
* If the market price is $21 per bushel, what must happen to restore equilibrium in the market? Explain how this would occur.
2 marks
Price per Bushel Quantity Demanded
(bushels) Quantity Supplied (bushels)
$3 30 000 0
6 26 000 4000
9 22 000 9000
12 18 000 12 000
15 15 000 15 000
18 12 000 22 000
21 8000 28 000
24 4000 36 000

ATTACHMENT
TEMPLATE for submitting your answers.
Please copy the following pages to create a new Word file. Fill in your answers (inserting more space at each question, as required). Save as a pdf document and then submit via FLO.

Flinders Business School
Assignment cover sheet: online submission
Complete this cover sheet and copy and paste the whole page at the beginning of your assignment.
Assignment Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Student ID
First name
Family name
Topic code and name
Word count
Your tutorial details
ie day, time, location
Before submitting this assignment please check the following:
* lines are double-spaced
* there is a wide margin (3 cm) on the left hand side of the page
* your name appears only on this title page
* your Student ID number appears on every page
* pages are numbered
Please submit your assignment as a pdf document.

Question 1
Discuss the importance of the concept of opportunity cost. In your discussion you are required to identify and explain:
* The concept of opportunity cost and why it is a fundamental concept in economics
* Why the concept of opportunity cost is important to individuals (and illustrate with an example(s))
* Why the concept of opportunity cost is important to firms (and illustrate with an example(s))
* Why the concept of opportunity cost is important to governments (and illustrate with an example(s))
* The notion of increasing marginal opportunity costs in production (as illustrated by a production possibility curve)
(Include a diagram. If you can’t draw an appropriate diagram electronically then refer to an appropriate diagram in the textbook.)
* The relationship between comparative advantage and opportunity cost; and hence why comparative advantage is the basis for trade, not absolute advantage
Question 2
Refer to the Table below. This table shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland.
* Which country has an absolute advantage in the production of motorcycles and which has an absolute advantage in the production of guitars? Explain your answer.
* What is Ireland's opportunity cost of producing one motorcycle?
* What is Scotland's opportunity cost of producing one motorcycle?
* What is Ireland's opportunity cost of producing one guitar?
* What is Scotland's opportunity cost of producing one guitar?
* If each country specialises in the production of the product in which it has a comparative advantage, who should produce motorcycles? Explain your answer.
* If each country specialises in the production of the product in which it has a comparative advantage, who should produce guitars? Explain your answer
One Motorcycle One Guitar
Ireland 10 hours 2.5 hours
Scotland 9 hours 2 hours
Question 3
Refer to the Table below. The table contains information about the corn market. Use the table to answer the following questions.
* What are the equilibrium price and quantity of corn?
* Suppose the current price is $9 per bushel. Is there a shortage or a surplus in the market?
* What is the quantity of the shortage or surplus?
* If the market price is $9 per bushel, what must happen to restore equilibrium in the market? Explain how this would occur.
* At what price will suppliers be able to sell 22,000 bushels of corn?
* Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market?
* What is the quantity of the shortage or surplus?
* If the market price is $21 per bushel, what must happen to restore equilibrium in the market? Explain how this would occur.