ECO5000 Assessment
Assignment 1
Three Short Answer Questions/Problems
Content Coverage: Module 1 (Weeks 1 to 3)
Due: Monday 7 August 2017 at 12 midnight (USQ time)
Value: 15%
Instructions
A cover page will go at the front of your assignment submission. It must contain the following information at a minimum: Name (in full), USQ student number.
The answer to each question shall have a maximum length of one (1) A4 page, font size 12. Content which goes over the one page limit per question will not be marked.
Each question shall be marked out of five (5) – content 4.5, research, presentation, grammar, spelling etc 0.5
Maximum length of your submission shall therefore be four (4) pages.
References (if needed and up to a maximum of three) should be placed at the end of your answer to each question.
Files extensions that can be submitted are: doc, docx, rtf.
Title your file with your surname.
Submission is through the Assignment 1 portal which will be on the front page of the study desk.
Assignment Questions/Problems
1. Outline and explain the rational actor paradigm. Give any two examples of when it has not held.
2. Outline the advantages and disadvantages of using net present value and break even analysis as criteria for assessing a firm’s investment decision.
3. An ice cream factory has set up shop in town. It paid $200k for the land and $100K for custom machinery that cannot be relocated elsewhere. The factory can produce litres of ice cream with the following operating schedule:
Volume (000’s litres) Operating cost schedule
100 $50k
200 $150k
300 $350k
400 $550k
500 $750K
600 $1.05M
a) Briefly explain the sunk cost fallacy.
b) What are the sunk costs for the firm?
c) If the ice cream is sold for $2.50 per litre (hint: allow for 000’s units), what is the optimum quantity the factory should produce?
d) What is the profit or loss it will make at the optimum quantity?