Question 3: ABC Company

A: Cost

TFC = $5,000

TVC = $15,000/day

Q = 100 pendants/day

So,

AFC = TFC/Q = 5,000/100 = $50

AVC = TVC/Q = 15,000/100 = $150/day

ATC = TFC + TVC = 50 + 150 = $200

Total Cost = FC + VC = 5,000 + 15,000 = $20,000

B: Economic Profit & Accounting Profit

The implicit costs are the opportunity costs (forgone rent, forgone interest & forgone salary) while the explicit costs are wages, salary, interest paid, raw material and other payments

Economic Profit = Total Revenues – Explicit Cost – Implicit Cost

Economic Profit = $500,000 – (400,000 + 10,000 + 50,000 + 20,000) – (8,000 + 10,000 + 7,000)

Economic Profit/(Loss) = $500,000 – 480,000 – 97,000 = ($77,000)

Accounting Profit = Total Revenue – Explicit Cost

Accounting Profit = $500,000 - $480,000 = $20,000

Question 4: Charles

A: Second-hand textbooks aren’t part of GDP calculation as the book in question was manufactured in other year and not in the current year, so it is not counted in GDP calculation for current year.

B: Again, the underlying good is second-hand and isn’t produced in same year. Any transaction pertaining to it will have no impact on current year GDP so it will remain unaffected in current year.

C: Spending on new houses is regarded as an investment. Hence, it will be included in current GDP calculation. Investment will be added to GDP equation and thus it will increase the GDP.

D: Any item produced in a given year within the economy is included in GDP calculation. Meat produced and exported to Indonesia is counted in domestic production and will be used in GDP calculation. Goods sold abroad are named as exports and are added to GDP. Hence, exports of meat will increase GDP in current year.

E: The fish bough by shop will be used in producing final good i.e. meal served at diner. The fish isn’t itself a final meal, yet it is added to the final consumption of goods by consumers. Hence, this will also increase GDP value in current year.

F: Buying new deep fryer for making final good (fries) will constitute as the investment in equipment. Hence, as investments are added to GDP equation, so new purchases will increase the GDP in current year. 

Question 5: ABS

The labor force participation rate is calculated as the number of people in labor force divided by the working age people. Hence the participation rate in Australia is:

LFPR = 10,979,300/1,680,200 = 0.653 or 65.3%

The unemployment rate is calculated as the number of people unemployed divided by the number of people in labor force. It consists of the employed and unemployed people. Hence, the total number of unemployed people in Australia as per question was;

Number of unemployed persons = Labor Force – employed = 10,979,300 – 10,514,600 = 464,700

So unemployment rate is 464,700/10,979,300 = 0.042 or 4.2% in Australia as per the given data in question.

Question 6: Australian Economy

A: Slowdown in China’s Economic Growth

As Australia is a net exporter to China, the slowdown in the Chinese economic growth will put the downward pressure on demand for Australian goods. This will reduce the exports to China while reducing aggregate demand of Australian goods. This will shift demand curve from AD to AD₁ with reduction in prices from P to P₁ and output from Q to Q₁.

B: Wage Rate Up

The rise in the wages will increase the net cost of production for the producers. This will push the suppliers in producing and supplying less goods that will shift supply curve to left from ASC to ASC₁ while raising the price level from P to P₁ and reducing output from Q to Q₁.

C: Consumer Confidence Increase

The increase in the consumer confidence will increase the demand curve and put it to shift to right from AD to AD₁ while causing the increase in both prices and output level (from P to P₁ and from Q to Q₁) due to optimism in the market