Assignment -

Assignment consists of three problem questions answer the following:

Question 1 - Excise tax rates on tobacco and tobacco products increase in March and September based on average weekly ordinary time earnings. Perform a web-search to determine the amount of excise tax charged (as at 1 January 2018) on a standard 20 packet of cigarettes. If the standard packet is sold for a price of $30, how much is the before tax price?

Illustrate using the demand and supply model, the effects of a tax imposed on sellers of tobacco products. Explain in detail who pays the tax (buyers and/or sellers) and discuss the role the price elasticity of demand plays in determining the impact on prices and quantity of tobacco products sold. Be explicit about any assumptions made in developing predictions.

Question 2 - a) Assume a perfectly competitive firm's total cost (TC) for different levels of output Q is given by:

In a table format for the range of output (Q) provided determine: average total costs, average fixed costs, average variable costs and marginal costs. At a price of $35 how many units will be produced in the short run? At this price how many units will be produced in the long run?

b) Explain the differences between a monopolistically competitive market and an oligopolistic market? Give examples of industries with these market structures to explain your answer.

Question 3 - Some State Governments around Australia have pursued policies to merge Local Government Councils. Explain the economic rationale for these policies, use cost curves and related evidence to support your arguments.

Rationale - The questions address the following learning outcomes:

• be able to apply demand and supply analysis to make a range of market related decisions
• be able to explain and defend why it is important to understand the structure of the market in which a firm operates
• be able to make decisions that incorporate the relevant benefits and cost analysis.