midterm saqs - model answers nov 3

7/23/2019 Midterm SAQs - Model Answers Nov 3

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MGTA03 – Introduction to Management IModel Answers

1a. From the news story on the previous page, which of the four types of

economic system discussed in the lectures is in place in the nation of Granisima? 1 mark

Answer

Granisma is a type of “planned” or (alternatively) “command” economy. The

very first sentence of the case describes Granisima as having “centrally

controlled economic policies”. The case then describes how the political leader

General !anche" will “allow” people to r#n small resta#rants b#t contin#es to

impose limits on their si"e.

$e recognise two kinds of planned economy%

&omm#nist% $here all (1'') of the factor of prod#ction are owned and

controlled by the government

!ocialist% $here most of the factor of prod#ction are owned and controlled by

the government

f the two Granisima appears to be socialist. This is beca#se some small

b#sinesses are permitted to e*ist.

1b. Justify and explain your answer by describing the main characteristic(s) of

this kind of economic system and provide evidence from the case + marks

Answer%

,conomic decision making is highly centralised in this case in the hands

of a powerf#l a#tocrat.

The government appears to have all of the economic decision-makinga#thority thro#gh a “&entral oard of ,conomic Advisers”.

/a0or ind#stries are owned by the government (b#s transportation

hotels)

The government sets prices (b#ses cant set their own fares)

• !ome small b#sinesses are owned by private individ#als (ta*is and small

resta#rants) b#t these are heavily reg#lated by the government.



Question 25 marks

2a ased on the above information, what is the degree of competition inthe broom manufacturing industry in !alexico? 1 mark

nly possible correct answer% /onopolistic competition

2b. "xplain and #ustify your answer, by giving at least fo#r importantcharacteristics of this degree of competition, and provide evidence from the case + marks

3elatively large n#mber of competitors% 4'5

6o obvio#s barriers to entry% two new entrants this year

6o obvio#s barriers to entry% brooms are simple and relatively

ine*pensive to make

A large n#mber of competitors are small% 4'5

A small n#mber of competitors (2) are large

The large competitors are m#ch more profitable than the small

competitors (profit more than 1' of reven#es vers#s less than 7 for the

others).

$age 2 of 7



Question 3 2parts - 7 marks

The chart below shows Greek GDP growth over the period from 2008 to 2013. The table at the bottom of the chart shows the populatio of Greece durigthose !ears. .

GreeceG! Growt" and !opulation

200# – 20$3

2008 200" 2010 2011 2012 2013#0.2

#3.1

#$."

#%.1 #%.0

#3."

Pop. 11.2millio

11.2millio

11.2millio

11.1millio

11.1millio

11.0millio

4a% &hat do these figures tell us about the G'$ per capita in Greece between

* and +? "xplain and fully #ustify your answer% + marks

G89 per capita will have fallen.

G89 fell for : consec#tive years. Total G89 is abo#t 4' smaller in 2'14 than it

was in 2'';.

/eanwhile pop#lation didnt change m#ch (declined by less than 2).

G89 < &apita = G89 < 9op#lation

The n#merator declined by />&? more than the denominator the G89 per

&apita will be m#ch smaller.

$age 4 of 7



$age + of 7



4b. &hat do you expect happened to the unemployment rate in Greece

between * and +? "xplain and fully #ustify your answer% 4 marks

Answer% The #nemployment rate almost certainly increased i.e. a higher

percentage of the pop#lation will be #nemployed

$hy% @alling G89 = recession

@alling G89 = lost confidence by both b#siness owners and cons#mers

@actories and b#sinesses will lay off workers

$orkers witho#t 0obs will postpone p#rchases (no new car sales no kitchen

renovations)

This f#rther ca#ses layoffs and b#siness fail#res

$orkers will lose their 0obs at failed firms

$age 7 of 7

midterm saqs - model answers nov 3

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