A Thomas Malthus reasoned that because the amount of land is fixed, as population grows and more and more labour is applied to land, the productivity of labour in food production would decline, leading to widespread famine
Microeconomic Analysis BEO 2264
Assignment
Question 1
A Thomas Malthus reasoned that because the amount of land is fixed, as population grows and more and more labour is applied to land, the productivity of labour in food production would decline, leading to widespread famine. Malthus’s prediction failed to materialise as advances in technology greatly increased labour productivity in food production. Do such technological advances contradict the law of diminishing marginal returns?
B Why do you think the motorcar production exhibits strong economies of scale but not the trucking (haulage) industry?
Question 3
A What impact does the federal government’s subsidy of 38 cents per litre on ethanol production have on the market for ethanol in Australia? Will the producers of ethanol necessarily be 38 cents per litre better off because of the subsidy?
B Ethanol or alcohol is a substitute fuel for petrol, and it has been added to petrol supplies by some retailers. What might have motivated the government to grant a subsidy to ethanol producers? In your opinion, does the subsidy have any economic merit?
C Using an economic model that includes both a typical firm/farm in a perfectly competitive market and market supply and demand curves, explain what will happen to the equilibrium price for pork and economic profits of firms/farms in the short run and in the long run.
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