Answer the following questions. 2.1.1 Name TWO types of costs that are used to calculate the total costs of a firm. 2.1.2 How does the government address the challenge of an oversupply of demerit goods? Study the extract below and answer the questions that follow. FLYING AROUND SA HAS JUST GOT MORE EXPENSIVE. Comair has been forced to ground flights several times due to safety and security risks. This has resulted in limited competition in the aviation space. With a considerable amount of competition almost instantly cut from South Africa's airspace, demand outstripped supply, driving up prices on other airlines and triggering a warning from the Competition Commission around price fixing.

NSC Economics The Dynamics of Imperfect Markets: Answer the following questions.

Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

Question 2

Answer the following questions. 2.1.1 Name TWO types of costs that are used to calculate the total costs of a firm. 2.1.2 How does the government address the chall... show full transcript

Worked Solution & Example Answer:Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

Step 1

2.1.1 Name TWO types of costs that are used to calculate the total costs of a firm.

96%

114 rated

Answer

The two types of costs used to calculate the total costs of a firm are:

Variable Costs: These are costs that change with the level of production. They increase as more units are produced (e.g., raw materials, labor).
Fixed Costs: These costs remain constant regardless of the level of production. They do not change with the quantity produced (e.g., rent, salaries).

Step 2

2.1.2 How does the government address the challenge of an oversupply of demerit goods?

99%

104 rated

Answer

The government addresses the challenge of an oversupply of demerit goods by levying taxes, such as sin taxes, which are intended to discourage consumption. By increasing the costs associated with these goods, the government aims to reduce the quantities supplied and consumed.

Step 3

2.2.1 Identify any ONE term in the extract that relates to price formation.

96%

101 rated

Answer

The term in the extract that relates to price formation is Demand/Supply.

Step 4

2.2.2 Name the market structure where price fixing is common.

98%

120 rated

Answer

The market structure where price fixing is common is Oligopoly.

Step 5

2.2.3 Briefly describe the term cartel.

97%

117 rated

Answer

A cartel is an organization of firms that come together to operate like a monopoly. These firms collaborate to limit the quantity of products available in the market to control prices and maximize collective profits.

Step 6

2.2.4 Explain the role of the Competition Commission in the economy.

97%

121 rated

Answer

The Competition Commission investigates practices that may harm competition in the market. It makes recommendations to the Competition Tribunal regarding penalties for businesses found guilty of anti-competitive behavior, helping to maintain fair competition.

Step 7

2.2.5 How can low prices negatively affect the producers of goods and services?

96%

114 rated

Answer

Low prices can negatively affect producers as follows:

Insufficient Revenue: Producers may not cover their production costs, leading to financial losses.
Reduced Investment: Lower prices may discourage investment in business expansions and innovations.
Employment Issues: Producers might struggle to pay wages, potentially leading to layoffs or retrenchments.
Market Exit: Sustained low prices may force some producers out of the market, reducing competition.

Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

Worked Solution & Example Answer:Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

2.1.1 Name TWO types of costs that are used to calculate the total costs of a firm.

2.1.2 How does the government address the challenge of an oversupply of demerit goods?

2.2.1 Identify any ONE term in the extract that relates to price formation.

2.2.2 Name the market structure where price fixing is common.

2.2.3 Briefly describe the term cartel.

2.2.4 Explain the role of the Competition Commission in the economy.

2.2.5 How can low prices negatively affect the producers of goods and services?

Join the NSC students using SimpleStudy...