Office Use Only

Semester Two 2014

Examination Period
Faculty of Business and Economics
EXAM CODES:

ECF3900

TITLE OF PAPER:

Business Competition and Regulation

EXAM DURATION:
READING TIME:

2 hours writing time

10 minutes

THIS PAPER IS FOR STUDENTS STUDYING AT: ( tick where applicable)

Berwick
Clayton
Malaysia
Off Campus Learning Open Learning
Caulfield
Gippsland Peninsula
Enhancement Studies
South Africa
Pharmacy
Other (specify)
During an exam, you must not have in your possession, a book, notes, paper, electronic device/s, calculator,
pencil case, mobile phone or other material/item which has not been authorised for the exam or specifically
permitted as noted below. Any material or item on your desk, chair or person will be deemed to be in your
possession. You are reminded that possession of unauthorised materials, or attempting to cheat or cheating in an
exam is a discipline offence under Part 7 of the Monash University (Council) Regulations.
No exam paper or other exam materials are to be removed from the room.

AUTHORISED MATERIALS
CALCULATORS
OPEN BOOK
SPECIFICALLY PERMITTED ITEMS

YES
YES
YES

NO
NO
NO

Candidates must complete this section if required to write answers within this paper

STUDENT ID:

__ __ __ __ __ __ __ __

DESK NUMBER:

__ __ __ __ __

INSTRUCTIONS TO STUDENTS

Answer SEVEN (7) questions out of Eight (8) questions below.

Each question is worth 10 marks. Answers with examples, diagrams (where appropriate) will carry
higher marks.
Page 1 of 3

ANSWER ANY SEVEN (7) QUESTIONS

1.

Under a kinked demand model in oligopoly, demand curve is more or less elastic above
and below the equilibrium price? Explain this fully with the help of a diagram. In your diagram, show
the equilibrium price and output level. Explain why price is sticky in this scenario.
(10 marks=2+4+1+3)

2.

Draw a diagram for a perfectly competitive industry with firms earning normal profits.
All firms in the industry use oil as a key input. Using your diagram, illustrate a reduction in the price of
oil. Will firm-level profits increase or decrease and will market supply increase or decrease?

(10 marks=2+3+2+3)

3.

Do economies of scale offer a competitive advantage? Explain your argument with the
aid of an example and diagram(s).
(10 marks=3+3+4)

4.

List two products that you think are price elastic. List two products that you think are
price inelastic. Is consumer surplus greater under elastic or inelastic demand? Explain all your answers
in detail.
(10 marks=2+2+6)

5.

Explain in detail how each of the following policy suggestions are appropriate for
improving economic growth in an economy?
a.
b.
c.
d.
e.

The encouragement of R&D

A reduction in marginal tax rates to increase labour supply
The establishment of training and education schemes to improve human capital
Reduction in company tax
An increase in real wages for major sectors of the economy
(10 marks=25)

6.

a. What is the difference between a pooling and a separating equilibrium? Give examples.

b. If there is a surplus amount of rental office in a city, what do you expect to happen to rents? Use a
diagram to explain your answer.
(10 marks=5+5)

Page 2 of 3

7.

What are economies of scope and how might they lead a firm to diversify? Give an
example of a company/business with various products enjoying economies of scope in answering your
question.
(10 marks=5+5)

8.
a.
b.

In the short run, why do average total costs initially fall and then increase?
Explain why average fixed costs are always declining. What commercial strategies can
be supported by falling average fixed costs?

(10 marks=5+5)

****END OF PAPER****

Page 3 of 3