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The document contains a multi-part question assessing understanding of economic concepts related to the COVID-19 pandemic. Question 1 asks about OPEC's decision to cut oil supply in 2020 and its effects. Question 2 involves calculating profit-maximizing output for a news website before and after the pandemic. Question 3 asks about the type of unemployment and recession India would experience and the pandemic's effects on aggregate demand and supply. Question 4 asks about the macroeconomic policies the Indian government and central bank should adopt in response.

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165 views4 pages

Questions

The document contains a multi-part question assessing understanding of economic concepts related to the COVID-19 pandemic. Question 1 asks about OPEC's decision to cut oil supply in 2020 and its effects. Question 2 involves calculating profit-maximizing output for a news website before and after the pandemic. Question 3 asks about the type of unemployment and recession India would experience and the pandemic's effects on aggregate demand and supply. Question 4 asks about the macroeconomic policies the Indian government and central bank should adopt in response.

Uploaded by

infiniti sloutions
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The following questions will be graded.

The submission needs to be done using


the template in the next segment.
Question 1 (13 marks)
You learnt that the Organisation of Petroleum Exporting Countries (OPEC)
decided to reduce the supply of oil by 9.7 million barrels per day from May 2020.
In this context, answer the following questions.
 
Question 1A: Name and describe the phenomenon which involves such joint
decision-making. What are its advantages and disadvantages? (2+2 marks)
 
Question 1B: What made OPEC decide to cut the supply of oil? What was the
desired outcome of the decision? What was the change in the supply and demand
curves of oil and the subsequent market equilibria? Analyse the changes both
before and after the decision to reduce supply. (1 + 1 + 3 marks)
 
Question 1C: What market structure does the OPEC operate in? What are the key
features of such a market structure? (1 + 3 marks)
 
Question 2 (12 marks)
Suppose you own a small Italian news website. Your team consists of journalists
who write news articles on the website. The wage of each journalist is €3000 per
month. Your office building and utilities cost €8000 per month. The business earns
ad revenue on each article it produces.
 
From past experience, you know the number of articles you can produce based on
the number of journalists you employ.
 
No. of Journalists No. of articles per month

1 15

2 29

3 42

4 54

5 65

6 75

7 84

8 92

9 99

10 105
 
You may use the following Excel sheet to help with calculations.
Italian News Website Excel
Download

Question 2A: Assume that the business was operating at the profit maximising
level of output before Covid-19. Each article brought in an ad revenue of €375. 

 How many articles was the business producing? (2 marks)

 What was the total profit? (1 mark)

 Explain conceptually how you arrived at the profit maximising level of output. You

don't need to show exact calculations. (3 marks)


 
Question 2B: On 9th March 2020, Italy went into lockdown. As a result, you had
to shut down your office and adopt a ‘work from home’ policy. This eliminated
your fixed costs of €8000. At the same time, your ad revenue per article reduced to
€250. This was because all companies suddenly reduced their advertising
spending.

 How many journalists would you have to fire? Assume that you only care about

maximising profits. (2 marks)

 What is your new total profit? (1 marks)

 Why did you fire the journalists? Explain your answer conceptually. You don’t need

to show exact calculations. (3 marks)


Question 3 (8 marks)
The Covid-19 situation of 2020 has severely affected economies across the globe,
including India’s. The Indian economy, too, has been severely affected by this
crisis, with different sectors of the economy being affected to different levels.
Based on your understanding of the situation, provide detailed answers for each of
the components mentioned below.
 
Question 3A: What type of unemployment would a country like India experience
from such a pandemic? Please provide an explanation. (2 marks)
 
Question 3B: What type of recession would be caused by such a pandemic?
Provide an explanation. (2 marks)
 
Question 3C: What would happen to the aggregate demand and aggregate supply
in India because of the above two phenomena? Elaborate your answer. (2 marks)
 
Question 3D: How will the AD/AS curves behave in this situation? Please
elaborate your answer. (2 marks)
 
Question 4 (7 marks)
In a country like India, where such pandemics affect millions of people and
severely hamper the economy:
 
Question 4A: What type of macroeconomic policy should the Indian government
adopt after such a crisis? Please mention the policy measures to be undertaken
clearly with explanations. (3 marks)
 
Question 4B: What type of macroeconomic policy should the Reserve Bank of
India adopt after such a crisis? Please mention the policy measures to be
undertaken clearly with explanations. (4 marks)

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