Questions week 1

1
Questions week 1

• Introductory Economics for the Treasury
• Dr. Paul Frijters

2

• 1. Give an example of opportunity costs in your
  line of work.
• Where you could work otherwise, leisure for your
  time, consumption instead of saving, taxing one
  versus another.
• Note an effect is not an opportunity cost.
• 2. What constitutes the opportunity costs of new
  housing developments on lake Burley Griffin?
• Parks, recreation, airport, anything else one can
  do with that land.

3

• 3. For what type of actors and actions do you
  think it reasonable to assume rationality
  (young/old/firms/individuals/government) ?
• Those with more experience and resources to think
  about the future are probably more rational about
  their decisions, as lang as they are not subject
  to short-run whims of others. Hence trade policy,
  firms structure, buying a house, and retirement
  behaviour are probably more rational than the
  choices of new-born babies, governments during
  election campaigns, or firms concerning one-off
  spur-of-the-moment choices.
• Note rationality does not imply selfishness.

4

• 4. Do you think Australias comparative advantage
  is in industrial goods? (why? 2 reasons minimum).
• No, because it is relatively sparcely populated.
  No, because it is a long way from many markets
  and transport costs for industrial goods are
  relatively high.
• Yes, a very skilled workforce. Yes, natural
  harbours.
• (wrong) because Australia has no manufacturing
  (thats the result, not the cause of having no
  comparative advantage)
• 5. What economies of scale are there in the
  operation of an international organisation of
  your choice that has recently been in the news?
  (2 reasons minimum).
• Nato, having a command-structure that enjoys
  increasing returns in organising many countries
  simultaneously on peace-keeping missions (i.e.
  Bosnia). Also UN, merger between BHP and WMC
  (head-office costs), UNICEF, OECD, Red Cross,
  Wesfarmers and Telstra (diseconomies)
• Virgin Airlines, enjoying economies of scale in
  airline capacity (when one route is unpopular,
  airoplanes can be quickly redeployed elsewhere).
  Also Toyota

5

• 6. Give a topical example of the creative
  destruction issue in Australia (not sugar!).
• Telstra and mobile phones.
• IT examples of new data processes (DvD).
• Ageing (on health and pensions).
• Digital photography.
• Closure of some firm (e.g. BHP, clothing
  industry, small miners)
• Superfunds (new legislation and competitive
  pressure)
• Drought
• Hecs
• Globalisation