Economics of Enterprise Answers

Why do firms enter an industry when they know that in the long run economic profit will be Zero? Under What conditions will a firm exit a market? Explain. 

A market failure occurs when there is an inefficient allocation of resources. In other words, the true cost of a good is not reflected in the price. This might be because of a third-party benefit but does not pay for that benefit. Or, it could arise due to a cost that is imposed on a third party without their consent and compensation. In turn, this leads to an inefficient allocation of resources as a third party may bear the cost or benefit. There are many causes of market failure which range from externalities to inefficient supply. The inefficient allocation of resources is not just limited to the supply of goods. Market failure can also occur through externalities. This can be both positive and negative

Propose and analyze any four causes of market failure.

Over the last two decades, there has been an emphasis, particularly in the English-speaking advanced countries, on reducing the role of government and on reforming public management by adopting aspects of private sector practice. The research programme on which this study is based was concerned with the fact that similar practices were being introduced in developing and transitional countries, often in association with economic adjustment. There has been considerable research on the difficult process of adjustment but little on the process and outcomes of public management reform for improved service delivery. 

question: Taking into consideration the theoretical knowledge you have gained on the broad views of the role of government, critically analyse the view South Africa’s government subscribes to in playing its role in the country. Justify your answer

Determine the equilibrium quantity: Qd=25-3P; Qs=10+2P 

The market demand curve p=30-Q there are only two firms in the market each with marginal cost of $0 what is market price in the stackelberg model

Explain clearly the function of and the difference between the following terms:

a. Estimates and estimators

b. R2 and Adjusted R2

Explain the association of the following diagram (hints: the association has directions; from sales order to customers, and from customers to sales orders)?

What is segregation of duties and why internal controls need segregation of duties?

Elaborate the term Total Revenue and Marginal revenue also calculate TR and MR in the given table 

Deregulation within the airline industry was introduced in South Africa in 1991. Before deregulation, South African Airways (SAA) was the only service provider on the main domestic airline routes as well as the international airline routes. The first decade after deregulation resulted in a wave of low cost airline competitions such as Flitestar, Sun Air, Phoenix Air, Nationwide, 1time and Velvet sky entering the domestic market. 

SAA functions within a free-market economy, which is characterised by which of the following attributes?

a.   Private ownership of production factors

b.   Free competition

c.   Profit motive recognised

d.   Limited right to strike in state enterprises

1.2 Explain why nations trade using the following theories and illustrate with an example in each case.

(a) Adam Smith theory [5]

(b) David Ricardo theory