2.1 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? (1 x 2) 2.2 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. [Adapted from Business Insider SA, 1 June 2022] 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?

NSC Economics Market Failures: 2.1 Answer the following questio

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

Question 2

2.1 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 ... show full transcript

Worked Solution & Example Answer:2.1 Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

Step 1

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

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Answer

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

Variable Costs: These are costs that change with the level of output. For example, raw materials and labor costs vary depending on the production volume.
Fixed Costs: These costs remain constant regardless of the level of production. Examples include rent, salaries of permanent staff, and insurance.

Step 2

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

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Answer

The government can address the challenge of an oversupply of demerit goods by implementing taxes on these goods. For instance, by levying taxes such as sin taxes, the government can discourage the consumption of demerit goods, which consequently reduces the quantities supplied in the market.

Step 3

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

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Answer

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

Step 4

Name the market structure where price fixing is common.

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Answer

Oligopoly is the market structure where price fixing is common, as a few firms dominate the market and can coordinate their pricing strategies.

Step 5

Briefly describe the term cartel.

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Answer

A cartel is an organization of firms that come together to set prices and limit production, effectively operating like a monopoly. By coordinating their activities, firms in a cartel can manipulate market conditions to maximize their profits.

Step 6

Explain the role of the Competition Commission in the economy.

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Answer

The Competition Commission investigates and monitors businesses to prevent anti-competitive practices. It can impose penalties on firms found guilty of activities such as price fixing, ensuring fair competition and protecting consumers.

Step 7

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

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Answer

Low prices can have several negative impacts on producers:

Producers may struggle to cover their production costs, potentially leading to financial losses.
Reduced profits can hinder the ability to pay employees, resulting in job cuts or layoffs.
Persistent low prices might deter investment, as investors may withdraw their support due to insufficient returns.

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

Worked Solution & Example Answer:2.1 Answer the following questions - NSC Economics - Question 2 - 2023 - Paper 2

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

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

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

Name the market structure where price fixing is common.

Briefly describe the term cartel.

Explain the role of the Competition Commission in the economy.

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

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