ASSESSMENT EXEMPLAR WITH GUIDE FOR INSTRUCTORS:
MARGINAL ANALYSIS
Topic:
☒Microeconomics
☐Macroeconomics
☐Statistics/Econometrics
Learning domains:
☒Knowledge
☒Application
☐Data analysis
☒Communication
☒Reflection
Core concepts:
Marginal analysis, Cost analysis, Market
structures, Market regulation
Type(s) of task (can be more than one)
☒Constructed response given stimulus material
(clip/narrative/etc.)
☐Constructed response with no stimulus material
☐Quantitative analysis
☐Independent data sourcing
☒Independent research (not data sourcing) (masters level)
☒Written presentation
☒Oral presentation (Bachelor’s level)
☒Group collaboration (Bachelor’s level)
☐Use of nominated maths/stats software (specify):
☐Use of other technology (specify):
☐Other (specify):
________________________________________
This assessment task focuses on firm and market analysis. The first part of the assignment
addresses cost structures and profit maximization at the firm level. The second part of the task
centers on market analysis and regulation. The choice of a market where there is a high degree of
regulation has been made to encourage students to consider the impact of regulation on consumers,
producers and social welfare. The bachelor level task is designed for Levels 1 or 2, however the task
could also be extended to include a more mathematical approach for higher level students. This could
include mathematical as well as graphical analysis of marginal benefits and costs and net social
welfare impacts under different policy alternatives. The master’s level task requires a cost benefit
analysis which would include research skills.
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Bachelors level task:
Individual written assignment plus participation in panel debate
participation in a panel debate
Approx: 1500 words plus
The assignment has two components: a written task and participation in a panel debate.
Written task
This task relates to a hypothetical taxi licence owner/operator in an Australian capital city.
a) Suppose you purchase a taxi licence at a cost of $500,000 and that the opportunity cost of
capital is reflected by the current interest rate of 5%. Assume that the cost of running the taxi
is simplified to the labour costs plus vehicle running costs. Assume that you consider your
labour costs to be $30 per hour for normal hours and $50 per hour for shifts incurring penalty
rates and that you pay yourself penalty rates for any shift over 8 hours. You decide to work 12
hours a day, 6 days a week, and 52 weeks of the year. Assume the running costs are $2.50
per kilometre and the average trip is 10 kilometres. You average 2 trips each hour.
Assume the marginal revenue is constant at $50 per trip.
i)
ii)
iii)
Complete a table which shows the total fixed cost, total variable cost, marginal cost and
marginal revenue for your business. (Hint: Use number of trips as the quantity variable).
[AB1]
Are you making an economic profit, and if so what is the amount of economic profit?
[KB1]
If you were offered alternate employment with a 40 hour week, 4 weeks annual leave
and an annual salary of $150,000, would you take the offer? Show your workings and
explain how you have made your decision. [AB2]
b) The taxi industry is a regulated industry. With the aid of a diagram explain, in general terms,
how you would describe the market structure in which the taxi industry operates and the
impact that regulation has on producers and consumers. [KB1, AB2, CB1]
c) The taxi industry is undergoing considerable change with the emergence of technology which
has made ride sharing more feasible as a transport alternative. In response to this, many state
governments have reinforced that ride sharing is illegal. For example, “Transport for NSW has
confirmed 20 UberX drivers are facing prosecution, after being issued with 77 court attendance
notices for breaches of the Passenger Transport Act.” (Saulwick 2015). In the meantime,
ridesharing companies are urging the public to lobby for regulatory change.
i)
Present your views on whether the regulation of this market should be changed and
support your argument with economic justification. In presenting your argument, include
graphical analysis of the likely impact on producers, consumers and social welfare of
your preferred policy alternative. [AB1, CB1, RB1]
Panel Debate
The debate topic is “The taxi industry is over regulated”. Students will be divided into
teams based on their chosen side of the debate from Part c (i) above. Each team to
prepare their case, including structuring their argument between speakers. [KB1, CB1]
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Reference
Saulwick, J (2015) “UberX drivers hauled through the courts, as Uber appeals to public for support” Available
at: http://www.smh.com.au/nsw/nsw-state-election-2015/uberx-drivers-hauled-through-the-courts-as-uberappeals-to-public-for-support-20150316-1lzx2p.html, Accessed 6th June 2015.
Masters level task:
Individual written assignment
Approx: 2000 words (Individual assignment)
This assignment relates to a hypothetical taxi licence owner/operator in an Australian capital city.
Suppose you purchase a taxi licence at a cost of $500,000 and that the opportunity cost of capital
is reflected by the current interest rate of 5%. Assume that the cost of running the taxi is simplified
to the labour costs plus vehicle running costs. Assume that you consider your labour costs to be
$30 per hour for normal hours and $50 per hour for shifts incurring penalty rates and that you pay
yourself penalty rates for any shift over 8 hours. You decide to work 12 hours a day, 6 days a
week, and 52 weeks of the year. Assume the running costs are $2.50 per kilometre and the
average trip is 10 kilometres. You average 2 trips each hour. The revenue for the marginal
revenue is constant at $50 per trip.
iv)
v)
vi)
Complete a table which shows the total fixed cost, total variable cost, marginal cost and
marginal revenue for your business. (Hint: Use number of trips as the quantity variable).
[AM1]
Are you making an economic profit, and if so what is the amount of economic profit?
[KM1]
If you were offered alternate employment with a 40 hour week, 4 weeks annual leave
and an annual salary of $150,000, would you take the offer and explain how you have
made your decision? [AM2]
a) The taxi industry is a regulated industry. With the aid of a diagram explain, in general terms,
how you would describe the market structure in which the taxi industry operates and the
impact that regulation has on producers and consumers. [KM1, AM2, CM1]
b) The taxi industry is undergoing considerable change with the emergence of technology which
has made ride sharing more feasible as a transport alternative. In response to this, many state
governments have reinforced that ride sharing is illegal. For example, “Transport for NSW has
confirmed 20 UberX drivers are facing prosecution, after being issued with 77 court attendance
notices for breaches of the Passenger Transport Act.” (Saulwick 2015). In the meantime,
ridesharing companies are urging the public to lobby for regulatory change.
i)
Assuming you are employed as a consultant to the ride sharing companies, prepare a
report which uses a cost benefit framework to present the argument for deregulating the
industry. In your report, include both market and non-market values. (For example, what
is the willingness to pay for safety and how can it be estimated?) [KM1, AM2, AM3,
CM1, RM1]
Reference
Saulwick, J (2015) “UberX drivers hauled through the courts, as Uber appeals to public for support” Available
at: http://www.smh.com.au/nsw/nsw-state-election-2015/uberx-drivers-hauled-through-the-courts-as-uberappeals-to-public-for-support-20150316-1lzx2p.html, Accessed 6th June 2015.
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Advice to assessors:
This task has been developed as a starting point for the development of firm analysis. The extent of
information given to students and the degree of assistance with the task can be varied, as can the
extent of questioning. Similarly, rather than giving bachelor students the choice to choose which side
of the debate regarding regulation, they could be forced into one position. The panel debate has
been included to emphasise oral communication skills. The organisation of the debate will depend on
student numbers and mode of offering. It could be conducted either in class or online.
The estimation of non-market values would also be an interesting aspect to include, even at the
bachelor level, particularly for more advanced level students.
The master’s level task of undertaking a cost benefit analysis has been designed to develop this skill
which may be required of economists in the workplace. A debate could also be incorporated at
master’s level.
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Learning
domain
Learning outcomes
Bachelor Degree
Masters Degree
Knowledge
KB1 Bachelor graduates will be able to
identify, coherently explain and synthesise
core economic concepts
KM1 Masters graduates will be able to
identify, coherently explain and synthesise
core and advanced economic concepts,
including recent developments in the
discipline
Application
Bachelor graduates will be able to:
Masters graduates will be able to:
AB1• frame problems in terms of core
economic concepts and principles
AM1• frame and critically analyse problems in
terms of core and advanced economic
concepts and principles
AB2• apply economic reasoning and
analytical skills, in order to make informed
judgments and decisions
AM2• apply advanced economic reasoning
and analytical skills, including quantitative
techniques where appropriate, in order to
make informed judgments and decisions
AM3• plan and execute a research-based
project
Data analysis
Bachelor graduates will be:
Masters graduates will be able to:
DB1• able to use economic data to address
typical problems faced by economists
DM1• select and apply an appropriate
empirical method to address typical problems
faced by economists
DB2• aware of, and able to implement,
basic empirical techniques and interpret the
results
DM2• critically evaluate the results
Communication CB1 Bachelor graduates will be able to
present a clear and coherent exposition of
economic knowledge, ideas and empirical
evidence both orally and in writing,
individually or in collaborative contexts
CM1 Masters graduates will be able to
communicate complex ideas clearly and
coherently, in written form and interactive oral
form to expert and non-expert audiences,
individually or in collaborative contexts
Reflection
Bachelor graduates will be able to reflect
on:
Masters graduates will be able to reflect on
and evaluate:
RB1• the nature and implications of
assumptions and value judgments in
economic analysis and policy
RM1• the nature and implications of
assumptions and value judgments in
economic analysis and policy
RB2• interactions between economic
thinking and economic events, both
historical and contemporary
RM2• interactions between economic thinking
and economic events, both historical and
contemporary
RB3• the responsibilities of economists and
their role in society
RM3• the responsibilities of economists and
their role in society
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