City-wide lockdowns were implemented in Sydney by the NSW government in July-August 2021 in response to new COVID-19 cases detected in the community. Assume that builder XYZ is a monopoly in Sydney’s Southwest, who specialises in apartment construction. (a) Draw a diagram to illustrate XYZ making economic profits before the implementation of the hard lockdown in Sydney’s Southwest. On your diagram clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge. (b) Assuming costs remain constant and that that the construction industry is still allowed to operate normally, explain the impact of Sydney’s lockdown on builder XYZ’s demand from Q2 part (a). With the aid of a new diagram, discuss XYZ’s static profit or loss situation after these changes. Clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge. (c) Assume that XYZ survives the lockdown and stays in business. If the NSW government decides to double the first home buyer’s grant, explain the impact on XYZ’s demand. With the aid of a new diagram, discuss XYZ’s static profit or loss situation after this change takes place. Clearly indicate the quantity XYZ is choosing the produce and the price XYZ is choosing to charge.
City-wide lockdowns were implemented in Sydney by the NSW government in July-August 2021 in response to new COVID-19 cases detected in the community. Assume that builder XYZ is a
(a) Draw a diagram to illustrate XYZ making economic profits before the implementation of the hard lockdown in Sydney’s Southwest. On your diagram clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge.
(b) Assuming costs remain constant and that that the construction industry is still allowed to operate normally, explain the impact of Sydney’s lockdown on builder XYZ’s demand from Q2 part (a). With the aid of a new diagram, discuss XYZ’s static profit or loss situation after these changes. Clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge.
(c) Assume that XYZ survives the lockdown and stays in business. If the NSW government decides to double the first home buyer’s grant, explain the impact on XYZ’s demand. With the aid of a new diagram, discuss XYZ’s static profit or loss situation after this change takes place. Clearly indicate the quantity XYZ is choosing the produce and the price XYZ is choosing to charge.
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