Name Aishwarya AnilKumar

Question 1

1 (A):

The Phenomenon which involves joint decision making is known as Collusion

Collusion takes place in an Oligopoly market structure which is operated by a few large firms
where-they come together for them mutual benefits that is influencing the output and setting
the price-of a product. OPEC is one such organisation where 13 oil-producing member
nations has colluded & formed a formal Cartel.

The Advantages of Collusion are as follows:

1. Firms/Organisations collude with the intention of maximising profit and reducing

competitiveness of the market.
2. During uncertain time, like recession, firms/organisations have the power to control
supply which in turn helps in keeping the price stable.
3. Since firms/organisations united as per this phenomenon, competitive advertising is
avoided, thus helping the firms to solely focus on production. Although collusion is beneficial
For/ organisation , it has some disadvantages
over the economic welfare.

some of these disadvantages are given below.

1. Collusion mainly implies high prices for consumers, thus leading to a decline in
consumer surplus.

2. Entry of new firms/organisation is highly restricted as the colluded firms/organisations

act as one.

1 (B):

OPEC reached a decision to cut oil supply to stop the falling prices of oil and similarly reduce
oversupply. The desired outcome was complete market protection from the drop in demand
due to lockdowns and restrictions. Changes in supply and demand following the cut in supply
were characterised by low price elasticity of demand and an inelastic supply curve.
 1(C):

OPEC operates in an oligopolistic market structure. Key characteristics of this market

structure include interdependence since actions and decisions cannot be made
independently, barriers to entry due to market dominance, and the existence of price rigidity.

Question 2

2 (A):

The business was producing y articles per month

Total Revenue = ad revenue per article * number of articles (92 * 375) = €34,500.

Total Front = Total revenue - Total costs

=€34,500-€32,000
= €2,500

Operating at profit maximising the business was producing between 92 articles monthly with
&
journalists since the profit maximising option occurs at the maximum level of output (92)
giving the equilibrium level whereby the marginal costs is equivalent to the marginal revenue.
The marginal cost that is equivalent to the marginal revenue is €375.

2 (B):

Given that the business only cares about profit maximisation. the new number of articles that
will be produced after the lockdown is 54 articles with 4 journalists since marginal costs is
equal to marginal revenue at that equilibrium level.Therefore,
Number of to fire

= 8 journalists prior lockdown - 4 journalists during the lock down

=4

Question 3
 3 (A):

India's economy is likely to experience cyclical unemployment rates due to the impacts of the
pandemic on the economy s business cycle.
Cyclical unemployment usually results from
economic downturns and contractions such as the one caused by the COVID 19 pandemic.

3 (B):

The coronavirus pandemic has triggered a prolonged boom in the economy than ever before.
Thus, the pandemic is likely to cause an L-Shaped recession that is characterised by steep
declines and extended recession.

3 (C):

Cyclical unemployment is likely broad within the aggregate demand and aggregate
supply framework. 1his is in which case the equilibrium falls below the expected UDI and
similarly less when the equilibrium is closer to potential GDP. A fall in the Indian GDP
indicates the economy’s dip into recession with the AS/AD equilibrium level of sustainable
domestic product falling below the expected potential.

3 (D):

cyclical unemployment is portrayed by the closeness of the economy to the potential GDP.
As such. a low cyclical unemployment is shown by the level of output being relatively closer to
the potential GDP and the equilibrium point. The reverse is the case for a higher cyclical
unemployment.

Question 4

4 (A):

Small to medium enterprises required a multi-prolonged effort. Therefore, India s government

should adopt a policy that advocates for infusion of cash to pay accumulated arrears of these
enterprises. In addition, banks should also be allowed interest subsidies to enable reduction
of
credit on SMEs loans.
Protection of workers in the informal sector through Mahatma Gandhi National Rural
Employment and Jan Dhan accounts. These systems operate as automatic stabilisers in a
way
that the unemployed persons can apply or jobs when they need them
For firms operating in the organised sector, banks should me made less risk averse in lending
while also maintaining the authority to determine the viable and non-viable firms.

4 (B):

Macroeconomic policies that should be adopted by RBI include easing liquidity since the
direst need is offering credit to the hurting businesses. With this approach, RBI will be obliged
to take cues from other central banks since liquidity should not be a constraint. Similarly. RBI
should relax the non-performing assets norms. The financial services sector is looking to RBI
to offer relief, a plan that also includes deferment of NPA classification norms. This way, the
banking system could enjoy some comport away from me under-casual and increased debts
Lastly, RBI could offer liquidity support to Indian banks on foreign operations and also widen
the re-finance opportunity for both small -medium and large enterprises as way of enabling
them settle their debts.