Name RRB

Question 1

Write your answer for Part A here.

The phenomenon of such joint decision-making is called Collusion. In the given case study
OPEC is work as a Cartel, where a group of companies or firms that have agreed to work
together to alter the output and price of a product, this is the process of work or decision is
known as collusion.

some of the advantages and disadvantages of OPEC are as follows,

Advantages:

 Higher Production: - The cartel involved in supervising the marketing of the items.
So, the companies are free to the manufacturer and concentrate on production with
improve efficiency and lower costs.
 High and sure profit:- In this type of phenomenon charge prices are very much more
than the production and distribution, so Cartel members are very much sure about the
high and reasonable profit.
 Low competition cost:- As the products are not differentiated in this process, a group
of companies that are in cartel spend very little money on marketing and advertising.

Disadvantages:-

 Monopoly Impact:- Monopoly can easily occur in Cartel and should create very bad
results in terms of restriction of production due to consumers interest, introducing
artificial scarcity.
 Low Stability:- Companies or firms may exit the cartel at any time as this voluntary
process to join cartels so they don’t have full control over them and can result in a lack
of stability.
 Inability to control demand:- As the demand is very fluctuating in the situation,
cartels are not able to prove themselves to control this demand.

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 Write your answer for Part B here.

 Due to the differences between Moscow and Riyadh about the production of oil, the oil
prices collapsed to a historical low, due to this Organization of the Petroleum
Exporting Countries (OPEC) decided to reduce the oil supply by 9.7 million barrels per
day from May 2020.
 OPEC's decision to cut off oil supplies caused demand to remain stable, so the
demand curve will shift right from its original position, further affecting the equilibrium
point and causing the new equilibrium price to be set at a higher level as compared to
the previous equilibrium position.
 Whenever a market is not at equilibrium, economic pressure is applied to bring it
closer to price and quantity equilibrium via individual behaviors.
 Stagflation also occurs in this situation, which indicates that inflation is increasing but
output and unemployment are decreasing.

Write your answer for Part C here.

OPEC operates on an Oligopoly market structure. In an Oligopoly market structure, many

players share the market. For this reason, the Oligopoly market structure is the most widely
recognized type of market structure.

key features of Oligopoly market structures follow:-

 Number of Firms:- Only a few large firms that dominate the market hold the major
share in the market.
 The products can be either identical or highly differentiated. In the given case of
OPEC Oil is a Highly identical product to supply.
 Difficult entry:- Due to the presence of strong players in the market, it is difficult for
any new or potential competitor to enter the market.

Question 2

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 Write your answer for Part A here.

If business was running at maximum profit level output before COVID – 19

 The business was producing 92 articles.

 No. of Journalist = 8
 The total profit was €2500.
 In this case, marginal revenue curve is a horizontal line, So
Marginal Revenue = Change in quantity / Change in total revenue i.e., €375.

If a company wishes to maximize its profits, the marginal cost must equal the marginal
revenue, which occurs only if the company meets the above criteria.

Write your answer for Part B here.

 Considering the given case, we must fire 6 to gain maximize the profit.
 The new total profit would be €1500.
 This will happen when Marginal cost (MC) = Marginal revenue (MR) and the company
only has 4 Journalists on board.
 By increasing the number of journalists over 4 we would have MC > MR, which would
result in a reduction in overall profit. It will also cost more to create a new article than
the revenue expected.

Question 3

Write your answer for Part A here.

 It is most common for a country such as India to suffer from cyclical unemployment
during such a pandemic, which is the result of the economy going into contraction, i.e.,
a drop in GDP or a recession.

 In other words, cyclical unemployment can be called deficient-demand unemployment

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 or Keynesian unemployment.

In India, the economy will suffer from a decline in aggregate demand caused by the economic
downturn. As a result of the lockdown which is happened during this pandemic, goods and
services have been reduced, which has further led to a decrease in production. This has further
reduced the need for workers, which is why layoffs are taking place. Therefore, there is less
money for consumers and households to spend, so savings increase.

Write your answer for Part B here.

Initially, during such a Pandemic, there would be a supply-led recession, followed by a

demand-led recession. Currently, numerous countries are dealing with multiple crises,
including a health crisis, a financial crisis, and a decline in commodity prices.

As a result, demand has additionally fallen. As a result of social distancing techniques and
concern of infection, people's motivation to use such services when they are open for
commercial enterprise has additionally dropped. Job losses limit people's capability to spend
and worry about the future causing households and organizations to postpone purchases till the
trouble is handled.

We are seeing predominant losses of output given that demand in Businesses has sharply
declined. Suppliers are consequently slicing on manpower which is further inflicting
unemployment.

Write your answer for Part C here.

Effect of cyclical unemployment and recession on aggregate demand and supply in India.
Aggregate supply will fall as people stay home due to unemployment or movement
restrictions.

As a result, with the extension of the lockdown period and the decline in people's appetite for

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 consumption, demand will fall in the short term.

The huge lockdown of the financial system in India has led to a giant negative demand shock.
This is causing a drop in aggregate demand throughout the country. This is inflicting mixture
demand to collapse across the country. Additionally, to the demand reduction, there'll even be
widespread provide chain disruptions, as some individuals stay home, others return to their
villages, imports area unit noncontinuous, and foreign travel is stopped, this may negatively
influence production in most industries.

Write your answer for Part D here.

 AD/AS model is mainly used by Economist to verify the inflation rate, recession, and
unemployment
 In an extremely negative demand shock situation, the AD line i.e., the Aggregate
demand line moves left and downward. This is explained by the AD-AS model.
 When a negative supply shock occurs, the AS line moves up and to the left. If the
demand curve remains constant, then output falls and prices and costs increase.
 The AD/AS model suggests that cyclical unemployment is high when the equilibrium
is below potential GDP and small when it is near potential GDP

Question 4

Write your answer for Part A here.

Should adopt a Fiscal Policy in Macroeconomics.

The main measures of Fiscal Policy are as follows,

 The government uses fiscal policy to maintain the economy during business cycles by
engaging in spending, taxation, and borrowing. Simply put, fiscal policy refers to the
processes used by the government to tide over the economy.

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  As government spending is a major component of the GDP, fiscal policies decisions
can significantly impact the GDP.
 As per the GDP [(C + I + G + (X - M)], where G stands for Government spending,
GDP is positively impacted by increases in government spending, while GDP is
negatively impacted by decreases in government spending.
 Fiscal policies are of two types, namely Expansionary fiscal policy and
contractionary fiscal policy.
 During recessions and periods of slow economic activity, the government should
pursue an Expansionary fiscal policy to stimulate the economy.
 During times of strong economic growth, governments should implement
contractionary fiscal policy to save through higher taxes or lower spending

Write your answer for Part B here.

Should adopt a Monetary policy in Macroeconomics to regulate the economy.

The main measures of Monetary policy are as follows,

 Monetary policy is used to influence consumer and business decisions on savings,

investment, and spending.
 Should achieve its objective by Regulating money supply and Regulating interest
rates.
 Banks can regulate money supply through quantitative easing, by injecting money into
the economy, which assists in lowering interest rates and boosting economic growth.
 To keep inflation rates low and economic growth stable, the Reserve Bank of India
must strike a fine balance.

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