Imt Covid 19 Project
Imt Covid 19 Project
Imt Covid 19 Project
Question 1
1 (A):
Collusion takes place in an Oligopoly market structure which is operated by a few large firms
wherethey come together for their mutual benefits that is influencing the output and setting the
priceof a product. OPEC is one such organization where 13 oil-producing member nations
has colluded & formed a formal Cartel.
2. During uncertain time, like recession, firms/organizations have the power to control supply
which in turn helps in keeping the price stable.
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.
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 characterized by low price elasticity of demand and an inelastic supply curve
1 (C):
Question 2
2 (A):
Total Revenue = ad revenue per article * number of articles (92 * 375) = €34,500.
= €34,500 - €32,000
= €2,500
Operating at profit maximising the business was producing between 92 articles monthly with 8
journalists since the profit maximizing option occurs at the maximum level of output (92)
giving the equilibrium level whereby the marginal costs is equivalent to the marginal revenue.
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
Number of to fire
=4
New Total profit = Total Revenue = ad revenue per article * number of articles (54* 250) =
€13,500.
= €13,500 - €12,000
= €1,500
The journalists are fired since the new equilibrium level that maximises profit changes to 54
articles with 4 journalists since the marginal costs are equivaent to marginal revenue at this
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 characterized by steep
3 (C):
Cyclical unemployment is likely broad within the aggregate demand and aggregate
supply framework. This is in which case the equilibrium falls below the expected GDP 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
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):
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
Protection of workers in the informal sector through Mahatma Gandhi National Rural
Employment and Jan Dhan accounts. These systems operate as automatic stabilizers in a way
that the unemployed persons can apply for jobs when they need them.
For firms operating in the organized 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 comfort away from the under-capital 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