Category: Economics for Business: Ch 09
Shell have announced record profits of $27bn. This is the highest profit ever made by a European company and is only surpassed worldwide by the annual profits of another oil company ExxonMobil at $40bn. These high profits have led to calls for a windfall tax to be imposed on the oil companies and the articles below consider the likely impact of a tax of this nature.
Threat of windfall tax to energy companies is ‘legalised piracy’ Times Online (28/2/08)
Tax uncertainty a sure-fire killer Times Online (28/2/08)
Q&A: Windfall tax on Shell BBC News Online (31/1/08)
The great fuel folly Guardian (5/2/08)
Video
Windfall tax suggested for fuel profits BBC News Online (February 2008)
Questions
| 1. |
Using diagrams as appropriate, show the impact on the equilibrium level of price and output of Shell of a windfall tax being imposed on their profits. |
| 2. |
Discuss the extent to which the high level of profitability of oil companies is determined by the oil price. |
| 3. |
Analyse whether a windfall tax is an economically efficient form of taxation. What alternatives could a government consider that might be more efficient?
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Having secured the 2012 Olympics, we now have to work out how to pay for it. Recent news has indicated that the cost of hosting the Olympics has risen significantly from the original estimate. However, there is considerable debate in the media about what the real cost is. The figures given are massive, but what will we be left with after the games are over? How can we value these assets? The blog below from Evan Davis looks at some of these issues and discusses the real cost of hosting the Olympics.
Why do costs overrun? BBC News Online (16/3/07)
Real cost of 2012? BBC News Online – Evan Davis blog (15/3/07)
Questions
| 1. |
Identify five fixed and five variable costs of running the Olympics. |
| 2. |
Discuss the value of the opportunity cost of hosting the Olympics. |
| 3. |
List the direct and indirect benefits of hosting the 2012 Olympics in London. |
Adam Smith is the face on the new £20 note. This could be used as an argument that economics has moved into the mainstream, but many people may not be aware of the influence that he has had on modern classical economics. The articles below may help reveal his ongoing economic influence.
What you should know about Adam Smith BBC News Online (13/03/07)
Why Brown reveres the man on the new £20 note Guardian (19/03/06)
Questions
| 1. |
Assess the impact of Adam Smith on classical economic theory. |
| 2. |
Summarise the main works and theories of Adam Smith. (You may find the information in the Biz/ed Virtual Economy on Adam Smith helpful. For a complete list of works of Adam Smith, many online, see website C18 in the hotlinks section of this site.) |
| 3. |
Discuss the extent to which Gordon Brown has been influenced by Adam Smith in his policies. |