Question

1.6 Nonjabulo thinks that McDonald’s hamburgers are the best – much better than Steers’ – while Anne cannot tell the difference:

a) Anne’s demand for McDonald’s hamburgers is likely to be more price elastic than Nonjabulo’s.

b) Nonjabulo’s demand for McDonald’s hamburgers is likely to be more price elastic than Anne’s.

c) Anne’s demand for all hamburgers is less price elastic than Nonjabulo’s.

d) Nonjabulo’s demand for all hamburgers is more price elastic than Anne’s

4.1 Lonewolf Ltd is the sole manufacturer and supplier of solar panels in the country. As a result of this the CEO claimed in a recent meeting that he can set any price he wishes and sell as many units of his product as he wants at that price. Is this correct? Motivate your answer. (7)

4.2 Explain using properly labelled diagrams, why a perfectly competitive firm will earn only normal profit in the long-run. (16)

4.3 Explain SEVEN (7) conditions necessary for a perfectly competitive market to exist. (7)

Answer 1