Question

1) With creating value we have:

a shift in both the demand and supply curves to the right.

a shift in both the demand and supply curves to the left.

demand shift to the right and supply to the left.

demand shift to the left and supply to the right.

2.) A necessary condition for market power to exist for a particular company in a market is that:

		information must be understood by both buyers and sellers.
		effective barriers to entry must exist.
		the number of firms is over 150.
		consumers perceive all products as homogeneous. 3.)    ____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility's plant over a larger number of units of output. Peak load pricing Inverted block pricing Block pricing First degree price discrimination none of the above 4.) A monopolist faces the following demand curve: P = 12 - .3Q with marginal costs of $3. What is the monopolistic PRICE? P = $5.50 P = $6.50 P = $7.50 P = $8.50 P = $9.50

Answer 1

Answer:

1]

With creating value we have: a shift in both the demand and supply curves to the right.

A] a shift in both the demand and supply curves to the right.

Explanation:

The demand and supply will increase with creating value (value creation) and accordingly, both the demand and supply curves will shift to the right.

2]

A necessary condition for market power to exist for a particular company in a market is that: effective barriers to entry must exist.

B] effective barriers to entry must exist.

Explanation:

If there are free entry it will become competitive market and price is set just equal to marginal cost. Hence producers have no market power to charge higher prices.

3]

Peak load pricing as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility's plant over a larger number of units of output.

A] Peak load pricing

4]

Demand curve: P = 12 - .3Q

Marginal Costs = $3

P *Q = 12Q – 0.3Q^2

MR = d(P*Q) / dQ = 12 - 0.6Q

For monopolist: MR = MC

12 – 0.6Q = 3

0.6Q = 9

Q = 15

P = 12 – 0.3Q = 12 – 0.3(15) = 7.5

monopolistic PRICE = $7.5

C] $7.50