Question

Suppose the company E-bikes R US is the sole supplier of e-bikes and faces the following inverse demand function: p = 100 - 2Q, and total cost is given by TC = 16q + 2. The deadweight loss from E-bikes R US equals

A) $21.

B) $441.

C) $882.

D) $1,764.

Suppose the company E-bikes R US is the sole supplier of e-bikes. As other e-bike firms enter the market, the market power of E-bikes R US

A) is unaffected.

B) declines.

C) increases.

D) increases according to the Lerner Index but decreases according to the price/marginal cost ratio.

Suppose the company E-bikes R US is the sole supplier of e-bikes. The more elastic the demand curve faced by E-bikes R US, the monopolist

A) will have a larger Lerner Index.

B) will face a lower marginal cost.

C) will earn more profit.

D) will lose more sales as it raises its price.

37. Suppose there is a competitive market for e-bikes that is in the long-run. If firms in the e-bike market are not identical, then an increase in cost will

A) shift marginal cost to the right.

B) push the most inefficient firms out of the market.

C) push the most efficient firms out of the market.

D) There is not enough information to answer.

Answer 1

Answer 1: Option B

Answer 2: Option B.

As other players enter the market if E-bike firms, the market power of the company will decrease. This is because competition in the market will increase and given the demand remains same, the company will see a decrease in its market power.

Answer 3: Option D.

If the company faces a more elastic demand curve, this means that demand of the product is elastic, and any increase in price will reduce total revenue or sales of the company because consumers will not purchase the good and look for alternatives given the elastic nature of the demand curve.

Answer 4: Option B.

In the case of perfeclty competitive market, increase in the cost faced by the firms will push the most inefficient firms out of the market because there firms will be earning losses and not able to cover their variable cost.