Use the Following to Answer Questions

question 42

Multiple Choice

Use the following to answer questions:
Scenario: A Small-Town Monopolist
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs.
-(Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist. If the company is allowed to offer different prices for its good, what is the maximum amount of profit this company can earn?

• A) $1,000
• B) $750
• C) $1,375
• D) $1,520

Differentiate between binding and non-binding price ceilings and floors.

Examine the dynamic between supply, demand, and the elasticity in regulated markets.

Understand the concept of price floors and their impact on market equilibrium.

Analyze the effects of minimum wage laws on employment and standard of living.

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Definitions:

Premium

An amount paid for an insurance policy or the amount by which the price of a bond exceeds its face value.

Foreign Exchange Market

A global marketplace for exchanging national currencies against each other.

Financial Market

An arena where buyers and sellers participate in the trade of assets such as equities, bonds, currencies, and derivatives.

Triangle Arbitrage

A trading strategy that takes advantage of discrepancies between three currencies in the foreign exchange market to make a profit.