In 1992,the Enron Development Corporation,a Subsidiary of the Houston-Based Energy

question 58

Multiple Choice

In 1992,the Enron Development Corporation,a subsidiary of the Houston-based energy company,signed a contract to build the largest-ever power plant in India,requiring a total investment of $2.8 billion.After Enron had spent nearly $300 million,the project was canceled by Hindu nationalist politicians in the Maharashtra state where the plant was to be built.Which of the following is true?

• A)Upon the news release of the project cancellation, Enron's share price fell immediately by about 10 percent.
• B)In the process of structuring the deal, Enron made a profound political miscalculation: Instead of waiting for the next election results, Enron rushed to close the deal and began construction, apparently believing that a new government would find it difficult to unwind the deal when construction was already under way.
• C)Enron had the last laugh, however when they went bankrupt and left the power plant unfinished.
• D)All of the above

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Definitions:

Equilibrium Price

The cost at which the amount of a product or service consumers want to buy matches the amount that manufacturers are willing to sell.

Equilibrium Quantity

The quantity of goods or services that is supplied is exactly equal to the quantity demanded at the equilibrium price.

Commodity X

A placeholder term for any generic, interchangeable good or service in economic analysis.

Demand Equation

A mathematical expression that relates the quantity demanded of a good to its price and other factors influencing demand, typically in the form of Qd = f(P, ...), where Qd is quantity demanded, P is price, and ... represents other determinants.