Assume That Total Demand in a Market Is 1 and That

question 67

Multiple Choice

Assume that total demand in a market is 1 and that customers are uniformly spread across the line segment from 0 to 1.There are only two companies in the market and there is no cost or service advantage held be either Firm 1 or Firm 2.Firm 1 locates at point a,and Firm 2 locates at point 1-b as shown in the figure.A customer chooses one firm or the other solely on the basis of distance travelled.

-The demand at Firm 1 is given by

• A)a + \(\frac { 1 + b - a } { 2 }\)
• B)a + \(\frac { 1 - b - a } { 2 }\)
• C)a - \(\frac { 1 + b - a } { 2 }\)
• D)a - \(\frac { 1 - b + a } { 2 }\)

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Definitions:

Legal Capital

The portion of a company's equity that cannot legally be distributed to the shareholders as dividends, typically the par value of issued shares.

Corporate Creditors

Individuals or institutions owed money by a corporation, typically as a result of lending money or providing goods and services on credit.

IFRS

International Financial Reporting Standards are accounting guidelines created by the International Accounting Standards Board, increasingly adopted worldwide for drafting financial statements of public companies.

Reserves

Funds set aside by a company to cover future obligations, losses, or unforeseen expenses.