Scenario 15-2 Consider a Local, Privately-Owned Electrical Cooperative Named Poweshiek Power Company

question 3

Multiple Choice

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company PPCo) . PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true? i) New entrants to the market know they will have a smaller market share than PPCo currently has.
Ii) PPCo is most likely experiencing rising marginal cost.
Iii) PPCo is a natural monopoly.
Iv) PPCo is most likely experiencing declining average total cost.

• A) i) and ii) only
• B) i), ii), and iii) only
• C) i), iii) and iv) only
• D) i), ii), iii), and iv)

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